Tuesday, March 04, 2008

India steps back

After listening to the budget proposals on the waiver of the farmer loans the first thing that came to my mind is that we are stepping backwards. The issue I have is not about the money being spent but on what it is being spent. In this post I will try to elaborate as to why I have such strong views on this subject.

Spending 650 billion rupees (65,000 crores) for no change
The farmer whose loan is written off will anyway have no money again even after his loan is written off. He still has to borrow the next year to grow his crop. With no change in the environment surrounding his current situation which put him in this position in the first place what's stopping him from ending up where he is again two or three years down the line. So we are spending all this money in writing off his debt but it will not change anything. He will be in debt very soon again as he has no money in his hand.

Agricultural Infrastructure is the problem
The reasons the farmers are in the situation they are in is because of the infrastructure that they have at their disposal. Many of them still till their land using bullocks and a plough. They use substandard seeds. They do not have consistent water supply. They do not get adequate compensation for the crop that they grow. They do not have access to technology that can improve their crops. They do not have a good supply chain that will get their produce where it is needed most and a good price for it. If these are put in place I do not think the real farmer needs such write-offs.

Rewarding the defaulters
The ones that have not paid back the loans are the ones that are being rewarded. How do you know that these people are not wilful or habitual defaulters? We are rewarding those farmers that made mistakes and the ones paying for it are the farmers that are being truthful and paying for the defaulters mistakes through the taxes they pay (if they pay any). What about the ones whose property has already been attached by the bank and sold to recover the money loaned. What do we do for them ? I think this is highly unfair.

What is stopping them from doing this again?
This is the third time we are doing this. Don't we learn any lessons. Has it stopped them from defaulting on their loans? What is stopping them from doing it again? And the answer to all of this is a resounding "NO", "NO" and "Nothing". So are we moving forward in an environment where "India Shining" is being talked about and the answer again is "NO" as we are not benefiting anyone by doing this.

This decision by the finance minister is completely politically motivated - there seems to be absolutely no meaning in developmental terms in order to do this. Development takes time and effort to show results - this does not. Development is a long term gain - this is a short term gain. Given that elections have to get done in another year - it does not take a genius to figure out why a political party goes for something that gives it short term gain rather than long term gain. On the other hand development creates something for our future, hand outs rob us of our future. So giving the farmers this handout is sure to rob us of a lot of things that we could have done with that same money to improve our farmers environment and hence our country.

6 comments:

Vidhyashankar K said...

well, this is a known fact in our country where the honest ones get ripped off and those who cause wilful harm get pardoned and put on a pedestal because they've "turned" righteous.

In the end, it is us taxpayers who will continue to support the government's populist deeds.

Indian Home Maker said...

'What if you could harness the power of the free market to solve the problems of poverty, hunger, and inequality? To some, it sounds impossible. But Nobel Peace Prize winner Muhammad Yunus is doing exactly that. As founder of Grameen Bank, Yunus pioneered microcredit, the innovative banking program that provides poor people––mainly women––with small loans they use to launch businesses and lift their families out of poverty. In the past thirty years, microcredit has spread to every continent and benefited over 100 million families. But Yunus remained unsatisfied. Much more could be done, he believed, if the dynamics of capitalism could be applied to humanity’s greatest challenges.' "Creating a World Without Poverty" A New Book by Muhammad Yunus
http://www.grameen-info.org/

Sudeep D'Souza said...

Microfinance is a good idea but there are also a lot of other ways that we can get the resources to the farmers. India has done a decent job with the whole co-operative movement in the dairy sector why can't we learn from that and implement the same thing in the farm sector where the farmers run a co-operative that provides the tools and the support infrastructure to improve their well being.

Abhishek said...

After listening to the budget, I felt that Lalu Yadav gave a more balanced budget which is not only populist but also spurs growth in long as well as short term.
In this budget however I could not find much that will actually drive growth as such. There are too many tokenisms here.
As far as 60K crore waiver is concerned, you are right that it is rewarding defaulters and may not make much difference for farmers whom we think it will help: the Vidarbha farmers.

However a trivia: waiving of corporate tax in 2004-5 cost state and central govts. 245000 crores!

Mona said...

Well, I don't think even the Finance Minister is able to sleep well at night after giving that waiver. It is quite obvious in his actions, namely, immediately after he announces the 'gift', he firsts calls on Corporates and private sector to support the farmers and then he makes it amply clear to the media, that this is a one-time write-off. What about all the large scale textile manufacturers that have been hit really hard with the appreciating Rupee. Where is the finance minister's heart, in that case?
So, its quite obvious that many of the lines of his budget was written by the ruling party and not him and that's politics. It does'nt mean that we have to ACCEPT it. So, lets be careful whom we vote for in the next elections. Cheers!

Sue said...

I'm told, in addition, that this will only benefit those who have borrowed from government banks.

Most of the farmers who are seriously crippled by loans are indebted to local money-lenders.

Then again, perhaps this will encourage them to borrow from govt. banks instead?