Monday, March 03, 2008

Union Budget 2008 – One step forward and at least 10 steps backwards.

Initially when I read this I thought I understood it wrong. Then I thought it was a typo. Then I went to different websites to confirm it. The Indian Union Finance Minister in this years Budget has announced Rs.60,000 crores (approximately $15 billion USD) waiver of all loans taken by farmers. If you are a farmer that has less than 2 hectares of land and have taken a loan, government has announced that it will waive your loan. The Government of India will compensate the bank.

The media, political parties and experts all welcomed this announcement. Every one claimed that waiving the loans would be a huge relief for farmers who are having a tough time with rising production cost and dwindling profit or growing loss. But will this step save the farmers of India? Will it revive agriculture in India? This step is only going to put farmers and agriculture sector as a whole in deep trouble in coming years. We need a long term solution than a short term patch up to revive agriculture.

The way I view this – think about this analogy. Assume in a country students are failing in their exams and the national pass percentage each year is less than 20%. The national government gets alarmed and in the election year they decided to “improve education sector” by declaring that every student gets promoted to the next grade. Media and politicians and political parties hail this as a historic move by the government to improve the education sector.

Will this move by the government improve education sector? Are we not actually lowering the standard of education by that move? Are we not telling the students that “studying hard” is no longer necessary to pass the exam? Does this move discourage students who really work hard to pass the exam? Following years also, wont the students expect the government to step in to make them promote rather than use their brains to pass exams? In the long term is this step good for the country?

If the government really wanted to improve education what should the government do instead of promoting every student to next grade? They should have found out the reasons why they are failing and put more resources in those areas and improve education sector. They should appoint more qualified teachers, increase the salary of good teachers, decrease the student teacher ratio, give incentives to students who really do well in school etc. These steps will improve the education sector and the country in the long run.

Doesn’t the same apply to agriculture sector also? Isn’t waiving of loans like promoting all students to the next grade without investigating reason for their failure? With this announcement isn’t the government making a fool of the people (farmers) who paid off their debt in time? Now won’t it send a wrong signal to all the people who take loan in the future that in an election year the government is going to waive their loan?

If the government was really interested in reviving agriculture sector it should never have announced this step. It is a known fact that agricultural sector in India is suffering because agriculture no longer is a profitable business. As long as it is not a profitable business, people who are already into it try to get out of it and also it won’t attract more people into it. Who wants to invest or waste time on something that won’t give them back their investment? Instead of waiving Rs.60,000 crores of loan, if the government has used this money to increase the procurement price of agricultural products by say 3 times the present price the farmers who cultivate it would have made some profit and they will also be motivated to continue agriculture.

Some genuine farmers like blogger Keralafarmer have expressed their opposition to this move of the government. I felt it was strange that such a bizarre policy was announced by the government headed by Dr Manmohan Singh. I am pretty sure that Dr Manmohan Singh knows the consequences of these steps. But in an election year, short term populist measures take precedence over long term development goal and I see this announcement by the Union Finance Minister as a cheap populist measure to bring more votes to the Congress Party in the next general elections.


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Blogger bkrish said...

Exactly Brijesh..we never try to get into the roots of the problems, or we dont want to get into the root cause. Just solve the peripheral and be happy, thats our attitude.

March 04, 2008 12:02 AM  
Blogger keralafarmer said...

This comment has been removed by the author.

March 04, 2008 12:24 AM  
Blogger keralafarmer said...

Did you know what is going on at Panchayath levels?
The gramasabha is a smallest group like Parliament to take action for the growth of ariculture. The 10% of total Voters have to attend the meeting once in three months for sufficient quorum. But, what are they doing? They distribute all funds to dearer and nearer peoples even without sufficient quorum. They will put unauthorized signatures to makeup the quorum. No development can be achieve like this. This is Kerala model Development.
A first step can be done at ward level to solve the problems of farmers by giving reasonable prices to their produces.

March 04, 2008 12:34 AM  
Anonymous Anonymous said...


Insubstantive post by you. your comparison between farmer loan waiver and passing the students is absurd. you dont know the plight of the farmers at ground level. Do you know that 9 out of 10 times farmers pay their loans with out defaulting it? Do you know that one default loan closes the door for farmers to get fresh loan and forcing them to the clutches of the money lenders?

Even accepting your method to solve the agrarian crisis, is it possible for the goverment to pay 3times for produces every year? is nt that the temporary measure by your standard?

we should accept that there are problems with agricultural sector and there is no magic wand that we could use to solve these problems. Even the developed economies spend billions of dollars every year in subsidies for agricultural sector. if we oppose the governments initiatives such as this loan waiver, we would beg for food from the developed countries as we did in 70s.

March 04, 2008 3:55 PM  
Blogger karmanna said...

the loan waiver is a right decision if the infrastructure is capable of delivering 100% of the benefit to the farmers... it never goes beyond 20% in India..jai Bharat!!

...a political stunt!!!

March 06, 2008 2:29 AM  
Blogger Sudipta Das said...

well Prior to the budget, which is held every year, business owners or corporates suggest possible changes in the economy. One may call it the "wishlist". The representatives from different industries have pinned their hopes on a possible reduction in personal as well as corporate income tax rates in the forthcoming India Budget 2008.

sudipta das
Free grant money

April 30, 2008 11:16 AM  

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