Scaling New Heights

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.