Easy to give in, but how do you stop?

The newly elected BJP government of UP has waived loans incurred by farmers at a cost of Rs 363 billion. "It is well-known that the rural economy and the agricultural sector in particular have been in distress for quite some time now," wrote Prof Himanshu. "The distress which started three years back worsened with two back-to-back droughts in 2014 and 2015. But the distress was also due to declining farm gate prices of a majority of crops since 2014." "According to the Situation Assessment Survey(SAS) of 2012-13, 52% of all farmers in the country have debts outstanding, with an average debt of Rs 47,000." That is a lot in India. "At all India level, 60% of these loans were from institutional sources while the remaining were accounted for by local money lenders and other sources. The data also shows that the dependence on non-institutional sources was much higher for small and marginal farmers with more than 50% of loans of this group coming from non-institutional sources." This explains a rise of 42% in suicides by farmers. Although loan waivers do help some farmers in the short term it is not the answer to long standing rural distress, wrote Roshan Kishore. Why was a loan waiver necessary when the government's data showed an increase in the area under cultivation following the good monsoon last year? The import duty on wheat was lowered from 25% to 10%, which shows that claims of increased production of wheat was wrong, wrote Himanshu. Also fertilizer sales have been dropping since 2013 which is at odds with claims of increased production. Importing wheat lowers its price in India, leading to decrease in income of farmers who are unable to meet their costs. Loan waiver rewards defaulters and punishes those who repay their loans, leading to an increase in defaults, with the expectation of more waivers in the future. Besides loan waiver in UP will only increase the pressure on chief ministers of other states to do the same for their farmers as well. Indian banks are already burdened by trillions of rupees in bad loans and this will only add to the pain, although the government has promised to pay the banks in three stages. So why do it? Because,"Unhappy farmers worry politicians," wrote R Sukumar. The Vajpayee government lost in 2004, despite a growing economy, because of lingering effects of a drought in 2002. Modi is not going to take any chances, never mind the cost. No one had heard of Naxalbari, a small village in West Bengal, until 1967 when farmers rose up in revolt. Policemen are still being killed by Maoists inspired by that event. India is a 'do something' nation where politicians want to show that they are doing something, to win elections, wrote R Jagannathan. Even if that something has been shown not to work. Besides it costs nothing to waste taxpayer money.