The politics of loan waivers

Abstract

On examining broad numbers of indebted farmers commiting suicide, we realise that these farmers are not necessarily the small and the marginal. From the statistics of the Reserve Bank, it is evident that while agricultural loans have doubled, the actual number of borrowing cultivators has gone down, thereby increasing the average amounts lent per account. In a situation where the average holding size is decreasing across the country, we do not require any sophisticated statistical exercise to declare that these loans are moving towards larger farmers. If the average loan size goes up, without a concurrent draw one of the two following conclusions- the repayment capacity of the borrower must have significantly gone down, or the loan must have been diverted to some other purpose. Either way, it is very evident that there is a time bomb ticking in the doubled agricultural credit situation.