Context:
The Maharashtra government’s ₹35,000 crore farm loan waiver has revived debate over its impact on credit discipline, fiscal burden, and long-term agricultural sustainability.
Key Highlights:
- Policy Details
- Total waiver: ₹35,000 crore
- ₹20,000 crore for defaulters
- ₹15,000 crore incentive for regular payers
- Beneficiaries: ~30 lakh farmers
- Historical Trends
- Since FY15, 10 states have announced waivers worth ₹2.4 lakh crore.
- Over ₹3 lakh crore spent in 35 years on loan waivers.
- Major schemes:
- ARDRS (1990)
- ADWDRS (2008)
- Stakeholders
- State governments
- Farmers (borrowers)
- Banks and financial institutions
- RBI (regulator)
- Significance / Concerns
- Provides short-term relief to distressed farmers.
- Raises concerns about:
- Credit culture deterioration
- Rising NPAs in agriculture
- Fiscal stress on states (0.1%–1.8% of GSDP impact)
Relevant Prelims Points:
- Farm Loan Waiver
- Government writes off outstanding agricultural loans.
- Credit Culture
- Borrower behaviour regarding loan repayment discipline.
- Non-Performing Assets (NPAs)
- Loans overdue beyond 90 days.
- RBI
- Regulates banking system and credit policy.
Relevant Mains Points:
- Advantages of Loan Waivers
- Immediate debt relief for farmers.
- Can boost consumption and short-term investment.
- Concerns
- Encourages moral hazard (strategic defaults).
- Weakens banking discipline and credit flow.
- Only ~50% of eligible farmers benefit.
- Distorts priority sector lending behaviour.
- Fiscal Implications
- Burden on state finances, crowding out development spending.
- Reduces ability to invest in infrastructure and irrigation.
- Long-Term Alternatives
- Strengthen institutional credit access.
- Promote crop insurance (PMFBY).
- Invest in irrigation, storage, and market reforms.
- Direct income support (e.g., PM-KISAN).
- Way Forward
- Use waivers only as exceptional measures.
- Focus on structural agricultural reforms.
- Improve credit delivery and financial literacy.
- Ensure targeted and transparent implementation.
UPSC Relevance:
• GS 3 – Economy (agriculture, banking, NPAs)
• GS 2 – Governance (welfare policies, fiscal management)
• Prelims – Loan waivers, RBI, NPAs