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Loan waiver for farmers to worsen UP's economic mess?

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  8 April 2017 12:00 AM GMT

By Mohit Dubey

Having waived the loans of margil and small farmers — as promised in the run-up to the assembly polls — the Uttar Pradesh government may well find itself carrying an unprecedented fincial burden in the days to come.

While officials and ministers in the Yogi Adityath government insist the “whole thing has been planned well”, fincial experts here say the new Bharatiya Jata Party (BJP) government will find it hard to bear the burden, which will be around Rs 37,000 crore (over $6 billion), especially as it has said that there would be no new taxes levied on the people.

Of the 23 million farmers in the state, 92.5 per cent (about 21.5 million), who are small and margil, have been granted a waiver against crop loans up to a limit of Rs 1 lakh each. The Yogi government has also erased loans of around 700,000 farmers who have defaulted and are now under the non-performing assets (NPA) tag to the tune of Rs 5,630 crore.

“There would be no burden on the people, they should remain relaxed,” state Fince Minister Rajesh Agarwal said. But the bravado, many fear, could be short-lived. Siddhartha th Singh, a minister and the state government spokesman, has been candid in admitting that the Union government headed by the BJP has already said a firm no to any sharing of the burden following the farmer loan sop.

“We are tied to fiscal discipline which mandates the states to keep the deficit not above three per cent of its GDP,” Singh said citing the FRBM Act passed by Parliament. Other than this, the state government will also have to face the major burden of the Seventh Pay Commission payouts.

The predecessor Akhilesh Yadav government had to bear this brunt for only three months but it would burn a hole in the pocket of the Yogi government for the entire 2017-18 and also in the years ahead. This alone involves an outgo of Rs 31,000 crore.

With growing incidences of violence in the state by women over their demands for a liquor-free Uttar Pradesh, the state government’s revenue will take a further hit in case it goes for such a social cause under pressure. Fear is looming large in the corridors of power on the shrinking revenue net and hence the loan waiver for farmers is being seen with some apprehension here.

If all the debts of the Uttar Pradesh government are taken into consideration, an official said, the state is reeling under an unprecedented debt of Rs 375,049 crore — a whopping 30.3 per cent of the state’s GDP.

“The fincial system of the state and economic planning has been a complete mess in the past decade and it sure will take a lot of time to mage it, forget taking new hits like the loan waiver,” a senior bureaucrat said. The state says it has an answer: Raise funds to cover for the loan waiver through a Kisan Relief Bond.

The modalities of the bond are being worked out and it would be cleared during the forthcoming budget session of the state assembly. Even so, a tough litmus test awaits the Yogi government as it treads delicately between economic prudence and populism.

Politically, the opposition parties are questioning the decision of the BJP government, saying it made a mockery of the pain being felt by the farmers. Former Chief Minister and Samajwadi Party (SP) president Akhilesh Yadav has called it a “farce perpetrated on farmers”.

“There was no capping in the promise made by the BJP during the state assembly election campaign; now they have done so and are only trying to fool the people,” he said. The Congress, on its part, has welcomed the waiver, saying that while the decision was good, much more needed to be done by the BJP government in Uttar Pradesh and at the Centre. (IANS)

(Mohit Dubey can be contacted at

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