GS Mains Model Question & Answer: To waive farm loans is a
feasible option. Justify. Suggest alternative measures if not. Examine. Comment
Q. To waive farm loans is a feasible option.
Justify. Suggest alternative measures if not. Comment
To waive farm loans is a feasible option. Justify. Suggest alternative
measures if not.
To waive farm loans could be seen in the following perspective:
- Loan waivers impose a significant cost on the budgets of State governments
since banks will have to be compensated by the governments for the losses they
- Further, the offer to waive off loans could end up increasing the cost to
governments by encouraging wilful default by farmers who can actually afford to
pay off their loans.
- Loan waivers also lead to the problem of moral hazard. Farmers, when they know
that the government will waive off their loans when things go wrong, are more
likely to make poor investments or take higher risks.
- In actual farmer distress it is helpful but there is a proper mechanism to
assess the real situation.
- It could not be seen as a populist measure of political vote bank only.
- Alternative measures:
- Indian agriculture faces a secular crisis due to the risks involved in
agriculture, and the lack of sufficient returns. Many economists have argued
that this cannot be solved through temporary populist measures, but instead
requires structural reforms. Such reforms can help improve farmer incomes and
also encourage farmers to seek their livelihood in more profitable sectors of