Waive' goodbye to sustainable economics

When economist Raghuram Rajan described loan waivers as doing "more harm to the system" than good, he emphasised distortions in credit prices and widespread misappropriation. Still, despite several mishaps, they remain a favourite tool in the political kitty, with CM Kumaraswamy now forced to make good on a pre-poll sop that will cost the exchequer Rs 53,000 crore, made against an annual budget of Rs 2.5 lakh crore. Meanwhile, farmers' problems remain unaddressed, with the agrarian community buckling under poor irrigation facilities, untimely rains, spurious seeds and the lack of government support prices.

It's no small number. Over 3,000 farmers killed themselves between April 2013   and November 2017 in the state and  the only panacea the government has come up with is an offer to write off their loans. Experts, however, believe this is only a patchy solution to a more complex problem. Many also remain sceptical about how the government intends to raise the funds it needs to carry out its promise.

While Chief Minister H D Kumaraswamy had in his party's election manifesto promised to waive-off loans within 24 hours of coming to power, he appears to have since realised the enormity of the task.  Even former Chief Minister Siddaramaiah is seen bringing up this valid point in a private chat with his party associates in a video that has since gone viral. While it may have caused the coalition government some discomfort, the question that he raised is being asked by others too. 

Says  former president of the Federation of Karnataka Chambers of Commerce and Industry (FKCCI), Muralidhar D, " Mr Kumaraswamy promised to waive-off loans within 24 hours of coming to power, but a  month has gone by and nothing has happened. It is only when you are  in the hot seat that you know the practical difficulties of executing promises made without properthought."

While agreeing that the state has been reeling under a drought over the past two years and farmers across the state are in distress, he warns that merely waiving off farm loans to the tune of Rs 53,000 crore as promised by the JD(S) will serve no real purpose.

In his view the better alternative would be  measures such as the ones takenby states like Telangana, where under a farmer investment support scheme a subsidy of Rs 8,000 per acre is given to farmers in the form of cheques towards their purchases and preparing their field for various crops. "This is how  poor farmers should be helped without burdening the state's economy," he says.

When Karnataka has only a  two lakh crore annual budget and spends 60 per cent of it on salaries of government employees, and other expenses, leaving only 30 to 40 per cent for developmental work in various sectors like health, education, how is it going to meet this additional commitment of writing off farmers loans, he asks pertinently.

"Raising funds by selling encroached land as suggested by the  A T Ramaswamy report and the V Balasubramanian Task Force could fetch over Rs 50,000 crore, but not immediately," Mr Muralidhar adds. 

"In Uttar Pradesh farm loans were waived to the tune of Rs 35,000 crore, but its budget is 2.5 times the size of Karnataka's and after implementation of GST its income too has been streamlined. So it has managed to absorb the waiver, but this is not the case here in Karnataka," he warns.