Lord Meghnad Desai
London-based economist Lord Meghnad Desai has said that farm loan waivers, triggered by the Congress government in some states, and now being followed by some BJP-ruled states, is not the answer to India’s agrarian crisis. The veteran economist also said that the Reserve Bank of India should not write a cheque for the centre from its capital reserves.
In an exclusive interview to BTVI, the veteran economist said, loan waivers were harmful and addictive. “If I were a worker in the city and had debt, could I go to the government and say cancel it. The government would say get lost, you took the debt and it’s your responsibility, it is your debt and you clear it. Why are farmers so special?” asked Desai.
“They have input subsidies, they have tax exemption. Why does everybody believe that farmers in India are in distress and their debts need to be exempted. From where does this money come from? It comes from health, education, cash meant for the poor,” emphasised Desai.
Explaining the ‘Moral Hazard’ of a loan waiver, Desai added “You cancel someone’s debt, and all that would do is to encourage him to get into debt again. Honest farmers who paid back their debts must feel like fools, wondering why did I pay back my debt? It is not a solution, it is like opium”, Desai said.
Lord Desai said a large chunk of Indian farmland, approximately 80 per cent, was not even viable for farming because of its size. So, the need of the hour is to have fewer farmers and push the next generation from farming communities to do skilled jobs.
Desai urged politicians of India to show the courage to say no to debt cancellation because of the fear of insulting farmers.
The veteran economist said he was surprised to see ordinary people in India not getting such benefits of debt cancellations, except farmers. “Do industrial workers get debt cancellations?” asked Desai
Lord Desai said he was against such blanket benefits because subsidies and other tax benefits do not work in the longer run. “The day will come when tax payers will not put up. I seriously want to ask the government, why not debt cancellation for the other poor of society who cannot even borrow money?”
He said the UPA-2 farm policy of waivers was a disastrous one. Even in cases like minimum guaranteed price scheme, the big question that constantly emerges is who will pay for the gap between the actual market prices and minimum guaranteed prices. “Who is paying for those subsidies? And for how long? Why only farmers, why not coal, textile, steel and iron plant workers who are in debt? Eventually, it will all add to the burden of states and national debt.”
Lord Desai said the Reserve Bank of India should not write the much-debated cheque for the Indian government. “Ten years ago, when the financial markets collapsed, every Central bank had to find resources to shore up the economy. A bank must be ready for the extreme scenario. You don’t get a notice that a Tsunami of financial collapse will occur. RBI should ask a foreign central banker to evaluate right level of reserves, this is not the job of an IAS. The Central Bank must be cautious, more orthodox than the government would like.”