Sonia hailed the loan waiver to farmers as revolutionary. Well, why wouldn’t she, it’s not her money. This largesse, at the cost of our tax money, is aimed at getting enough votes to stay in power. But, like you may have read elsewhere, this is simply not the solution. And curiously enough, Sonia addressed a large gathering of farmers soon after the budget was announced. How did the farmers manage to get there so fast? Wasn’t possible without leaking the budget & getting them gathered outside 10 Janpath. Staged, anyone?
Let’s see where the problem lies. There is a very simple fact, in order to be well off, you have to earn more than you owe. Only then will you see some savings in your bank. Our poor farmer’s plight has something to do with that. They are trapped into a vicious cycle of debt. They borrow money to cultivate their lands, but their yield does not give them enough money, as a result, they do not make enough to pay off their loan. Not to forget, there’s no saving for them in the end. They are left with borrowing more money to survive.
First they seek loans from banks. On failing to pay off their debt there, they are no longer favored for further loans. That leaves them at the mercy of local money lenders, who lend at a much higher interest. Many of these lenders aren’t even registered. This cycle continues until, the hapless farmer learns, the only way to end this is to stop existing anymore. In view of this problem, the loan waiver isn’t going to help the farmers at all. It’ll be a short term relief at the best. The loan waiver is a bad example & will make it difficult for future governments. It will lead the farmers to believe it's ok to default, the government will take care of you.
Now, let’s look at the fine print. The waiver will only benefit farmers with land measuring two hector or less. That leaves most of the farmers in Vidarbha out of this. This was the area that caused the PM to pay a visit & announce a relief package owing to the farmer suicides. Besides, what happens to those who owe to the private money lenders, what plans do we have for them? Of course, the government can’t help those who follow illegal means, but the problem is deep.
There’s no denying that our farmers do need help. What they really need is a plan to make them competitive & provide sustainable growth. They need good price for their produce so they can pay off their loans & make some money for themselves. This crisis in the agriculture sector has been pointed out numerous times, but has failed to catch attention of our leaders. Our FM is happy with the record tax collections & our agriculture minister is busy with his BCCI duties (when he gets paid from our tax money for his duties as a minister).
While the FM has decided to write off the loans, what this will do the balance sheets of banks is another matter. Writing off debts isn’t going to do them any good. Besides, the consequences could be grave, if the recent sub-prime crisis in the US is any indication.
Rs. 60,000 crore is a large sum to write off. The waiver has set us back by that much. It’ll be interesting to see what will this do to the deficit & how does the FM plan to raise that much money. The answer may be this, raising or levying other taxes & burdening us more. And he has done exactly that. Also, do not forget the sixth pay commission.
By increasing the income tax slab, the FM has provided relief to tax payers. However, other taxes have gone up. Capital gains tax increase is penalizing those who turn in a profit. This may lead to them seeking ways to avoid tax, like most of the small businesses do.
The budget wasn’t short on populism. Allocation for minority welfare was doubled, with plans to increase the number of banks in minority dominated areas. Now here’s another possible loan waiver in the making (just speculating). The most baffling announcement was more folks from the minority will be recruited in the Central Para-Military forces. This doesn’t fall under Chidambaram, does it? Well, with the elections coming up, all this makes sense.
The union budget is borrow & spend that doesn’t bode us good. Will it maintain our growth?
1 comment:
In Vidarbha, the moneylenders are mostly Congress guys. There's a reason the central and state govt have failed to provide helps to farmers there. Their own vested interest torpedoes any package. The co-op banks in that region too are owned by Congress leaders.
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