Reuters write “Prime Minister Narendra Modi’s government is likely to announce loan waivers worth billions of dollars to woo millions of farmers ahead of a general election, government sources said, after his ruling party suffered a rural drubbing in state polls”.
To claw back support among India’s 263 million farmers and their many millions of dependents, Modi’s administration would soon start working out the details of a plan allocating money to write off farm loans, government sources said.
With a national election due by May 2019, Modi and the BJP have run out of time to announce other easy, popular measures such as raising the support, or guaranteed, prices for staples such as rice and wheat, farm analysts said.
“Elections are round the corner and you know that you’ve failed to fix the problems being faced by these farmers, so you will soon go to town promising agri-loan waivers,” said Ashok Gulati, a farm economist who advised India’s last government on crop prices.
The plan could see as much as 4 trillion rupees ($56.5 billion) in loans written off, the government sources and analysts said.”
My two cents
I was hoping against hope that we will not see any more dole out of the free money but with a pliant RBI governor and soft CPI government might just succeed in reflating the economy and postpone this problem to be dealt after the general election.
Contrary to popular perceptions, populism is very bullish in early stages because it liquifies the system. Fiscal policy taking over to offset monetary drag. At some point of time in near future Bond Market will revolt and that is when populism devolves into anarchy.
Makes a bullish cash for gold and silver apart from consumer durables with rural consumption
I agree in short term free money always lead to higher demand for goods and services and in this case rural consumption
Unfortunately the system that exists gives farmers 10% of market rate that consumer pays. The 10% price is unsustainable so comes the waiver which is again paid by consumers/ taxpayers which is dubblewhammy to them. And Who goes laughing to bank ? The middlemen which are APMC controlled by vested interests. End of story
Hopefully better sense will prevail, but political compulsions always wins over sesnsible economics
Direct farm to fork seems the only long term solution