The UPA’s whopping 60,000 crore debt waiver has come for severe criticism in the Parliament.
While the BJP’s Arun Jaitley charged the finance minister Chidambaram with fuzzy math with these remarks
Â if he actually raised Rs 60,000 crore without budgetary provision “I will bow my head before him not as the greatest magician but as a great FZ+;Minister”.
BJP MP from Amritsar Navjot Sidhu had this to say
Likening the loan waiver for farmers announced in the budget as a “lollipop wrapped in paper or an analgesic tablet for a cancer patient”
Calling the write off the biggest eyewash in Independent India Sidhu had an interesting suggestion
though an expert group led by R Radhakrishna had looked into problems of agricultural indebtedness had not mooted writing off farm loans, instead recommending at least Rs 18,000 crore of noninstitutional debt entailing an over 30% interest rate should be transferred to institutional agencies
Clearly there is more than one way to address the crisis that while providing relief also upholds the fundamental dharma of borrowing and lending.
The Business Standard reports that the BJP has decided to set up a committee headed by senior leader Yashwant Sinha to study the problems faced by farmers, and to puncture, what it called, the “illusion” created by the government by announcing the package.
While the BJP ponders its response to the UPA’s populism, Offstumped poses the question if it will resort to more competitive populism of the giveaway kind or will it find the “Right” way to do this.
Offstumped has a few suggestions while claiming no expertise in either economics or agriculture but merely claiming basic Right Thinking Common Sense.
- Any approach to solving the crisis must be rooted in three basic principles.
- The first is that the basic dharma of borrowing/lending will be upheld and not compromised in any manner.
- The second is that Local Governance must take primary responsibility for addressing the plight of its constituents.
- The third is that Individuals must take responsibility for their actions and consequences of their actions.
- Deriving from the first principle must be some kind of Personal Bankruptcy Law that allows the farmers to be given legal and institutional protection while they remain committed to restructuring and eventually repaying debt. A key element of such protected restructuring could be what Sidhu was referring to where Institutions will buyout illegal loans owed to private money lender who have a choice of taking what they can get legally and cleaning up their act or face the rule of law including losing all all money owed and jail time.
- Deriving from the second principle could be some kind of a Local Community Debt Re-structuring Tribunal that Local Governments take responsibility for and will be held directly accountable by their constituents for. Such a Tribunal can then under ambit of the Personal Bankruptcy Law take a case by case view for each individual farmer to determine the best course of action for the Farmer to get on a path to financial viability with an eventual roadmap to paying off all debt. A centrally implemented scheme suffers from the fact that it would be a blanket giveaway which could end up rewarding the undeserving while penalizing the deserving while doing little to ensure a roadmap to financial viability. As we have seen in the Vidarbha suicides that each farmer’s situation is different and only the local government is the agency best empowered to factor in the uniqueness of each case and coming up with a local solution that works under those conditions while not compromising on any of 3 basic principles.
- Finally deriving from the 3rd principle the individual farmer must sign up and commit to a set of actions that will take him on a path to financial viability while eventually paying off all debt. These set of actions could be determined jointly by the farmer with the Local Tribunal. The Central and State Governments should commit to making the necessary legislative and Institutional changes necessary to enable the farmer and the Tribunal to be successful in not just determing what actions need to be taken but to also be successful in actually executing them within a specified timeframe. All relief should be contigent on the Farmer taking responsibility and commiting to those financially responsible actions.
The role of the Central and State Governments must be limited to providing legislative and institutional support and monitoring the Local Tribunals for their effectiveness and holding them accountable for lapses. The legislative support should include the freedom for the farmer to exit agriculture by selling their lands for any non-agricultural purposes where it makes economic sense and the freedom to sell their produce in open markets with limited or no price controls.
Such a 360 degree engagement with the Farmers by the Local Governments should be the most effective way forward on evolving solutions tailored to suit the unique needs of each farming community and individual farmer rather than a centrally implemented blanket giveaway that is high on populism and poor on delivery with no responsibility to make things different the day after the giveaway happens.