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Economy 21-Feb, 2024

Decoding the Financial Implications of Farmers’ Demands: Farm Loan Waiver & Other Demands

By: Damini Mehta

Decoding the Financial Implications of Farmers’ Demands: Farm Loan Waiver & Other Demands

Source: Getty Images

Amongst other major demands, the farmers want a complete loan waiver for all farmers. The farmers’ protests come just a few months before the 2024 Lok Sabha elections. In a country where nearly 60 per cent of the population still depends on agriculture for their livelihoods, issues of farmers and the agrarian community for long term societal progress.

The fourth round of talks between the protesting farmers and the Union government have failed and the farmers are back on the roads in their protest march to Delhi. Farmer representatives from protesting unions, Samyukt Kisan Morcha (non-political) and Kisan Mazdoor Sangh, have called the government’s assurance to provide MSP for five crops- three pulses, cotton and maize - a slighted attempt to introduce contract farming in India. According to them, they will not budge till the government assures legal MSP for all 23 crops along with fulfillment of the other promises. In the last piece, we took a deep dive on the farmers’ demand for legal MSP for all crops. In this piece, we take a look at the other demands the farmers have placed before the Union government. 

Apart from MSP, the protesting farmers are demanding an increase in the MGNREGA wages to Rs. 700 per day for 200 days per year. As of now, the Union government under MGNREGA provides 100 days of assured work to semi-skilled and skilled workers. The scheme is intended to act as a safety measure to provide jobs between sowing and harvesting during the lean period and witnessed a massive cut in the FY 2024 Budget with an allocation of Rs. 60,000 crores. This was a 33 per cent decline compared to the revised estimate of Rs. 89,400 crore in the FY 2022-23.  However, the revised estimate for the ongoing financial year for the scheme estimated a budget allocation of Rs. 86,000 crore. In the Interim Budget for FY 2025 the Union government kept the allocation for MGNREGA same as the revised estimate for the ongoing year at Rs. 86,000 crore but higher than the Rs. 60,000 crore budget estimate.

For FY 2023-24, the MGNREGA wage for Haryana was fixed at Rs. 357 per day, highest across the states. The farmers’ demands for a wage of Rs. 700 per day is nearly double the current wage rate in Haryana and more than three times the current MGNREGA wage in Uttar Pradesh and Bihar. While this may be a positive development for the MGNREGA beneficiaries, states such as Haryana and Punjab are at the risk of facing severe labor shortage if the laborers chose to stay back in their home state due to higher MGNREGA wages coupled with 200 days of work in their home states. Moreover, increased wages and doubled employment days would significantly push the budgetary allocations for MGNREGA, diverting money from more productive asset development. 

Source: Getty Images

The protesting farmers are demanding an old age pension for those above 60 years of age at Rs. 10,000 per month or Rs. 1.2 lakh per annum. This is 30 times more than the current old age pension of Rs. 300 per month provided by the Union government. There is no doubt a pension of Rs. 300 hardly covers basic costs, but a jump of more than 30 times will place a huge burden on the state exchequer. A more rational demand, in line with the state policy for old age pension to farmers below a certain level of landholding will be a more rational approach to support farmers in their old age. 

Amongst other major demands, the farmers want a complete loan waiver for all farmers. Farm loan waiver has been a consistent promise by political parties across assembly elections. The Congress detailed a farm loan waiver up to Rs. 2 lakh in the Madhya Pradesh and Chattisgarh elections late last year. The party made similar promises in the 2018 elections in Rajasthan, MP and Chattisgarh and managed to form a government in all the three states. The Congress also promised a farm loan waiver up to Rs. 1 lakh in Telangana elections conducted in early 2023. Economists have repeatedly warned against a farm loan waiver as a dangerous tool which puts extra pressure on the economy and the government and is likely to encourage default on loans on part of the farmers.  

According to a report from the State Bank of India, state governments across the country have waived off farm loans to the tune of Rs. 2.5 lakh crore between 2014 and 2022. The Union government on its part has been adopting measures to increase access to credit for agriculture and set a target of Rs. 20 lakh crore for agricultural loan in the Budget 2023-24. Experts suggest farm loan waivers in the event of major calamities that impact agriculture but recommend against waiving off farm loan carte blanche as a political tool. Instead of waiving off farm loans a better strategy would be to allow restructuring of agricultural debt as is mandated by the RBI and strengthening marketing and storage mechanism for agriculture produce to increase incomes. Other top demands of protesting farmers include nationwide implementation of land acquisition Act of 2013 and India's withdrawal from WTO coupled with freeze of all FTAs. 

The farmers’ protests come just a few months before the 2024 Lok Sabha elections where the incumbent BJP government led by Prime Minister Modi is seeking a third consecutive term in power. In a country where nearly 60 per cent of the population still depends on agriculture for their livelihoods, issues of farmers and the agrarian community for long term societal progress. Agriculture is the mainstay of food security and a sustainable and financially viable agriculture is crucial for sustained growth and economic progress. In this scenario and keeping aside the political implications of the protests, finding a long term solution to farmers’ concerns, one that modernizes agriculture and brings in revolutionary change without harming the cultivator is an imperative.

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