The United Progressive Alliance government's unprecedented move to waive INR 600 billion in debt owed by an estimated 40 million small and marginal farmers is a development that, predictably, has drawn significant flak. From gung-ho neoliberals to leading lights of the communist parties, the centrepiece of Finance Minister P Chidambaram's new budget has seen widespread criticism.
Before dealing with the details of this disapproval, the loan write-off needs to be placed in context. In recent years, along with low agricultural growth, India has been witnessing significant distress in the farm sector. For all the attention attracted by subsidies to this sector – especially for power to run water pumps – there has been no attempt to either ameliorate this distress or address the causes of the overarching calamity. The economic crisis in Indian agriculture has been brought home dramatically in recent years by the growing number of farmer suicides. These deaths are not confined to, as mostly reported, the poorer regions of Andhra Pradesh and Maharashtra, but extend even to Punjab, one of the country's most prosperous states.
Understandably, the clamour for mitigating the acute economic distress in the countryside has been gathering political momentum. In fact, even before the 2008-09 budget was presented, opposition members in Parliament disrupted proceedings on successive days, demanding that the government hasten the provision of meaningful relief to nearly two-score million farming families. In fact, with Manmohan Singh's government certain to announce measures to ameliorate the debt of India's farmers, the opposition parties were jostling to grab public attention so that the credit would be shared.
All of this posturing proves that, across the political spectrum, there was no disagreement on the need for the loan waiver. This was, of course, politically expedient, as well: those dependent on agriculture constitute the country's single largest block of voters. As such, it would be politically unrewarding, if not counterproductive, to publicly oppose springing the rural poor from their debt trap. But it is immaterial whether the loan waiver was based on the hopes of an electoral harvest. In this case, it is the logic of the waiver's effect that calls for critical exploration.