Indebted small farmers in India get a reprieve
|
New Delhi: The Indian government is to cancel the entire debt of the country's small farmers in a giant scheme that will cost 600 billion rupees ($15 billion or £7.6 billion).
The move is a centrepiece of India’s latest budget, with the government also increasing education spending by 20% and health funding by 15%.
Widely seen as a populist budget ahead of elections due by May 2009, Delhi has also pledged to control food prices. The government also said it would keep up work to control wider inflation. The farm loan cancellations will be offered to all farmers with less than two hectares of land. Reaction from farmers groups has so far been mixed, with some complaining that the land-size criteria is too strict, and that those with larger fields will unfairly miss out. Mohan Manidwar of Farmers Agitation Group, which highlights the large number of impoverished farmers committing suicide, said most farmers in the Vidarbha region of central Indian would miss out. ‘Price pressure’ Unveiling the latest budget, Finance Minister Palaniappan Chidambaram said India’s annual economic growth was now running at 8.7%. This figure, which covers the current financial year to March 31, 2008, is a slight slowdown from 9.6% in 2006-07 - India's fastest economic expansion in 18 years. Over the past year India has increased interest rates and reduced the supply of the rupee to cool this breakneck growth. “There is pressure on domestic prices, especially the prices of food articles,” Chidambaram told the Indian parliament. “Management of the supply side of food articles will be the most crucial task in the ensuing year.” “Keeping inflation under check is one of the cornerstones of our policy.” Chidambaram added that the government was determined to see India become self-sufficient in food grains. Chidambaram also announced higher spending on rural infrastructure and highways. Over 48% of farmers in debt Earlier citing The Economic Survey, an Indian newspaper reported that 48.6% of the farm households were indebted. Of the total number of indebted farmers, 61% had operational holdings of below one hectare. It is estimated that 57.7% of the outstanding amount was sourced from institutional channels (including government) and the balance 42.3% from moneylenders, traders, relatives and friends. The Radhakrishnan Expert Group had estimated that in 2003 non-institutional channels accounted for Rs. 48,000 crore of farmers’ debt, of which Rs. 18,000 crore was taken at an interest rate of 30% per annum or more. Of the total outstanding amount, 41.5% was taken for purposes other than farm-related activities. It is estimated that 30.6% of the total loan was for capital expenditure purposes and 27.8% was for current expenditure in farm-related activities. The Group has recommended inclusion of financially excluded, particularly the small borrower households, and adoption of risk mitigating measures for agriculture. It has proposed setting up of the Price Risk Mitigation Fund to compensate farmers in extreme situations of price collapse. The survey points out that the international experience of price stabilisation fund had generally been “disappointing.” The basic principle of a stabilisation fund was that prices should converge to the mean. Prolonged slumps in prices made the fund bankrupt and sustained high prices eroded the incentives for being associated with the fund, as the transaction costs of operation of the fund were considered avoidable. Source: BBC and The Hindu |
Printable version
Back to top
