Pro-elite govt’s doublespeak on waiving off loans exposes bias against farmers
Compel the banking system to follow the law of the land
In the last nine financial years, starting from 2014-15, banks have written-off Rs 14.56 lakh crore of bad loans. Giving details, the Minister of State for Finance Bhagwat Karad informed that the amount included a write-off of Rs 7.40 lakh crore of industries and services.
A few days later, the Securities and Exchange Board of India (SEBI) listed 120 companies that had ‘vanished’ leaving behind dues to the tune of Rs 73,287-crore as of March 2023. Calling them as ‘defunct companies’, it ‘regretfully’ acknowledged it’s helplessness in recovering the amount.
In the days to come, it shouldn’t therefore come as a surprise when this amount is also added in the list of over-all write-offs that banks are saddled with.
Only a few weeks back, I had spoken about the Reserve Bank of India (RBI) asking banks to enter into a compromise settlement with rich wilful defaulters who collectively owed Rs 3.46 lakh crore to the banks (Wilful defaulters enjoy holidays, petty defaulting farmers languish in jail, Bizz Buzz, June 23, 2023).
On top of it, the write offs are coming at a time when the industry in September 2019 (prior to the pandemic years) was given tax cuts and some other concessions amounting to Rs 1.45 lakh crore annually.
Put together, the total amount that the financial system has come under strain (or have already written off in the past nine financial years) comes to a staggering Rs 18.75-lakh crore. Call it by any name; this is in reality the largesse to defaulting corporate, industries and services. While we can go on blaming the poor for the ‘revdis’ political parties throw to lure them, the magnanimity with which banks continue to bailout rich barons is nothing short of a ‘revda’.
While we go on counting the ‘revdis’ to show how precious resources are going down the drain, we fail to learn from a popular Hindi saying: ‘Sau sunaar kee ek lohaar kee’. Translated, it means: A single blow of a blacksmith is equal to hundred blows of a goldsmith.
To carry the argument forward, when Finance Minister Nirmala Sitharaman cut the annual budget for MGNREGA scheme by 18 per cent, making a provision for Rs 60,000 crore for FY 2023-24, a lot of concern was expressed. The provision the Finance Minister made was much lower than the revised estimates of Rs 89,400 crore for the year 2022-23.
I can understand that the allocation was reduced for FY 2023-24 because of financial constraints, but imagine if the banks had actually recovered the amount that was due from the corporate and other big defaulters; the same amount would have been enough to fund the MGNREGA scheme for the next 31 years!
In fact, why only guarantee 100 days employment to rural poor, the amount could have very well been used to guarantee employment to rural poor for double the number of days in a year – to 200 days, and that too for at least the next 15 years. Given that as per World Bank estimates, 91 per cent of India’s population lives on less than $ 4 a day (or Rs 280 per day), the importance of ensuring adequate livelihood security for the masses needs no over-emphasis. Interestingly, the amount that SEBI finds it difficult to recover from the defunct companies is almost equal to the total debt that Punjab farmers owe to banking institutions. With an outstanding farm debt of Rs 73,673-crore (against Rs 73,287-crore that SEBI finds it difficult to recover from vanishing companies), Punjab has the highest institutional debt per farmer in the country. At Rs 2.95 lakh per farmer Punjab tops the chart, followed by Gujarat Rs 2.28 lakh, Haryana Rs 2.11 lakh and Andhra Pradesh at Rs 1.72 lakh. Remember, besides institutional credit, farmers also take substantial amount of loan from private money lenders and commission agents at exorbitant interest rates.
Even though the maximum agricultural advances, at Rs 1.47 lakh crore, has been made by banks to Rajasthan farmers, the fact remains that more than 19,000 defaulting farmers in the State have been served with a kurki notice by banks for defaults in the last four years.
Similarly, according to a study by the Punjab Agricultural University, the total outstanding farm debt in Punjab has been estimated at Rs one lakh crore. Now, I don’t have to explain the reasons behind the growing farm indebtedness, but the fact remains that farmers are finding it extremely difficult to pay back the loans because of low prices.
While asset-ripping and tax cuts continues to dominate, I am surprised at the lax attitude of the RBI towards big defaulters. When it comes to waiving farm loans, the blame is on farmers for upsetting the national balance sheet, but when it comes to write-offs of the toxic corporate loans, some economist say it enhances economic growth. As I have repeatedly said, both the corporate and farmers take loans from the same banks but when a farmer defaults a petty loan it is called a moral hazard but when the rich default massive amounts some mainline economists celebrate.
A former chief economic advisor had gone on record contending that corporate write-offs lead to economic growth.
It is because agriculture has been rendered non-remunerative over the past few decades that there has been an increase in rate of migration from rural areas to urban areas.
By keeping agriculture deliberately impoverished, the economic thinking is to sacrifice agriculture for the sake of the industry. This thinking has to go. Against a migration rate of 2,000 per day, as per the 2011 Census, a senior agricultural scientist and a director of a national research institute had recently claimed that on an average nearly 4,000 farmers are migrating to urban centres on an everyday basis looking for a menial job. He too expressed concern at the policies that push farmers to join the ranks of an army of landless that swarms the cities.
In a recent interview, I had said that it is stupid to take people off farm for cheap labour. It is a reflection of a flawed economic thinking that stands outdated. A fresh thinking that relies on making agriculture economically viable, sustainable and profitable depends more and more on educated Indians seeing through the fault lines and coming up with viable alternatives and question the flawed policies that have led the majority population to somehow survive against all odds. The need for instance is to question the economic framework that keeps farmers at the bottom of the pyramid.
Stopping the generosity towards the wealthy and diverting the same funds to the farming community and the poor can only happen when people begin to raise the right kind of questions.
To begin with, the banking system cannot be used anymore to allow the deep-pocketed to amass more wealth. The banking system should be made to follow the law of the land irrespective of whether it is for the rich defaulters or the poor. Banks cannot be allowed to handle the rich defaulters with kid gloves.
(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)