Tag Archives: loan waiver

Fitch: Indian Loan Waivers are a Risk to Fiscal Consolidation

Newsroom24x7 Network

Mumbai/Hong Kong/Singapore: The farm loan-waiver schemes being discussed and rolled out across an increasing number of Indian states could have a significant impact on state government finances, and might undermine efforts to bring down general government debt, says Fitch Ratings.

The impact on India’s debt dynamics and capital spending will depend on the total size of loans waived, how the scheme is financed, and whether there are possible offsets from cuts to other forms of spending, including capital projects, Fitch adds.

Larger state deficits would delay an expected gradual reduction in general government debt, which includes central and state government debt. When India’s rating was affirmed at ‘BBB-‘/Stable in May, Fitch forecast general government debt to fall to 64.9% of GDP by FY21, from 67.9% in FY17, and we highlighted that potential changes to India’s fiscal position are a rating sensitivity. Public finances are a key weakness in India’s sovereign credit profile, with general government debt well above the ‘BBB’ median of 40.9% and the fiscal deficit of 6.6% of GDP in FY17 much higher than the ‘BBB’ median of 2.7%.

India’s central government has gradually consolidated its fiscal position in recent years, and has indicated it will not participate in the waivers. However, the combined finances of the states – which are included in general government debt and deficits – have been under pressure. Public pay hikes, election spending and higher interest costs stemming from the UDAY scheme – under which state governments have taken on debt from power distribution companies – are all likely to add to expenditure.

There is a risk that farm loan waivers – which we have not previously factored into our assumptions – will lead to further fiscal slippage at the state level or will reduce the funds available for public investment. The central government has the authority to block states from borrowing to finance persistently large deficits, but it could be reluctant ahead of approaching elections in some states, and with the 2019 Lok Sabha election drawing nearer.

The last widespread farm loan-waiver scheme was rolled out in 2008 by the central government, and covered 43 million farmers. It reportedly cost around 1.3% of GDP. The combined cost to the states could also become large this time. Schemes have already been announced in Uttar Pradesh, Maharashtra, Punjab and Karnataka, which account for around one-third of India’s population. Other governments are likely to feel pressure to implement similar policies, particularly in states with upcoming elections. A roll-out across much of India is not unthinkable.

Banks could also be affected by the waiver schemes. The schemes will benefit banks to the extent that they offload farm loans with weak repayment prospects to state governments. Uniform farm loan waivers could lead to moral hazard and weaken the general repayment culture among financially healthy farmers, but they will still have an incentive to repay loans in order to retain access to future funding. Agricultural loans account for 14% of total bank lending, according to the Reserve Bank of India, and are equivalent to around 6.5% of GDP. (Fitch Ratings)

Newsroom24x7 adds:

Here are clippings of a series of news items by Lalit Shastri, Editor-in-Chief Newsroom24x7, published on 3-consecutive days in July 1989 by a leading newspaper of Bhopal. These exposed the impractical side and futility of rural loan waiver.

In the run up for the 1990 Assembly election in the central Indian State of Madhya Pradesh, the State unit of Bharatiya Janata Party, which was then led by Sunderlal Patwa, had announced from rooftops that once they come to power, all rural loans shall be waived. This was done without explaining what they meant by “Rin Mukti” or loan waiver and what would be the tune of debt that they hoped to exempt and also from where they were going to mobilise resources to meet this goal.

The BJP had done this showing zero regard to the fact that no government’s financial policy recognises or rewards a defaulter.

Patwa had become chief minister for a second term riding on the crest of popularity due to the loan waiver plank but his regime that lasted slightly more than 1000 days ended abruptly in December 1992 when his government was dismissed and President’s Rule was imposed in Madhya Pradesh in the wake of the riots that followed in Bhopal and few other cities after the demolition of the disputed Babri Masjid structure on 6 December that year.

 

 

Sunderlal Patwa: Politician to the core who defied the mundane

Lalit Shastri


sunderlal-patwaVeteran Bharatiya Janata Party (BJP) leader and former Madhya Pradesh chief minister Sunderlal Patwa passed away this morning after suffering a heart attack. He was 92.

The Madhya Pradesh government has announced a 3-day state mourning as a mark of respect to the departed leader.


When Janata Party had come to power in Madhya Pradesh in June 1977 after the Emergency imposed by Indira Gandhi between 1975 and 1977, Kailash Joshi was sworn-in as Chief Minister and his term lasted barely 7-months as he was replaced by VK Saklecha, who ruled for more than two years from January 1978 to January 1980.

Sunderlal Patwa succeded Saklecha but remained chief minister for only 29 days. His tenure was cut short as his government was dismissed and President’s Rule was imposed in February 1980 although he commanded majority. When elections for the State Assembly were held in June 1980, Congress came to power and Arjun Singh became the chief minister and completed his five-year term in office.

In the 1990 Assembly election, the BJP led by Sunderlal Patwa swept to power riding the crest of popularity due to the pre-election promise of “Rin-Mukti” (farmers’ loan waiver).

Here are clippings of news items by the author published on 3-consecutive days in July 1989 exposing the impractical side and futility of rural loan waiver

In the run up for the 1990 election, the State BJP unit led by Patwa had announced from rooftops that once they came to power, all rural loans shall be waived. This was done without explaining what they meant by “Rin Mukti” or loan waiver and what would be the tune of debt that they hoped to exempt and also from where they were going to mobilise resources to meet this goal. The BJP had done this showing zero regard to the fact that no government’s financial policy recognises or rewards a defaulter.
Patwa’s second term, though it lasted slightly more than 1000 days, also ended abruptly in December 1992 when his government was dismissed and President’s Rule was imposed in Madhya Pradesh in the wake of the riots that followed in Bhopal and few other cities after the demolition of the disputed Babri Masjid structure on 6 December that year.

Patwa presided over a democratically elected government that was dismissed due to the failure on its part to prevent post-Ayodhya riots from spreading in Madhya Pradesh, whereas the top officials, including the then State Chief Secretary and Director General of Police, who were monitoring the riot situation from the Control Room in the State capital and briefing the media on a day-to-day basis along with the Chief Minister at the State secretarat kept rising the ladders of success in their respective careers. Notwisthstanding the fact that both these top offcials were removed promptly by the then Governor on imposition of President’s Rule to allow fair Inquiry into the causes and acts of omission and commision leading to the flare up of the situation, the fact remains that on the one side Patwa lost his job as chief minister and on the other the top cop in quetion was elevated to the post of Director General of Border Security Force and the axed chief secretary who also went on deputation to the Centre was later appointed as chairperson of the Public Enterprises Selection Board [P.E.S.B], which is a high powered body constituted by Government of India for evovling a sound managerial policy for the Central Public Sector Enterprises and, in particular, to advise Government on appointments to their top management posts.

It is not the least surprising that the BJP had to pay a heavy price and it lost the 1993 State Assembly election. This happened since the majority of voters had refused to get polarised as hundreds had perished in the post-Ayodhya riots while the police under the Patwa regime had mostly abdicated it’s role. I have been a witness to police officers turning a blind and leaving the scene while rioters torched shops and indulged in an orgy of violence in old Bhopal streets.

Any one who has watched Assembly debates with Patwa as leader of the House or as Opposition leader, would recall his punchy jibes, humour and rustic replies that left all speechless. One recalls – on a particular occasion when the members from the Opposition benches had tried to pin him down on his unfulfilled promises, he had remarked with a nonchalant demeanour “मैने गंगा जल हात में लेकर शपथ नहीं ली थी”” (I did not announce this by taking oath while holding the sacred water of the Ganges in my hand).

Patwa had tremendous faith in his own popularity both within the party and outside. It was backed by his long years as a party worker with the erstwhile Jan Sangh and then as a legislator and parliamentarian and a veteran BJP leader who had played a key role in laying the foundation of BJP in Madhya Prdesh. A negative reporting here or a negative reporting there never bothered him even an iota.

Hailing from Mandsaur in western Madhya Pradesh Patwa had made Bhojpur, near Bhopal, his Assembly constituency. He had also defeated Congress stalwart Kamal Nath on his home turf in Chhindwara in 1998 and had also represented Hoshangabad in Parliament when he won that seat in 1999.

Political Career

  • 1957-67, 1977–97 and 1998 – Member, Madhya Pradesh Legislative Assembly (three terms)
  • 1957-67 – Chief Whip, Opposition Party, Madhya Pradesh Legislative Assembly
    1975 – General Secretary, Jana Sangh, Madhya Pradesh
  • 1977 – Member, Working Committee, Janata Party
  • Jan. 1980 – Feb 1980, March 1990 – December 1992 – Chief Minister, Madhya Pradesh (twice)
  • 1980-85 – Leader of Opposition, Madhya Pradesh Legislative Assembly; Chairman, Public Accounts Committee, Madhya Pradesh Legislative Assembly
  • 1986 – President, B.J.P., Madhya Pradesh; Member, General Purposes Committee, Madhya Pradesh Legislative Assembly
  • 1997 – Elected to 11th Lok Sabha
  • 1999 – Re-elected to 13th Lok Sabha (2nd term)
  • 13 Oct. 1999 – 30 Sept. 2000 – Union Cabinet Minister, Rural Development
  • 30 Sept 2000–7 Nov. 2000 – Union Cabinet Minister, Chemicals and Fertilizers
  • 7 Nov. 2000 – 1 Sept. 2001 – Union Cabinet Minister, Mines

 

Rahul Gandhi attacks Prime Minister Modi on farmers’ issue in Telangana

Newsroom24x7 Desk

Congress Vice President Rahul Gandhi during Padyatra in Adilabad, Telangana
Congress Vice President Rahul Gandhi during Padyatra in Adilabad, Telangana

Adilabad (Telangana): Rahul Gandhi on Friday took Prime Minister Narendra Modi and Telangana Chief Minister K Chandrasekhar Rao head on accusing them of completely forgetting their pre-poll promises to the farmers.

Taking a potshot at the Prime Minister, the Congress vice president said that neither Modi nor the Telangana chief Minister did anything when the farmers were hit by thundershowers and hailstorm. He even went on to describe Telangana chief minister Chandrasekhar Rao as ‘mini Modi’.

Rahul said Modi and the leaders now at the helm of affairs in Telangana had promised waiver of rural loans and remunerative prices for their produce but nothing has been done to meet this promise.

Rahul also used the platform to attack the Modi led Central Government’s for pushing the  controversial land acquisition Bill. He pointed out that the previous UPA regime had brought in a new package of land reforms so that the farmers and their children could benefit from the rising price of land.

The Congress leader was on a 15 km Padyatra (foot march) in Adilabad district of Telangana today.