Grain drain: Farmers lose Rs 1.5 lakh crore, get waivers of Rs 28,000 crore
Whether Modi succumbs to the pressure remains to be seen, but it is important to keep in mind that this is not the issue; what matters more is market access.
Widespread farm distress may or may not have caused the BJP to lose three state elections, but with the newly-elected governments of MP, Rajasthan and Chhattisgarh writing off Rs 60,000 crore of farm dues, Congress party chief Rahul Gandhi is mounting pressure on Prime Minister Narendra Modi to announce a UPA-style farm loan waiver in 2008.
Whether Modi succumbs to the pressure remains to be seen, but it is important to keep in mind that this is not the issue; what matters more is market access. Poor market access cost the country’s farmers anywhere between Rs 1.5-2 lakh crore every year; compared to this, the average loan waivers over the past decade — between the Centre and the states — have averaged just around Rs 28,000 crore. Put another way, were farmers to be given a choice between genuinely free markets and annual loan waivers, they would prefer free markets. It doesn’t help that every episode of loan waivers results in lower growth of bank credit which, in turn, means farmers need to turn to the more expensive informal markets.
Greater market access means unlimited freedom to export, something that is still denied to them if local prices start rising. Of greater import is the fact that farmers still can’t freely move their products across the country to get the best prices. eNAM hasn’t taken off and APMC restrictions remain in most parts of the country. Fixing this is critical.
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