Skip to main content

Waiving corporate loans is good economics; waiving farm loans is bad economics, bad politics?

By Devinder Sharma*
I fail to understand. How come farm loan waiver in Uttar Pradesh, Maharashtra, Rajasthan and Punjab is considered to be bad economics, bad politics whereas massive loan waiver for the big corporate is construed to be good economics, leading to economic growth.“Repeated loan waivers by various state governments distort credit pricing, thereby also disrupting the credit market,” former RBI Governor Raghuram Rajan had once remarked. Endorsing the viewpoint, the State Bank of India chairperson, Arundhati Bhattacharya on Wednesday said that crop loan waivers disrupt ‘credit discipline’ as ‘the farmers will wait for the next elections expecting another waiver.’
There is no denying that writing-off farm loans certainly makes some farmers habitual defaulters, expecting another waiver at the time of next elections. But let’s also look at what the Chief Economic Advisor has to say. Speaking at Kochi the same day, Arvind Subramaniam suggested that the government needs to bail out large corporate borrowers. “You need to be able to forgive those debts because this is how capitalism works. People make mistakes, those have to be forgiven to some extent,” he said, and added: “Political system has to be able to do that and bad bank is one way of trying to do that.”
If this is how capitalism works, I wonder why it doesn’t work the same way for farmers. If rich corporate can make mistakes and get a massive bail out, why do farmers who actually don’t make mistakes but are victims of economic policies that keep them deliberately impoverished, get a loan waiver. Are farmers not part of the same capitalist system? Unless, of course, farmers are considered to be children of a lesser god.
The policy of treating corporate defaulters with velvet gloves does not end here. Arvind Subramaniam goes on to say that ‘bailing out big corporate will surely lead to allegations of corruption and crony capitalism. There is however no other way to solve the problem but to write-off the mountain of debt’. If this is what growth economics is all about then Arundhati Bhattacharya too need to understand that crop loan waiver will surely bring ‘credit indiscipline’ among farmers but there is no other way to solve the problem. ‘Credit indiscipline’ among farmers, as she fears, is nothing different from the ‘credit indiscipline’ that corporate resort to.
Why then single out farmers for ensuring credit discipline whereas allowing the corporate defaulters, most of whom are willful defaulters, to virtually go on robbing the banks. According to the latest report of the Public Affairs Committee of Parliament, headed by K V Thomas, of a total of Rs 6.8-lakh crores of non-performing assets (NPAs), which actually is a euphemism for bank defaults, a whopping 70 per cent are those of big corporate houses, hardly one per cent of it belongs to farmers. Interestingly, much of these bad debts are predominantly of the large corporates – steel, power, infrastructure and textile sector.
And how much of it is likely to be written-off? Well, hold your breath. India Ratings, the credit rating agency, estimates that close to Rs 4-lakh crore, out of a total of Rs 7.4-lakh crore stressed loans that the big companies have accumulated over the five year period, 2011-2016, is expected to be written-off. Let’s also not forget, this is not the first time that the banks are going to write-off loans of big companies. Earlier too, close to Rs 10-lakh crores has been written-off or has been ‘restructured’ over the past decade. The question that needs to be asked is why does the corporate write-off keeps on coming back year after year? Did you hear the SBI chairperson blaming the massive corporate write-off at any stage for disrupting ‘credit discipline’?
Since writing-off corporate debts brings loud protests and charges of crony capitalism, the best way being suggested is to create a special bank where all these bad debts will be parked. Don’t forget, this is how capitalism works. And it clearly shows that capitalism only works for the rich and the powerful. Different strokes for different people. The banking laws that work for the rich defaulters do not work for the poor farmers. Writing-off the outstanding loans of the big companies is economic nirvana, whereas any waiver of small crop loans is termed as bad economics.
Despite the election promise of waiving farm loans in Uttar Pradesh (UP), news reports state that the waiver will be restricted to overdue cooperative bank/primary cooperative societies’ loans, which according to the state government are not more than Rs 8,500-crore. This is roughly 10 per cent of the unpaid dues of Rs 86,000-crore to commercial and cooperative banks. In Punjab, where too the Congress party had promised to write-off farm loans, the overdue loans in farming stand at Rs 5,150-crores.
Although Arundhati Bhattacharya clarified that the bank has not received any request so far to waive-off farm loans in UP or for that matter in Punjab, I fail to understand why the entire outstanding agricultural loans pending before commercial banks cannot be shifted to the proposed bad bank. After all, if the problem of bad debts of big companies can be resolved by creating a bad bank or a Public Sector Asset Rehabilitation Agency (PARA) why a similar approach can’t be adopted for the bad debts in the farming sector?
But then, it is obvious that capitalism does not work for farmers. A news report states that 32 farmers in Shivpuri in Madhya Pradesh defaulted on the Kisan Credit Card payments to the Madhyanchal Bank. Thetehsildar has seized the harvested crop. In another report, 19 tractors of as many defaulting farmers in Banda in Bundelkhand have been seized and will be put for public auction. The e-auction is scheduled for March 21. When was the last you heard of a similar e-auction of assets, including a stream of cars and vehicles belonging to the big companies which have defaulted the public sector banks? What to talk of public auction of assets, even the names of the big defaulters are being withheld. The government is trying not to ‘name and shame’ these willful defaulters.
This is how capitalism works. Bail out for big corporate becomes good economic. Waiving crop loans for farmers is termed as bad economics, bad politics.
---
Source: https://devinder-sharma.blogspot.in/2017/03/waiving-corporate-loans-is-good.html

Comments

TRENDING

Tracing roots of Hindutva Zionism: cannon fodder for 'warped' nationalist pretensions

By Shamsul Islam*  Those who believe in a world free of hegemonic ethno-nationalism, racism, religious bigotry and hatred have rightly taken note of Zionism and its ally Christian Zionism, major perpetrators of ethnic cleansing of ‘Others’. However, the civilized world with its core belief in multi-culturalism and peaceful co-existence is oblivious to a no less dangerous threat to the present human civilization: the Hindutva Zionism. As the term reads it is part of the Hindutva world-view which stands for an exclusive Hindu India minus Muslims and Christians. The other religions like Sikhism, Buddhism, and Jainism will have no independent status but treated as part of Hinduism. The Rashtriya Swayamsevak Sangh (RSS; National Volunteer Organization) is the most prominent flag-bearer of the Hindutva politics whose cadres presently rule India, the largest democracy in the world. RSS was founded by Keshav Baliram Hedgewar (1889-1940) in 1925 who was disillusioned with the Indian freedom st

'Blatant violation' of law by Central government in making NREGA payments

By Our Representative  In September third week, NREGA workers across the country were mobilised for two day so raise their issues and submit a memorandum to the Prime Minister. Organised the NREGA Sangharsh Morcha (NSM), a collective of groups that work with NREGA labourers across the country, workers from 13 states -- Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Jharkhand, Karnataka, Madhya Pradesh, Odisha, Rajasthan, Telangana, Uttar Pradesh and West Bengal -- carried out Kaam Do Abhiyaan, staging demonstrations and rallies against what they called blatant violation of law by the Central government in making NREGA payments. While NREGA has had very positive impacts, it has lately become fruitless, exploiting labour, even though workers who have put in honest hard work have to wait for their wages endlessly, it was suggested.  In such a situation, there is a need to firm up NREGA implementation and end systematic corruption to ensure that workers get their basic NREGA entit

Shocking? No Covid vaccine trials conducted on pregnant, lactating women: RTI reply

By Rosamma Thomas*  A Right to Information applicant who sought details of safety trials conducted in India on pregnant and lactating women for three Covid vaccines in use in India – Covishield, Covaxin and ZyCov-D -- was shocked to learn from the Central Drugs Standard Control Organization (CDSCO) that Serum Institute, manufacturer of Covishield, and Cadila Healthcare, manufacturer of the ZyCov-D vaccine, had not sought permission for such trials.  Bharat Biotech, manufacturer of Covaxin, had sought permission for trial on pregnant women and later withdrawn its application. This response , provided after the applicant was initially unsatisfied with the response and went in appeal, is from the joint drugs controller, CDSCO. It was dated September 13, 2022. One researcher closely following the vaccine rollout, however, is of the opinion that the lack of a trial on pregnant and lactating women is a blessing; potential trial participants and their unborn babies thus escaped harm. Aruna Ro

Fascism on prowl? Religious meet 'deeply pained' at silence of Church, bishops, priests

Counterview Desk  The ‘Forum of Religious for Justice and Peace’which held its 17th National Convention at the Montfort Social Institute, Hyderabad, Telangana from 22 to 24 September 2022 on the theme “Deepening our Identity as Religious: Responding to the Signs of the Times”, has expressed concern “at the deteriorating situation of our nation on every front”, especially stating, “Fascism seems to have come to stay” in India. At the same time, the convention, which took place with the participation of 60 persons from 16 states representing 20 religious congregations, in its unanimously-adopted statement added, “We have reached abysmal depths on every parameter: be it social, economic and political”, underlining, “The poor in India become poorer every day; the rich and powerful continue to profiteer at their expense and amass scandalous amounts of wealth.” Text: We, members (63 women and men Religious, from 16 states representing 20 Congregations) of the Forum of Religious for Justice

Rajasthan cops 'halt' Gujarat Dalit women's rally: homage to untouchability victim boy

By Our Representative  In a surprise move, the Rajasthan police stopped a Dalit women's rally from Gujarat on the borders after it crossed Gujarat alleging that it would "disturb peace" in village Surana, Jalore district, where the gruesome incident of death of a Dalit boy took place on August 13 after he was brutally beaten up by his teacher on touching the drinking water pot. Sources said, while the Gujarat government had "no objection" in allowing the rally, which originated from the Dalit Shakti Kendra (DSK), an empowerment-cut-technical institute for teens founded by human rights leader Martin Macwan, on September 24 morning, the Rajasthan police stopped it for two and a half hours before allowing it to proceed to Surana. The decision to take out a women's rally was taken at a DSK meeting on September 5 following a condolence meeting of the NGO Navsarjan Trust, also founded by Macwan, activists committed to work against caste-based discrimination, orga

Introducing non-native cheetahs is 'not equivalent' to restoring pride in the nation

By Bappaditya Mukhopadhyay*  The Cheetahs from the African continent has finally been introduced to India by the Indian Prime Minister on his 72nd birthday. The process had started with the previous Government in 2009. However, the Supreme Court clearance was pending owing to the objection by the National Tiger Conservation Authority (NTCA) plea to reintroduce cheetahs. Finally the clearance was obtained in January 2020 and thereafter Kuno National Park (KNP) was chosen for the reintroduction of first set of Southeast African Cheetahs. In the near future, depending upon the success story of the current reintroduction, more cheetahs from South Africa may also be introduced. This exercise has generated a lot of interest among various stakeholders with opinions on both sides galore. It is important to pose some questions that surround the whole exercise. Let us evaluate some of these arguments. The first set of arguments are quite detached from the issues of conservation as they most

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

'Military diplomacy': US praises Bangladesh Army for leadership role in UN operations

By Kamal Uddin Mazumder* As the Indo-Pacific region represents the world’s economic and strategic center of gravity, the Indian Ocean today is becoming the centerpiece of all geo-strategic play. Cooperation in the region is crucial to implementing the international community’s global agenda, including achieving the UN’s Sustainable Development Goals. Major powers like the US have enhanced and deepened their strategic engagement and leadership roles with countries in the region. The Indo-Pacific Army Management Seminar, or IPAMS, is a U.S. Army Pacific (USARPAC) initiated conference that is aimed at facilitating and enhancing interactions among the armies of the Indo-Pacific region. This year's 46th Indo-Pacific Armies Management Seminar (IPAMS)-2022, co-hosted by the Bangladesh Army and US Army Pacific (USARPAC), concluded in Dhaka. The objective of IPAMS is to promote peace and stability in the region through mutual understanding, dialogue, and friendship. It is the largest confer

Grave error? Scholar blames ex-Gujarat babu for anti-Christian riots 'citing fake report'

By Rajiv Shah  A few days back, I received a message from one of the finest former Gujarat government bureaucrats, PG Ramrakhiani, a 1964 batch IAS official, who retired in November 2000. I would often interact with him in 1997-99, even later, after I was sent to Gandhinagar as a Times of India man to cover Sachivalaya. Those were turbulent times. Shankarsinh Vaghela was the Gujarat chief minister, under attack from two sides – from the BJP, which he had left to form a separate breakaway party, Rashtriya Janata Party (RJP), one one hand, and the Congress, which was supporting him from outside, on the other. Ramrakhiani, in his message, referred to the book authored by Ghanshyam Shah and Jan Breman, both top-notch scholars who have known Gujarat in and out. Called “Gujarat, Cradle and Harbinger of Identity Politics: India’s Injurious Frame of Communalism”, I reviewed the book in January 2022.  It claims that Muslims in Gujarat have been turned into “new untouchables”, thanks to the Hin

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.