Debt waivers have not benefited farmers: RBI chief

Debt waiver schemes of central and state governments have not benefited farmers as they restricted credit flow subsequently, Reserve Bank of India (RBI) Governor Raghuram Rajan said Saturday.

"Studies have shown that debt waiver programmes have been ineffective, constraining credit flow to farmers after their loans were waived off," Rajan said at the 97th annual conference of the Indian Economic Association organised by the economics department of Mohanlal Sukhadia University in Udaipur, about 420 km from Jaipur.

Concerned over farmers' suicides, arising partly out of their inability to pay back loans, Rajan said there was a need to study the sensitive issue to find out if they were caused by indebtedness. "It is worth examining to ascertain if farmers' suicides are caused by indebtedness in the farm sector or other factors," Rajan said.

He recalled that loan waivers were declared for farmers in Andhra Pradesh after cyclone Phailin made landfall in October 2013. Banks had a combined exposure of Rs.1.3 lakh crore to the farm sector in both the neighbouring southern states. Though the Telangana government, which came into being in June 2014, paid 25 percent of the waived amount to the affected banks, the Andhra Pradesh government has not remitted its due amount till date.

The first UPA government announced in early 2008 an agricultural debt waiver and debt relief scheme under which Rs.52,516 crore due from 369 lakh small and marginal and 60 lakh big farmers across the country were waived off. The comptroller and auditor general, however, found out later that several ineligible farmers benefited from the central government's debt waiver scheme while many deserving farmers were left out.

Referring to subsidies in the agriculture sector, the central bank governor said it would be worth studying if they (subsidies) have actually helped farmers. "The concern is if the benefit in the form of cheap credit to agriculture is being put to right use or leading to over indebtedness," Rajan added.