Attention was drawn to a behavioral problem in our agriculture sector this week by the Supreme Court of India hearing a case related to the dismissal of a daily wage worker by the Patiala Central Cooperative Bank. The bank had sought to pay less compensation than what was ordered by a high court on the argument that such cases would lead it to financial distress and possible collapse, when any farmer would not be able to pay a loan in the hope of repaying the loan. The bar was not paying the new loan. The administration took over after the elections in Punjab next month. The top court saw merit in this, reduced the burden of the bank and upheld the high court’s job restoration. However, there was the bank’s testimony on poor credit discipline in an area that had been tied to the national mast of ‘food security’ for so long that many farmers see their role as state-appointed, in which input assurance is given. By governments who have to pay in due time for the production of their farms to fill the state’s granary. Political signals have mostly reinforced this informal social contract over the decades. Farm-loan waivers are often used as an electoral hand-out to win votes that farmers rarely see as a bonus to work, or as part of an undeclared agreement with the state. can go. Yet, such a statistical approach is not only bad for lenders, it promotes attitudes that stifle agricultural reforms.
The big eye for the farm-loan waiver announced by the Congress-led Center more than a decade ago ahead of India’s 2009 general election is unmatched for its impact. Worth 60,000 crore, it was packaged as crisis relief and the party retained power, but various states run by mixed parties were quick to adopt that ploy and its lasting impact is visible in the easy tool of politics. In some states, the write-off promises to spring from competitive campaigning. In others, the prospect serves as a chip for collective bargaining by the tiller. Overall, the exemption leaves the loan books in a mess, at least while lenders wait for the state treasury to pick up the tab, and also incurs fiscal costs that are usually unaffordable. If political parties avoid such write-offs, they will be doing our economy a favor for an even greater reason. Unless our farmers act more like state suppliers than maximum earning business units within the constraints of the market, it will be difficult to save the sector from stagnation. That loans are not mistaken for grants should be a primary aspect of any reform exercise.
With an increasingly misalignment of demand and supply, prices set by freely traded agricultural crops need space to play the corrective role of signal crunch and overflow that allows farmers to channel their expenses and efforts into the market. Will encourage you to adapt to reality. Insurers and future deals can reduce their risk. The Bharatiya Janata Party-led government’s 2020 market embrace stumbled at least partially on its failure to prepare the ground for it. What was perceived as freedom was seen by many peasants as a prelude to the termination of their services. Rather than giving up, we should aim to reorient attitudes away from our statistical system. Reform-minded states can take on a model bill drafted by the Center in 2017 that was not as flawed as the 2020 Acts on provisions designed to protect farmers from exploitation by private buyer cartels. Agriculture supports more life in India than any other activity. We can’t let it spoil. To give reforms a fresh chance, we must resist the show of false pre-election generosity.
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