Farm Loan Waivers: States Must Pay From Their Own Coffers, Arun Jaitley Says
Centre will not partake in state’s fiscal leverage in waiving farm loans: Jaitley
Finance Minister Arun Jaitley on Monday said the Union government will not share states’ fiscal leverage in waiving farm loans and the cost has to be borne by them.
The central government’s stance assumes significance against the backdrop of farm debt waiver announced by Maharashtra government on Sunday even as Madhya Pradesh witnessed violent protests from farmers last week, demanding a debt relief. Uttar Pradesh was the first state this year to announce a Rs 36,359-crore farm debt waiver for small and marginal farmers.
When asked about the Maharashtra government’s decision to forgo farmers’ loans, Jaitley made it clear that there will be no funding from the Central coffers.
States which want to go in for these kind of schemes (farm loan waivers) will have to generate them from their own resources. Beyond that the central government has nothing more to say.Arun Jaitley, Finance Minister
Despite a bumper crop this rabi season, farmers in many states are in distress because of sharp fall in prices in both domestic and global market, which is resulting into an agitation like situation in the country.
The Reserve Bank of India Governor Urjit Patel has already warned of a likely fiscal situation to be going out of hands if states keep on doling out in such a manner, which may also stoke inflationary expectations.
"The risk of fiscal slippages, which by and large can entail inflationary spillovers, has risen with the announcements of large farm loan waivers," the RBI said in its second bi-monthly monetary policy review for 2017-18 announced last week.
Reserve Bank keeps a close tab on retail inflation to decide on its monetary policy and manages the demand-supply math by tools such as repo rate -- at which is lends to banks.