RBI governor questions effectiveness of farm debt waiver schemes

On farmers suicide, he said there was need to study this important and sensitive issue.

Putting a question mark on the effectiveness of government’s farm debt waiver programmes, RBI Governor Raghuram Rajan on Saturday said such schemes have constrained flow of credit to farmers.

“In some states on certain occasions we have had debt waivers. How effective these debt waivers have been? In fact the studies that we have typically show that they have been ineffective. In fact they have constrained the credit flow post waiver to the farmers,” he said at the annual conference of Indian economic association.

On farmers suicide, he said there was need to study this important and sensitive issue. “One question is how else we should deal with over indebtedness in the farm sector.

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Also worth examining very important issue is of farmer suicide. How much they are caused by indebtedness especially to the formal (banking) system, how much formal system alleviates indebtedness,” the governor said.

Andhra Pradesh and Telangana governments have declared loan waivers for the farmers hit by cyclone Phailin last year. While the Telangana government has given the mandated 25 per cent of the written off loan amount to the banks, Andhra Pradesh has not done it so far.

Talking about subsidies for farm sector, Rajan said that it will be useful to see whether these subsidies have actually helped agriculture or not.

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