Gita Gopinath Says Cash Transfers are Better than Farm Loan WaiversTop Stories

January 23, 2019 15:01
Gita Gopinath Says Cash Transfers are Better than Farm Loan Waivers

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IMF’s First Woman Chief Economist Gita Gopinath said that Direct cash transfers to the farmers is way better than the loan waivers.

Speaking to CNBC-Tv18 on the sideline of World Economic Forum in Davos, Gita Gopinath said “There is a tremendous amount of distress in the agricultural sector and I believe that farm loan waivers don't solve the problem on any kind of permanent basis.” 

A cash transfer would be absolutely better than loan waivers and it would be more broad-based, Gopinath said, adding that the governments need to work more closely with farmers by giving them better technology and better seeds in a bid to increase yields. 

“Populist measures will not solve the problems faced by farmers permanently,” she added.

However, As Lok Sabha elections are fast approaching. So, In a bid to appease farmers and address the farm distress, many state governments have announced farm loan waivers.

The Congress, after coming into power in the three Hindi heartland states of Madhya Pradesh, Chhattisgarh and Rajasthan, made good on its campaign promise to waive farm loans almost immediately after taking charge, and the BJP-ruled Gujarat and Assam followed the same under pressure. 

Congress president Rahul Gandhi said his party and others would "not let PM Modi sleep or rest" until an all-India loan waiver scheme was announced.

But Prime Minister Narendra Modi has repeatedly attacked farm loan waivers as a poll gimmick in his rallies and sources have said the Centre is all set to unveil a direct benefit transfer scheme in a bid to woo the community ahead of the Lok Sabha elections.

And also, Former RBI Governor Raghuram Rajan had also opposed farm loan waivers and even asked the Election Commission of India to bar political parties from making it a part of poll promises. 

“I have written a letter to the Election Commissioner saying that it (farm loan waiver) should be taken off the table. Certainly there is reason to think about farm distress. However, they (benefits of welfare measures) often go to the best connected. Second, it obviously creates enormous problems for the fiscal (health) of the state once those waivers are done. And I think, unfortunately, it inhibits investment down the line," he said.

He had also backed moving to a fixed cash subsidy per acre cultivated to address distress in the farm sector, as was done under by the Rythu Bandhu Scheme of the Telangana government. 

-SaiKumar

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Gita Gopinath  IMF