What is it?Farm loan waivers are not new to the Indian economy. In 2008-09, the UPA-I government announced a farm loan waiver of ₹60,000 crore (that was the initial estimate, which went up to over ₹70,000 crore later). It hit the exchequer, and not the banks, but it distorted the credit culture since it discouraged farmers from paying up their dues. In addition, when one State offered a waiver, it raised expectations in other States too. Since the BJP took office in May 2014, starting with Andhra Pradesh, several States have joined the farm loan waiver bandwagon, with Uttar Pradesh and Maharashtra being the most recent ones, despite Union Finance Minister Arun Jaitley’s stand that the States would have to foot the bill.Mr. Jaitley had shown resolve to maintain fiscal discipline during his budget speech earlier this year, which was lauded by industry and investors. Hence, he told the States that the Centre would not pay for the waiver. On the other hand, the Reserve Bank of India (RBI) warned about the deteriorating fiscal position of the States. “We need to create consensus so that such loan waiver promises are eschewed. Otherwise, sub-sovereign fiscal challenges in this context could eventually affect the national balance sheet,” RBI Governor Urjit Patel said. He pointed out that if on account of loan waivers, the overall government borrowing went up, yields on government bonds would also be impacted. In a cascading effect, this would crowd out private borrowers as higher government borrowing could lead to an increase in the cost of borrowing for others.How did it come about?Two successive years of below normal rainfall, in FY14 and FY15, are being seen as the main reason for the loan waiver demand. But the recent farmers’ unrest in Madhya Pradesh took place despite a good monsoon that resulted in a bumper crop. However, the prices of farm produce came under pressure because of demonetisation as there were ‘fire sales’ of vegetables — a fact which was acknowledged by the RBI. The sharp decline in food prices in the consumer price index-based inflation was evident. Retail inflation dropped to 2.18% in May as the decline in the prices of food and beverages was sharper in May than April (-0.22% in May against 1.21% in April).Why does it matter?The loan waiver will have a significant impact on the States’ finances. According to a report by the State Bank of India, the impact on Punjab will be the maximum, with the State’s fiscal deficit jumping by an additional 4.8% of the GSDP. The report says that the States will make provisions for farm loan waiver in their budgets in multiple years. In its recent report on the States’ finances, the RBI also pointed to the worsening position of their financial health. It noted that the consolidated finance of the States had deteriorated in recent years, with the gross fiscal deficit to GDP ratio averaging 2.5% in the last five years (from 2011-12 to 2015-16), compared with 2.1% during the previous five-year period.The RBI observed that the State governments faced severe resource constraints as their non-debt receipts were often insufficient for fulfilling their development obligations. There is one positive aspect of the current loan waiver schemes, as highlighted by some economists: the schemes announced in several States have emphasised that loans should be waived only up to a specified threshold limit (mostly ₹1 lakh), and any amount over that will have to be paid.What next?More such schemes will possibly follow as the States going to the polls have started upping the ante for a farm loan waiver. There are protests in several parts of Gujarat demanding a waiver. The State will go to the polls later this year.Bankers have been concerned about this. As SBI Chairman Arundhati Bhattacharya put it: “In case of a farm loan waiver, there is always a fall in credit discipline because the people who get the waiver have expectations of future waivers. Future loans given often remain unpaid.”
BJP leader Yashwant Sinha, who had recently caused a flutter by criticising the Centre for its handling of the economy, will be on a three-day tour of poll-bound Gujarat starting November 14, on an invitation from an NGO supported by the Congress party.The former Union Finance Minister would interact with the business community and deliver lectures in Ahmedabad, Rajkot and Surat, a Congress leader said on Thursday.The events are slated to be organised by the Loksahi Bachao Andolan (Save Democracy Campaign), an NGO supported by the Congress.Economic featsMr. Sinha, whose son Jayant Sinha is a Minister in the Narendra Modi government, is likely to speak about demonetisation and the GST, the two steps being showcased as major economic achievements by the current dispensation.Former Finance Minister and Congress leader P. Chidambaram had recently interacted with the traders of Rajkot on the GST and on the subject of ‘State of Economy’, though not under the banner of any political party.In a recent newspaper article, Mr. Sinha criticised the Centre and Union Finance Minister Arun Jaitley in particular for the handling of the economy, which he said was on a “downward spiral and is poised for a hard landing”.Mr. Sinha had also written that many people in the BJP were aware of this reality, but not speaking up out of fear.
Friday night’s mob violence in Itanagar, triggered by the Arunachal Pradesh government’s move to grant permanent resident certificates to six non-tribal communities, left one person dead in police firing and another grievously injured. The government clamped prohibitory orders and suspended Internet service. The Army staged a flag-march on Saturday. These measures came after protesters went on the rampage, destroying private and government property.The violence coincided with the start of the first Itanagar International Film Festival (IIFF) that was envisaged the Frontier State as a film destination. A mob ran through the festival venue – Indira Gandhi Park in the heart of the city – destroyed five inflatable cinema halls, cars and almost everything else standing.This forced the organisers, a Goa-based firm, to call the festival off.The mobs continued to vandalise property and burn vehicles till about 4:30 am on Saturday, much after Chief Minister Pema Khandu tried to douse the flames by announcing that his government would not discuss the PRC issue during the current Assembly session “keeping in view the present situation”.Officials in Itanagar said a mob – women and elderly among them – surrounded the Assembly building and threatened to burn it down. They damaged the vehicle of former Chief Minister Nabam Tuki at the gates as most of the other MLAs stayed the night in the Assembly for fear of being assaulted.The police resorted to firing when another group tried to storm the Secretariat building in Itanagar. A man from Kimin in Papum Pare district died in the firing while another person, injured, was being treated at the Tomo Riba Institute of Health and Medical Sciences at Naharlagun nearby.Security was particularly strengthened around the house of Deputy Chief Minister Chowna Mein as the protestors threatened to bury the body of the man killed in police firing at his residence. “We had to call in the Army for a flag-march to instill a sense of security among the people and clamp Section 144,” a senior police officer said.Mr Mein, along with Mr Khandu, had sought the granting of PRC to six of the Frontier State’s non-tribal communities – Adivasi, Deori, Gorkha, Moran, Mishing, and Sonowal Kachari – some of whom are Scheduled Tribes in Assam.These six communities are dominant in Changlang and Namsai districts of Arunachal Pradesh. Mr Mein represents the Lekang Assembly constituency in Namsai district.Internet shut, call for calmIn an order on Friday night, the State’s Home Commissioner G.S. Meena said telecom service providers have been asked to suspend internet services for the next 24 hours. “This is in view of the law and order situation to avoid rumour-mongering through the internet,” he said.The Chief Minister on Saturday appealed for calm, accusing “vested interests” of misleading the people over the PRC issue. “The government had never intended to bring a Bill on the PRC issue, which was blown out of proportion leading to misunderstanding among the people,” he said.A joint high power committee (JHPC), headed by Environment and Forest Minister Nabam Rebia, to look into the PRC issue had prepared a report that was to have been discussed in the Assembly, he said.“JHPCs formed earlier, one of which involved Takam Sanjoy, had also recommended PRC for the communities concerned,” he said, adding that his government would never take a step that would affect the indigenous communities.A former MP, Mr Sanjoy is the president of Arunachal Pradesh Congress Committee.Naga rock band hitOne of the worst affected by the mob violence was Nagaland-based singer, composer, and songwriter Alobo Naga, the frontman of popular rock band Alobo Naga and The Band (ANTB). He had reached Itanagar on the fateful day to perform at the film festival.Many of Alobo Naga’s shows across the globe have been in conflict zones. He had a first-hand experience of violence in Itanagar, the place he least expected to be “caught in the crossfire”.Winner of the Best Indian Act at the MTV Europe Music Awards in 2012, Mr Naga said he had never imagined in his worst nightmare that he would become the victim of mob violence.“Trouble had started brewing when I arrived here. I thought the film festival venue would be a safer place to park my music van than the hotel. This (Saturday) morning, I found my van burn along with my guitar, keyboard and other music instruments,” he told The Hindu from Itanagar.The van, he said, was worth Rs 25 lakh and the music instruments priceless.Other participants at IIFF too were counting losses like the Nagaland rock band. A Guwahati-based supplier of acoustics and tent material said the mob destroyed “almost everything” running into a few million rupees.Apart from damaging at least 20 vehicles at the Dorjee Khandu Convention Centre – in Itanagar’s VIP area – where the main screen of the film festival was installed, the mob destroyed five inflatable screens at the Indira Gandhi Park besides everything else standing there.“We had installed five inflatable halls with a screen, each with a capacity for 130-150 people. They are all damaged,” an organiser said, declining to be quoted.“Many artistes invited for the film festival were caught at the venue the whole night. The protestors did not harm anyone but cars and equipment of many artistes,” film-maker Utpal Borpujari said after participants were escorted out of Itanagar.The organisers had curated 51 films, seven from film-makers of the north-eastern sates, for the festival. The films included Bulbul Can Sing by national award-winning director Rima Das of Assam.