Raising concerns over the recent spate of farm loan waivers across the country, the Reserve Bank of India (RBI) Governor Urjit Patel has said that rush for such actions may harm the country’s fiscal health and may have inflationary spillovers. He said that past episodes have shown when there are significant fiscal slippages they do permeate through inflation sooner or later.
RBI governor further warned that unless there is existing fiscal space in the state budgets, the states should avoid going down the slippery path of farm loan waivers, as it would be risky to tread on that path and could dissipate the state’s fiscal gains made over the past two-three years, noting that the country need to tread path very carefully before it gets out of hand.
In April, the Uttar Pradesh government had waived farm loans worth Rs36,000 crore for marginal and small farmers of the state, following that recently, Maharashtra government had said it will announce a loan waiver of Rs 30,000 crore, owed by farmers with up to five acres of land, by October.