Centre won't pay for farm loan waivers announced by states

13 Jun 2017 | By Abheet Sethi

Union Finance Minister Arun Jaitley said the Centre won't pay for loan waivers announced by states for farmers.

He said the states would have to offer debt relief by generating funds themselves.

Jaitley's clarification came after Maharashtra joined other states to announce costly loan waivers for farmers in response to widespread protests.

In context: States to finance farm loan waivers themselves

13 Jun 2017Centre won't pay for farm loan waivers announced by states

Jaitley clarifies Centre's position on loan waivers

Jaitley said: "I have already made the position clear that states which want to go in for this kind of schemes (farm loan waivers) will have to generate the money from their own resources. Beyond that, the central government has nothing more to say."
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Maharashtra's farm waiver to cost state Rs. 1.14 lakh crore

DetailsMaharashtra's farm waiver to cost state Rs. 1.14 lakh crore

On June 11, Maharashtra announced after a 10-day farmers strike that it would waive off loans of small and marginal farmers which would cost the state exchequer Rs 1.14 lakh crore.

MP Chief Minister Shivraj Singh Chouhan has also promised to consider writing off farmers' loans after six farmers were killed in police firing while protesting debt relief and better crop prices.

ProjectionsState governments may give Rs. 2.5 lakh crore farm waivers

UP's BJP government was the first to announce loan waivers for farmers, amounting to Rs. 30,000 crore.

Various state governments are expected to waive off Rs. 2,57,000 crore ($40 billion) in farm loans before the 2019 general elections, according to Bank of America Merrill Lynch projections.

The UPA government had in 2008 given a loan waiver to farmers equivalent to 1.8% of India's GDP.

RBI warns against farm loan waivers

RBI Governor Urjit Patel has warned against farm loan waivers saying they can "lead to fiscal slippages and undo the work on the fiscal deficit done over the past two years." Critics have pointed out that farm debt accounts for a fraction of corporate debt.