Farm debt waiver could hurt Punjab most: report

Tamil Nadu, Uttar Pradesh, Kerala also to be hit

June 20, 2017 09:37 pm | Updated 09:37 pm IST - NEW DELHI

Punjab, which became the latest State to announce a farm loan waiver scheme on Monday, is most vulnerable to a fiscal shock from such debt write-offs along with three other States, while Uttar Pradesh could also overshoot its fiscal deficit goals on the same account, a research report by JM Financial said. While Andhra Pradesh and Telangana had announced farm loan waivers in 2014, Tamil Nadu, Uttar Pradesh and Maharashtra have followed in their footsteps recently. Madhya Pradesh, where farmer protests took a violent turn recently, has resisted a blanket waiver for now, but promised a special zero-interest loan arrangement for defaulters of existing farm loans instead.

“Assuming all States announce the farm loan waiver with a staggered timelines (like AP and Telangana did by releasing funds over 4-5 years to curtail impact on their fiscal deficit), we find that Tamil Nadu, Punjab, Rajasthan and Kerala will be worst hit. States like UP and MP too, are expected to exceed their budgeted fiscal deficit as their additional fiscal space is inadequate to fully absorb the burden,” JM Financial analysts noted in the report titled ‘State-wise Sensitivity to Farm Loan Waiver.’

Gujarat, Maharashtra and, to an extent, Karnataka, however, could cope with the strain of such a debt write-off scheme, as per the report, but this would depend on the extent of the loan waiver scheme’s coverage.

On an aggregate basis, it estimates that the gross fiscal deficit of 17 States could go up by 60 to 90 basis points as a percentage of gross state domestic product and push States’ deficit beyond the 3% limit envisaged under the Fiscal Responsibility and Budget Management framework for 2017-18.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.