Solving Agricultural Indebtedness

A digression from the national political drama and the Gujarat polls (courtesy Nitin for forwarding the report). This was something that should have made news back in July but escaped?most of our attention. Not much in the media on this either except for a couple pieces in The Hindu Business Line and the Indian Express.

So here goes…

Are you in debt ?

Is debt bad habit for you ?

How do you solve it ?

Perhaps foregoing that which requires you to borrow.

Perhaps not borrowing if that’s an option.

Perhaps being more responsible with your borrowing if you can help it.

Perhaps looking to increase your disposable income thus being less dependent on?your?borrowing.

But what if one were to suggest that the your indebtedness was not because of you but was despite you.

What if one were to suggest the real problem lay with those who lend money to you ?

They are not protecting themselves enough from your inability to repay.

They are not doing enough to make it easy for you to continue to borrow without having to worry about repaying anytime soon.

They are not thinking of enough ways to insure their own risk in lending you money.

How wonderful would it be if for once all your indebtedness was someone else’ fault and it is they who need to do something about it and not you ?

Well despair not, your benevolent Government feels you are entitled to the luxury of defaulting for it is the society at large which is to blame for your debt.

Still clueless on what is going on here ?

The Report of the Expert Group on Agricultural Indebtedness commissioned by the Ministry of Finance, Govt of India, which was looking at the agrarian crisis in India is suggesting exactly that. The report makes 47 recommendations of which only 1 recommendation, the 46th one to be precise, suggests that the debtor do something about his debt by looking to other sources of income. The remaining 46 recommendations are about how society at large needs to feel guilty and lend more while shifting the risk and responsibility to the tax payer through new kinds of state provided insurances.

So what are these recommendations ?

Immediate credit measures aka Prime Minister’s relief package, rescheduling of loans, more credit, cyclical credit, formalization of credit, project based lending, agency and mobile banking, Bharat Kisan Card, Reforming Lead Bank Scheme, Credit Counseling, Simplifying Procedure for Mortgages, Reduce Transaction Costs, Computerize Records, Integrate Micro Finance Institutions with Mainstream Banking, Qualified Personnel, Redefine NABARD, Ensure Priority lending, Improved deployment of rural funds, federation of farmers, crop insurance, weather insurance, price risk mitigation, crop surveillance.

Almost all of them are about getting the Farmer into debt and staying there and not one of them is about how to get the Farmer out of debt.

Offstumped has only one question.

If despite all of the above the individual still makes bad financial decisions and finds himself deeper in debt, will the Government intervene to save the individual from himself ?

Offstumped Bottomline: Perpetuating debt through an elaborate state funded infrastructure of entitlement is not the answer to the agrarian crisis. While creating enough incentives for formal private lending and insurance to reach the farmer the Government needs to focus its energies on giving the farmer economic freedom and trust him to find the responsibility to live and not commit suicide.

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