The Loan Waiver: A Primer
It’s time for the government to reconsider its anti-poverty programmes. The subsidies can readily finance generous direct cash transfers, vouchers for primary education, and health insurance for the poor.
There has been much confusion on the implications and desirability of the loan waiver programme announced by finance minister P Chidambaram in his 2008-09 Budget. There is need for clarity of thought so that each of us can arrive at an informed judgement on whether the proposal is a net plus or minus for India.
My own bottom line is that given the daily hardships marginal and small farmers face, virtual absence of formal social safety nets, and 8-9% overall growth per year, the waiver is justified. At the same time, politicians on both sides of the aisle need to use the occasion for serious soul searching on devising the right policies to help the poor. Are repeated loan waivers the right instrument? Should borrowing and lending not be based entirely on commercial terms with better-targeted instruments deployed to aid the poor?