This presentation was given as part of a workshop organised by the Takshashila Institution for educational purposes only. The analysis done does include certain assumptions that might've not been mentioned in the presentation.

1. TEAM- THE GOOD, THE BAD AND THE POLICY
THE FINAL PRESENTATION
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS
TEAM MEMBERS:
1. Archana Rao
2. Tanvangi Tiwari
3. Aishwarya KS
4. Samarth Muralidhar
5. Satnam Singh
6. Prabal N. Muttoo

2. KEY CRITICISMS
 “Waivers undermine an honest credit
culture... It leads to crowding-out of
private borrowers as high
government borrowing tend to
(impose) an increasing cost of
borrowing for others,” Patel said after
the monetary policy announcement. “I
think we need to create a consensus
such that loan waiver promises,
otherwise sub-sovereign fiscal
challenges in this context could
eventually affect national balance
sheet.”
-Urijit Patel
Governor, Reserve Bank of India
 "Loan waivers though temporarily
necessary, don't provide secure
long-term credit system. It implies
that banks are compensated by
government,"
-M. Swaminathan
Father of India’s Green Revolution
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS

3. THREE SPECIFIC CRITICISMS
 Maharashtra has a history of droughts and there exists
significant amount of information about the failing
monsoons but there hasn’t been a well thought out plan.
 The blanket farm loan waiver highlights the lack of a
structural solution.
 The waiver is only a temporary relief yielded to the
farmers.
 Credit Imbalance is inevitable.
1. THE FARM LOAN WAIVER IS A TEMPORARY RESPITE
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS

4. THREE SPECIFIC CRITICISMS
 CAG Report on the 2008 Agricultural Debt Waiver: It was
found that 8.5% of the beneficiaries audited were not
eligible for debt waiver.
 There is a high chance of compensating farmers who are
not in dire need of a blanket waiver.
 Exclusion of farmers who are not under the formal credit
system.
 Targeting continues to be a concern.
2. INCLUSION-EXCLUSION ERRORS
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS

5. THREE SPECIFIC CRITICISMS
 Here the fungibility principle comes into play. This farm loan waiver is
expected to reroute funds from other infrastructural and development
activities such as MMRDA, CIDCO and other funds received from the Centre
for other purposes.
 This will lead to an imbalance in each sector’s predicted and desired growth.
 This policy is detrimental to the State’s overall growth.
3. EQUITY IMBALANCE
“The Mumbai Metropolitan Region Development Authority (MMRDA) has about ₹
16,000 crore of unutilised funds and City and Industrial Development Corporation
(CIDCO) has about ₹ 40,000 crore of such funds,”
- Chandrakant Patil
Cabinet Revenue Minister,
Govt. of Maharashtra
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS

6. SUGGESTIONS FOR IMPROVEMENTS
 As the farm loan waiver has already been approved
and is underway it is unfeasible to revoke the policy
initiative.
 At this point in time the loan waiver is the most
acceptable solution to address the immediate
agrarian crisis.
 Therefore, the suggestions listed here are
improvements that can be incorporated into the
existing scheme.
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS

7. THREE SUGGESTIONS FOR IMPROVEMENTS
1. IDENTIFYING THE BENEFICIARIES
2. RESTRUCTURING THE LOANS
• Move away from a blanket loan approach.
• Address worst-hit agrarian districts on priority basis.
• Incorporate farmer loan repayment history into the
identification process
• For remaining farmers across all districts, waiver of
interest rates along with extension of the timeline of
the loans.
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS

8. WHAT WILL IT COST US?
1. Beneficiaries for complete waiver = f ( x, y, z…)
o Meteorological data of district
o Area under cultivation and % of irrigated area in district
o Historical loan utilization and repayment of farmer loans
• As per initial calculations using available data and the 10 worst hit
districts in MH, this number is no more than 21 lakh farmers.
• A complete waiver for farmers in this bracket will require approximately
₹ 8,000 crores
2. Beneficiaries of loan restructuring (term extension)
o All other districts of Maharashtra
o Loan size under ₹ 1.5 Lacs
• Waiving off the interest and restructuring these loans for 90 lakh
farmers, not benefited by the full waiver will cost the state ₹ 11,000
crores
3. Administrative costs:
• Intensive surveying for most affected districts (10/36 districts) is
₹ 3,500-4,000 Crores based on previous estimates
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS

9. THREE SUGGESTIONS FOR IMPROVEMENTS
3. CREATION OF A STATE AGRICULTURAL POLICY
 Proper implementation (procurement capabilities of 23 crops) and decentralization of MSP with
adequate provisions for crop insurance. Focus not only on cost but also on profit
(Shantakumar Committee Recommendation – 6% Farmers benefit from MSP)
 Self targeted health and education benefits. E.g. hospitals designated for farmers etc.
 Investment in ecosystem services. Successfully addresses the market shortcomings and has been
implemented in China and countries across Europe.
 Improve market access – Requirement of 42000 mandis across India instead of the existing 5000 ones.
Elimination of middle men issues (Reference: Onion price rise in spite of normal production)
 Focus on agricultural productivity. The fact is that 50% workforce is delivering 15% of the country’s
GDP.
 Efficient use of IT: E-chaupals, eNAMS and seamless integration with APMC mandis to reduce
transaction costs.
 Groundwater Regulation: The district of Latur itself has 80,000 bore wells of which 50,000 are operated
throughout the year. The Maharashtra Groundwater (Development and Management) Act 2009 bans
bore wells going below 200 feet (60 metres) but it has not been enforced.
 Reform Land Ownership patterns to bring in economy of scale.
 Step up integration of Agricultural value chains.DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS

10. “ A good policy is only as good as its implementation”
- Pranay Kotasthane
Research Fellow,
Takshashila Institution
DISCLAIMER: THIS PRESENTATION WAS EXCLUSIVELY DONE FOR A POLICY WORKSHOP DONE UNDER THE AEGIS OF THE
TAKSHASHILA INSTITUTION. THE PRESENTATION INCLUDES HYPOTHETICAL SCENARIOS AND ASSUMPTIONS