Blanket debt waivers disrupt credit culture: Economic Survey

Source :IANS
Author :IANS
Last Updated: Fri, Jan 31st, 2020, 18:33:05hrs
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Nirmala Sitharman

New Delhi: Blanket debt waiver "is a bad idea", as it does not deliver any meaningful outcomes for the intended beneficiaries the while exchequer faces significant cost burden, the Economic Survey 2019-20 said on Friday.

The survey was tabled in the Parliament by Finance Minister Nirmala Sitharaman.

It said that the government's intervention in credit markets, in the form of full or partial, conditional or unconditional, debt relief has become increasingly common at the state level in India.

The phenomenon has become widespread after the large-scale farm debt waiver announced by the Union government in 2008. This was followed by announcement of waivers in states such as Andhra Pradesh, Telangana, Uttar Pradesh, Madhya Pradesh, Rajasthan, Punjab, Maharashtra, and others.

"Most importantly, debt waivers disrupt the credit culture and end up reducing the formal credit flow to the very same farmers it intends to help," the survey said.

"In other words, a waiver can at best be an emergency medicine to be given in rare cases after a thorough diagnosis and identification of illness and not a staple diet. In most cases, its side effects, the unintended consequences, far outweigh any plausible short term benefits."

According to the survey, an analysis of debt waivers given by states or the Centre showed that full waiver beneficiaries consume less, save less, invest less and are less productive after the waiver when compared to the partial beneficiaries.

 

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