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India election 2019: Should farmers' debts be written off? | India election 2019: Should farmers' debts be written off? |
(about 8 hours later) | |
Many farmers in India have found themselves overwhelmed by debt - but should those loans be written off, often at great expense? | Many farmers in India have found themselves overwhelmed by debt - but should those loans be written off, often at great expense? |
That's a question politicians and others in India have been debating in the run-up to nationwide elections in April. | That's a question politicians and others in India have been debating in the run-up to nationwide elections in April. |
Claim: India's Prime Minister, Narendra Modi, says waiving loans for farmers is not really a solution, comparing it to handing out "lollipops" at election time. But the Congress opposition says its proposed loan waivers would be an effective means of helping farmers in need. | Claim: India's Prime Minister, Narendra Modi, says waiving loans for farmers is not really a solution, comparing it to handing out "lollipops" at election time. But the Congress opposition says its proposed loan waivers would be an effective means of helping farmers in need. |
Verdict: The evidence from loan schemes implemented in the past suggests they don't address the deep-rooted problems facing farmers. | Verdict: The evidence from loan schemes implemented in the past suggests they don't address the deep-rooted problems facing farmers. |
Governments of all colours - both at the national and state level - have written off loans. | Governments of all colours - both at the national and state level - have written off loans. |
Between 2014 and 2018, loan waivers were announced in 11 states, by both BJP and Congress administrations, at a total cost of more than a trillion rupees (£10bn). | Between 2014 and 2018, loan waivers were announced in 11 states, by both BJP and Congress administrations, at a total cost of more than a trillion rupees (£10bn). |
What problems do farmers face? | What problems do farmers face? |
Over 40% of India's workforce is employed in agriculture. | Over 40% of India's workforce is employed in agriculture. |
Farmers sometimes borrow heavily to buy seeds, equipment and other essentials but then struggle with debt. | Farmers sometimes borrow heavily to buy seeds, equipment and other essentials but then struggle with debt. |
Poor harvests due to bad weather can devastate crops, leading to financial disaster and in some cases to farmers killing themselves. | |
One report last year said levels of debt in rural India had been rising in recent decades, notably in those households engaged in farming. | One report last year said levels of debt in rural India had been rising in recent decades, notably in those households engaged in farming. |
In recent years, farmers have also seen relatively small increases in real wages and stagnant or falling crop prices. | In recent years, farmers have also seen relatively small increases in real wages and stagnant or falling crop prices. |
Does writing off debts work? | Does writing off debts work? |
But it's far from clear whether debt relief schemes actually help farmers in distress. | But it's far from clear whether debt relief schemes actually help farmers in distress. |
For one thing, the link between indebtedness and farmer suicide is far from straightforward. | For one thing, the link between indebtedness and farmer suicide is far from straightforward. |
Suicide is often higher in wealthier states. And within those states, the wealthier farmers rather than the poorest with the most debts are more likely to kill themselves. | Suicide is often higher in wealthier states. And within those states, the wealthier farmers rather than the poorest with the most debts are more likely to kill themselves. |
There are other questions too about the effectiveness of debt relief schemes. | There are other questions too about the effectiveness of debt relief schemes. |
After a nationwide loan waiver in 1990, evidence emerged of a decline in the rate of recovery of non-waived loans by financial institutions. | After a nationwide loan waiver in 1990, evidence emerged of a decline in the rate of recovery of non-waived loans by financial institutions. |
It suggested that loan waivers created expectations of future write-offs, leaving borrowers with little incentive to pay back existing loans. | It suggested that loan waivers created expectations of future write-offs, leaving borrowers with little incentive to pay back existing loans. |
In one state, the loan recovery rate fell from nearly 75% to just over 40% in the year after a loan waiver had been announced. | In one state, the loan recovery rate fell from nearly 75% to just over 40% in the year after a loan waiver had been announced. |
A further nationwide scheme - worth 515bn rupees - was announced in 2008 ahead of general elections the following year. | A further nationwide scheme - worth 515bn rupees - was announced in 2008 ahead of general elections the following year. |
But a subsequent government audit concluded that it had been poorly implemented. | But a subsequent government audit concluded that it had been poorly implemented. |
This included money being given to farmers who were ineligible and some farmers who were eligible not receiving anything. | This included money being given to farmers who were ineligible and some farmers who were eligible not receiving anything. |
Critics of these schemes have also pointed out that many famers borrow informally from family, friends or local money lenders and do not therefore benefit from the loan waivers. | Critics of these schemes have also pointed out that many famers borrow informally from family, friends or local money lenders and do not therefore benefit from the loan waivers. |
Supporting the rural economy | Supporting the rural economy |
Some farmers' groups and lobbyists have been calling for a one-off write-off of all farmers' debts, and then a rethink of how best to support the agricultural economy. | Some farmers' groups and lobbyists have been calling for a one-off write-off of all farmers' debts, and then a rethink of how best to support the agricultural economy. |
But waiving all loans could turn out to be hugely expensive. | But waiving all loans could turn out to be hugely expensive. |
One estimate - by former Agriculture Secretary Siraj Hussain - puts the cost of a one-off nationwide debt relief payment as high as 3bn rupees. | One estimate - by former Agriculture Secretary Siraj Hussain - puts the cost of a one-off nationwide debt relief payment as high as 3bn rupees. |
"This amount could only be freed up at the expense of other welfare programmes," he told BBC News. | "This amount could only be freed up at the expense of other welfare programmes," he told BBC News. |
Other ideas for relieving farmer distress are now being implemented. | Other ideas for relieving farmer distress are now being implemented. |
One example is in the southern state of Telangana, where all farmers owning at least an acre (4,000 sq m) of land receive a guaranteed subsidy each growing season. | One example is in the southern state of Telangana, where all farmers owning at least an acre (4,000 sq m) of land receive a guaranteed subsidy each growing season. |
Other states have implemented similar projects and in February this year the federal government announced a plan to support small-scale farmers across the country with a guaranteed annual income support of about 6,000 rupees. | Other states have implemented similar projects and in February this year the federal government announced a plan to support small-scale farmers across the country with a guaranteed annual income support of about 6,000 rupees. |
Tens of millions of farmers have received the first instalment. | Tens of millions of farmers have received the first instalment. |
Read more from Reality Check | Read more from Reality Check |
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