Finance Minister P. Chidambaram announced a debt waiver in the amount of Rs. 600 billion for small farmers this past week. As per the proposal, farm loan cancellations will be offered to small farmers with less than 2 hectacres of land. The offer follows more than a decade of farmer suicides resulting from rising prices for pesticides, seeds, and fertilizer that have trapped small farmers in a cycle of poverty and debt. To date, more than 166,00 farmers have committed suicide in rural India. The current government, led by the Congress Party, is expected to lose control over the Upper House in early April, and is struggling to win the votes of poor, rural voters through what is perceived as an increasingly populist government agenda. The trend appears to be a larger one, as per the OneWorld South Asia:

The move is a centrepiece of India’s latest budget, with the government also increasing education spending by 20% and health funding by 15%. Chidambaram also announced higher spending on rural infrastructure and highways.

Critics contend that the proposal will not alleviate debt incurred through private, informal entities, often at high interest rates. It is estimated that 57.7% of the outstanding loan amount was borrowed from institutional lenders, and the balance of the loans were sources from private channels – moneylenders, traders, relatives, and friends. Small farmers also contend that the debt cancellation does not address the root of the problem – rising prices for hybrid seeds and pesticide, resulting in low quality/quantity yields. For :

This is at best a temporary and political solution. There should be permanent solutions to save the farmers from the greedy moneylenders. The solutions include better irrigation facilities and supplying better quality fertilisers and pesticides, which will ensure enhanced yield from even small farm holdings, Guhagarh, [a small farmer from the Konkan region] said.

Jagdish Pradhan, president of the Sahabhagi Vikash Abhiyan, a farmers’ group in Orissa, said the government should have chalked out a plan to identify the deserving farmers and provide them with some special schemes instead of writing off the loans.

“It is not a good sign for the agricultural economy. It is also not good for the government,” Pradhan said in Bhubaneswar. “The farmers need a good market to get remunerative prices for their products and not doles like this.

The government has yet to specify in detail how the proposal will be implemented. For more information regarding farmers’ suicides in rural India, go here.