More than 90 percent Indians are sleep deprived. Is it time for Prime Minister Modi to join such mass? He is threatened by Congress President Rahul Gandhi not to let him sleep until farm loans are written off.
Modi’s sleep hours will hardly be known, but if believed to RBI statement the economy will have sleepless nights as an impact of waiver.
Reserve Bank of India cautioned waiver increases fiscal deficits of the states, but the new elected chief ministers of Madhya Pradesh and Chhattisgarh seems lacking some knowledge about economy. Kamal Nath and Bhupesh Baghel have announced waiving farm loans in their states respectively and Assam may follow the same foot soon.
Earlier this year in July RBI released a report stating waiver means the state to face a double whammy of lower GST revenues and increase of 0.05 percent in fiscal deficit could be noticed.
RBI cautioned the same in 2017 and this is the second time it is saying waiver may result in fiscal deficit of about 2 percent of the GDP.
Waiver has a pathetic history. It resulted with a spike in banks’ NPAs in agricultural sector and farmers were forced to borrow money from money lenders. This reason behind this is that the banks became wary of lending to farmers.
Below is a RBI State Budgets related to contribution of loan waiver to fiscal deficits of states:
Maharashtra – Estimated budget was 0.35 while revised estimate was 0.65.
Karnataka – 0.74 percent ti 0.31 percnet.
Uttar Pradesh – 0.27 and 1.87 percent.
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