Realist, not conformist analysis of the latest financial, business and political news

Modi’s Wrong, Farm Loan Waivers Aren’t Lollypops, They’re Electoral Bribes

India’s Prime Minister, Narendra Modi, has hit out at the practice of granting farm loan waivers calling them lollypops (for English readers, lollipops). This is incorrect and Modi would do well to call them what they really are, electoral bribes. They are, of course, very popular with politicians around election time but then that just shows how political they are.

The basic problem here being that some 50% of Indians still are peasant farmers, working small plots of land of a hectare or three and reliant upon the mortgaging of that asset, the land, to provide the working capital for planting and so on. That’s not a particular problem of course, most farming in most places works that way. It’s just that the volume of farmers can overwhelm the political system.

If the crops have failed or some reason – or even if they’re really good and the volume of production is pushing prices down – there’s pressure to offer some relief to farmers. OK, that’s also not unusual, that happens in most political systems.

It’s just that when you’ve got that interaction of possible support for farmers and farmers are a plurality, possibly a majority, of the electorate then someone will always be tempted to try to buy the election with other peoples’ money. The most obvious manner of doing this being to instruct the banks – most of which here are state owned – to write of those loans to the struggling farmers.

This isn’t a lollypop, that’s far too mild a word:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Prime Minister Narendra Modi today called the farm loan waiver by the Congress governments in Madhya Pradesh, Rajasthan and Chhattisgarh “political stunts” and asserted that a majority of farmers do not benefit from these “misleading” announcements as they take loans from money lenders, not banks.
The PM, who had earlier described these farm loan waiver announcements as “lollipops”, said in an interview to news agency ANI: “To lie and mislead, that is what I called lollipop. Like saying that we have waived all farm loans. The truth is that nothing like that has happened… They should not mislead… And particularly a responsible political party should never do it.” “These are political stunts”, he said. [/perfectpullquote]

They’re not even just political stunts, they’re electoral bribery and we’d all be better off if we started calling them that.

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