Union minister Nitin Gadkari is spot on when he says farm loan waivers are not the answer to tackling rural distress. Making crop insurance more effective would certainly help, but a blanket loan waiver is clearly detrimental to the development of credit markets, adversely affects credit discipline and plain misallocates governmental funds that ought to shore up much-needed investment.
Over half the cropped area depends on rains for water. We need to boost agricultural productivity with a revamped irrigation and canal network, improved rural and district roads, besides investment in cold chains and better markets. We also need greater financial inclusion and timely access to agricultural credit from formal finance, but resorting to loan waivers would perversely disrupt and stymie credit markets.