Rural Distress and Government Policy

National Sample Survey data in Income, Expenditure and Productive Assests of Farmer Households, 2003 showed that 96 per cent of farmer households are in deficit and half of the households are indebted. Debt waiver can only be welcomed in such a situation. Once indebted, marginal and small farmers will hardly be in a position to repay the debt even if it is from institutional sources where interest rates are much lower than the rates charged by private moneylenders.

The solution lies not in periodical debt waivers but in creating conditions where agriculture becomes a paying proposition. This requires, among other things, massive public investment apart from facilitating private investment through access to institutional sources at a nominal rate of interest of 4 per cent as recommended by National Commission on Farmers. No less important is to make the loans hassle free as far as institutional sources are concerned.