The decision of Uttar Pradesh Chief Minister Yogi Adityanath to write off loans to farmers makes social, political and economic sense. This move alone will cost the government Rs 36,000 crore which is more than one-tenth of the State’s annual budget of Rs 3.46 lakh crore. The government plans to finance this election promise through bonds and money from the Centre. At the social level, this write-off of loans will bring huge relief to farmers who have been hit by two consecutive droughts. The general economic theory is that to make money, you have to invest money and the loan write-off should be seen as an investment in farmers, who are the poorest even though they are the ones who feed the nation. If industry needs government incentives, tax holidays, land at concessional rates or free and loan restructuring to survive, why can’t the same benefits be extended to farmers? The experience with MGNREGA has taught us that money put into the hands of those at the lower rungs of society flows directly into the market and boosts the economy. Now, every rupee that would have gone towards repayment of loans will enter the economy. The political gains from this write-off are huge and the BJP is going to run away with the credit. So, it’s a win-win-win situation for the farmers, BJP and the economy.
