"Vicious circle of Farmer Loan and LoanWaive: Political, Economical and SocialIndian agriculture is in the grip of crisis ranging from fragmented land holding, depleting watertable levels, deteriorating soil quality, rising input costs, low productivity. Full credit of thiscrisis should not be given to adverse natural environment and poor monsoon.There exists plethora of policies for the development of agriculture and increasing farmer’swelfare and every year major portion of budget is allocated in agricultural sector and it hadincreased to Rs.1.87 trillion (2017-18) from Rs.24909 crore (2015-16) and each political partyannounces new policies when in power such as National policy for farmers (2007), PradhanMantri Krishi Sinchayee Yojana (2015) among others. Certainly there is no shortage of policiesbut there is surely lack of proper implementation of these policies. This drawback is clearlyvisible as there is hardly any improvement in any spectrum of agriculture; agriculture share inGVA is continuously reducing and reached 17.4% (2014-15) from 18.5% (2011-12) (table 1) andonly marginal reduction in suicides (table 2). According to the National Sample SurveyOrganisation’s (NSSO) 2013 report, the monthly income of agricultural households was Rs. 6426 while their monthly expenditure during the same period was Rs.6223 which is not evensufficient for basic amenities.After UP and Maharashtra waiving off Rs.25000 crore and Rs.11000 crore respectively, farmersare protesting in various states for waiving off their loans. First providing loans and later waivingthem off is surely advantageous for political parties to develop a strong vote bank but from beinga temporary aid, it is increasingly made a trend which is neither economically viable nor sociallydesirable. The need of the hour is to compare the pros and cons where the pros are immediaterelief to farmers and cons are adverse affect on every section ranging from small producers toconsumers, government, tax payers, farmers themselves and so nation as a whole due to linkageeffects. It is also a threat to equity as the honest farmers feel cheated for timely payment of theirdebts.Waiving off farmer loans leads to moral hazard as reported by Indian Statistical Study (2013)that after the Central Government announced farm loan waiver of Rs.60000 crore in 2008 (a yearbefore the general election), even the honest farmers turned defaulters. ICRIER (2015) paperstated that 2008 waiver lead to three-fold increase NPAs of the commercial banks between 2009- 10 and 2012-13 which made banks wary of lending. This also means that government’s alreadystrained fiscal power is increased by the equal amount as the liability to pay the loans wasovertaken by government which it tries to recover from tax payers leading to decline in personaldisposable income, reduced levels of consumption, thereby reducing aggregate demand and thuseconomy experiences low level of output and income, which adversely affects the economicgrowth and development.Indebtedness is not the problem in itself, instead it is the result of problems and efforts should bemade to identify and tackle root causes, which will automatically solve this indebtedness crisisand break vicious circle of farmer loan and loan waiver. More emphasis should be given to anefficient mechanism for monitoring agricultural policies along with efficient feedback systemfrom the farmers to understand their exact requirements. Avoidance of overlapping policies andimproving coordination among them is vital to reduce government expenditure and for better andconfusion free understanding of the farmers. Thus, waivers should be used as temporary aid incase of severe crisis situation only and selective waiver to states should be adopted as nature andsituations are different for each state and each crop. So, waiver in aggregate form should beevaded. Huge amount spent on waiver can be alternatively used to create better infrastructure foragricultural development, to provide skills, education, to remove disguised unemployment wherethe marginal productivity of farmer is equal to zero. This will help to increase the productivity,income, reduce the suicidal rates, reduce loan waiver rounds and in turn will reduce the strain onthe fiscal power of the government and so less pressure on the tax payers and thus boosteconomic growth and development.Table 1: Percent to total GVA2011-12 18.52012-13 18.22013-14 18.32014-15 17.4Source: Central Statistical Office, Ministry of Statistics and Programme Implementation, Govt. of IndiaTable 2: Farmer suicidal Statistics2015 80072014 56502012 137552011 14207Source: National Crime Records Bureau"