Economic Implications of Farm Loan Waivers

Farm loan waivers have significant negative implications for the economy and the agricultural credit system, with research indicating that they do not enhance productivity or investment in agriculture. A considerable portion of waivers is granted to farmers who are already repaying their loans, leaving many genuinely in need without access to relief. This practice leads to increased non-performing assets (NPAs) within banks, as farmers predictably stop repayment in expectation of future waivers, further straining the financial system. Consequently, the burden of these waivers often falls on government budgets, resulting in inflated deficits and economic ramifications such as rising interest rates and hindered growth.