India Explained
ImplementedBJPYogi AdityanathState: uttar-pradesh

Uttar Pradesh farm loan waiver (April 2017)

In April 2017 Uttar Pradesh's new BJP government announced a waiver of crop loans up to Rs 1 lakh for small and marginal farmers, costed at Rs 36,359 crore. The RBI Governor cautioned against loan waivers generally.

Uttar Pradesh

Facts

  • Chief Minister Yogi Adityanath's cabinet announced the waiver about two days before the RBI Governor's press briefing of 6 April 2017 [2]; 4 April 2017 is used here as an approximate decision date. The government took office on 19 March 2017.
  • The waiver covers crop loans up to Rs 1 lakh per farmer from any bank, including cooperative banks, taken against paddy, wheat, fertilisers and insecticides before 31 March 2016; consumption loans are excluded [1].
  • The total is reported as Rs 36,359 crore, comprising Rs 30,729 crore for bank loans and Rs 5,630 crore for writing off non-performing assets (one source gives Rs 30,279 crore for the former) [3].
  • Beneficiary counts differ across reports: about 86 lakh farmers (YourStory), about 1.5 crore small and marginal farmers (ORF [1], Tribune) and about 2.15 crore (The Quint [2], India TV) [1][2]; the state has about 2.3 crore farmers in total [3]. The count was not verified from an official order.
  • The state planned to fund the waiver through bonds ('Kisan Rahat' bonds) to keep the deficit within the 3% of GDP limit, with an ORF author estimating annual interest of about Rs 2,727 crore at 6.5-7.5% [1][3].
  • On 6 April 2017 RBI Governor Urjit Patel said loan waivers undermine an "honest credit culture", add to inflation risk, remove repayment incentives for future borrowers and can raise government bond yields [2].

Why

Reasons given by those who did it

  • The ORF commentary [1] (an opinion piece) argues for the waiver on humanitarian grounds and out of respect for food producers; it is the author's view, not a government statement.
  • The state's own stated purpose was relief to indebted small and marginal farmers; no official order or speech was opened for this entry.

Criticism of that reasoning

  • RBI Governor Urjit Patel said waivers weaken credit discipline and could create sub-sovereign fiscal challenges for the national balance sheet [2].
  • The ORF author argues that moral-hazard concerns are overstated, noting farmers repay better than industrial defaulters, while expecting larger farmers to benefit more than small ones [1].

Benefits and concerns

Benefits (2)

  • Direct debt relief to a large number of farmers with loans up to Rs 1 lakh.Rs 36,359 crore across reported 86 lakh to 2.15 crore farmers [1][2][3]; counts conflict.
  • Relief extended to loans from any bank, including cooperative banks.Scope as reported in [1]; NSSO data cited there show 72% of farmers with under one acre relied on informal credit, so a bank-loan waiver reaches only those with bank loans.

Concerns (3)

  • Fiscal burden on a highly indebted state.The ORF author cites state debt of Rs 3,27,470 crore and annual bond interest of about Rs 2,727 crore [1].
  • Central bank concern about credit discipline and spillover to inflation and bond yields.Urjit Patel, press briefing 6 April 2017 [2].
  • Benefits may be uneven across farmers.ORF author expects larger farmers to benefit more than small and marginal ones [1]; opinion, not tested against loan records.

Evidence points

+2.5
points, mean of two scorers (scale −25 to +25)
+2 to +3
range between the two scorers' totals
Low confidence
scorers agree within 1 point on every criterion
ReachHow many people did the action materially affect?
Mean +3.0A +3B +3
Outcome evidenceDo official or independent data show the intended result (or its opposite), compared with the era baseline and peers?
Mean 0.0A 0B 0
Cost and sustainabilityIs the fiscal cost proportionate, and is the effect durable?
Mean −2.0A −2B −2
Process and rightsWas it made with debate, consultation and legal soundness, and did it respect rights and court rulings?
Mean 0.0A 0B 0
DeliveryWas it implemented as announced, on time and at scale?
Mean +1.5A +2B +1

Positive meanNegative meanScorer AScorer B

Scorer A. Rs 36,359 crore relief to farmers with bank loans, but fiscal burden on an indebted state, credit-discipline concerns and uneven benefits.

Scorer B. Rs 36,359 crore relief to many farmers but debt-heavy state, central bank warning and no outcome data keep net low.

Context used when scoring

Era baseline
In April 2017 the RBI Governor was publicly arguing against the practice of farm loan waivers, indicating that waivers were under national debate [2]; the sources opened give no comparison with other states.
Lag before outcomes show
3 years
Uncertainty
Low confidence. Scorer totals are +3 and +2. How uncertainty is shown.

In depth

The waiver was among the first major decisions of the government that took office in Uttar Pradesh in March 2017. It cancelled crop loans up to Rs 1 lakh per farmer for small and marginal farmers, with the cost to be met through state bonds.

Reports disagree on how many farmers benefit and on the split of the Rs 36,359 crore total. The RBI Governor spoke against loan waivers in general two days later, without naming the state. A commentator at ORF argued for the waiver on humanitarian grounds but also said waivers bring only temporary relief and that irrigation, credit access and non-farm jobs are the structural issues.

This entry relies on press and commentary only. No government order, budget document, CAG report or RBI data on repayment outcomes was opened, so outcomes such as later farm credit behaviour are not assessed and confidence is low.

Sources

Last reviewed .Report an error orchallenge a score.

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