Farm Loan Waivers Kill Credit Culture: Raghuram Rajan

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India needs to focus on resolution of farm distress rather than loan waivers which kill the credit culture, former RBI governor Raghuram Rajan said.

“First we need to worry about why people are so distressed and angry. There is a lot of agriculture distress. I personally believe that farm loan waivers are not the answers. But there are other answers,” he said.

The other focus area should be creation of jobs which the people want, he said at the launch of his book -‘The Third Pillar – How Markets and the State leave the Community Behind’.

“I would say that one is start creating those jobs people want. Take care of the distress, but whatever measures you put, put them as a pathway for people to get those jobs rather than standing in the way of getting those jobs. We can talk about the economic reforms that are needed, but jobs are task one,” Rajan said.

Several state governments have announced loan waivers for farmers.

Referring to the issue of farm distress, he said loan waivers cover only those farmers who have taken loans from the formal system.

Rajan is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business in the US.