It is a mathematical masterstroke, and political populism at its best...

IIPM - Admission Procedure

It is a mathematical masterstroke, and political populism at its best. But it will not help this poor farmer. He will continue to be at the mercy of the local moneylender

It was a cause for celebration. At many places, including at 10, Janpath, the residence of Congress President Sonia Gandhi, farmers danced. At the Congress headquarters, leaders espoused that this year’s Budget had pulled the rug from under the BJP’s feet. A BJP leader privately admitted that his party didn’t know how to react to the announcement. Even FM P. Chidambaram had that naughty and knowing smile when he announced the ‘Mother of all Loan Waivers’. He knew that this was the ultimate ‘populist’ political weapon to vanquish his opponents in the forthcoming general elections.

In many ways, the loan waiver of Rs.60,000 crore for small and marginal farmers was a mathematical masterstroke and brilliant ‘budget-o-nomics’. For one, it was the most populist Budget proposal in recent history. And it stumped all political and economic experts. Even the critics went about their task in a roundabout fashion. Uttar Pradesh’s Chief Minister Mayawati took out full page ads saying that this move would have been better if it had been taken four years ago, when the UPA came to power.

Devinder Sharma, a researcher who writes on food and trade policies, says that “the loan waiver is an historic step. It was desperately required.” Rajesh Mokashi, Executive Director, CARE, adds, “The step is a right one considering its positive social implications.” And, according to P.K. Joshi of the National centre for Agricultural Economics and Policy Research, “the scheme will temporarily give relief to roughly one-third of small and marginal farmers, and nearly half of large farmers.”

If one examines the loan waiver in terms of macro economics, Chidambaram seems to be holding all the four aces, including a few from another pack. Many have criticised him for reasons like the waiver will impact the bottomlines of state-owned banks, and add to overall fiscal imprudence and irresponsibility. Who’ll foot the bill, they ask, when the payback time comes? Like in the case of oil bonds, any mechanism to help the banking sector will poke a huge number hole in government finances.


But there’s a catch; it’s called Catch 2008. Most of these loans either fall into the non-performing assets category, or were likely to do so shortly. So, the scheme is only a sleight of PC’s hand to clean up the balance sheets of public sector banks. The reason: in many cases, the farmers were unable to return their loans due to regular crop failures. Hence, the government will neither have to help the banks majorly, nor will it have to show the waiver amounts in its own Budget balance sheets.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM : EXECUTIVE EDUCATION
IIPM, GURGAON
IIPM’s 36th Glorious Year of Academic Excellence
IIPM Ranked No. 1 B-School In Global Exposre - Zee...
4Ps Power Brand Awards 2007
When IIPM comes to education, never compromise
IIPM is A World of Career
Why Study Abroad When IIPM Gives You 3 global Advantages!
IIPM Ranked No. 1 B-School In Global Exposre - Zee...

Rashmi Bansal Publisher of JAMMAG magazine caught red-handed, for details click on the following links.

• Hindustan Times Article - Publisher goes underground
• Rashmi Bansal (Editor of JAMMAG)
• Rashmi Bansal (Publisher of JAMMAG)