Debt waiver schemes of central and state governments have not benefited farmers as they restricted credit flow subsequently, Reserve Bank of India governor Raghuram Rajan said. “Studies have shown that debt waiver programmes have been ineffective, constraining credit flow to farmers after their loans were waived off,” Rajan said at a conference in Udaipur.
Concerned over farmers' suicides, arising partly out of their inability to pay back loans, Rajan said there was a need to study if they were caused by indebtedness or “other factors.” He recalled that waivers were declared for farmers in Andhra Pradesh after cyclone Phailin made landfall in October 2013.
Referring to subsidies in the agriculture sector, the RBI governor said it would be worth studying if they (subsidies) have actually helped farmers. “The concern is if the benefit in the form of cheap credit to agriculture is being put to right use or leading to over-indebtedness,” Rajan added.
`Focus on inflation in medium term'
The RBI would focus on medium-term inflation to let the economy adjust to changes rather than chasing short-term inflationary goals, Rajan said. Rajan asserted that no country in the world chased short-term inflation targets ignoring domestic and global developments.