The debate occurred about the demand of loan waiver and state financial capability to waive the loan irrespective of pooling out the money from other expenditure. A loan waiver is the waiving of the real or potential liability of the person or party who has taken out a loan through the voluntary action of the person or party who has made the loan. The loan waiving has become a big political tool in hands of political parties that has ruined capital status of indian agriculture economics.

Arguments in favor of loan waiving:

• As the monsoon rains are highly erratic the small and marginal farmers left with no means of livelihood in case of monsoon failure.
• The very nature of Indian agriculture makes the act of loan waiving as essential tool for social security. Large number of small and marginal farmers with inability to capital investment makes loan waiver a social compulsion. According to NCRB report, debt and bankruptcy are behind 80% of farmers suicides. Hence making loan waiving a welcoming move to combat the distressful situation of rising farmers suicides.
• Lack of common market and assurance of guaranteed income makes farmers vulnerable to economic challenges.
• Large number of farmers are moving out of the agriculture and entering into distress employment that further creates pressure on employment in other sectors of economy. Every hour, according to Census 2011, around 100 farmers are giving up agriculture and at least one farmer is committing suicide.

Argument against the loan waiving:

• Loan waiving is generally declared by political parties for electoral gains. The very purpose of waiving is unjustified and the needs a review of overall waiving process.
• In many areas the vested interest are getting satisfied by diverting the loan money for some other purposes other than agriculture. Borrowers often turn into willful defaulters hoping their loans will be waived in next elections, at the same time benefiting rich farmers more than poor ones. It also undermines the morality of honest farmers who repay their debts timely.
• Loan waiving leads to Disruption of credit discipline of state economies which has already burden of fiscal deficits. The culture of subsidy and loan waiving has spillover effect as the further demands on free water and electricity also rises and get publicized. According to market economists, waiving off farm loan would create unnecessary fiscal stress and give wrong signal about reform.
• There is big challenge of High exclusion errors in loan wavier scheme as according to CAG 13.46% of the accounts are not eligible for loan waving. Inefficiency of MFIs in identifying actual beneficiaries needs to be corrected in order to avoid wastage of exchequers money.
• Loan waiving adds up to the non-performing assets of the banks.

Outstanding agricultural loan

Types of bank                             Outstanding loan amount

Commercial banks                      Rs 9.57 lakh crore

Regional Rural Banks                 Rs 1.45 lakh crore

Cooperative banks                      Rs 1.57 lakh crore

Waiving of loans should be done only in the most exceptional circumstances. Waiving of loans of farmers has helped the farmers save from many untoward incidents. Instead of waiving loans govt should focus on increasing the output of the farmers which in turn would generate more income for the farmers. Waiving of loans is a short term solution and may not solve the problem fully. There in need of focus more towards advancement of agriculture sector by schemes like Pradhan Mantri Krishi Vikas Yojana, PM Fasal Bima Yojana, promote research & development in agriculture.