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4) Critically examine whether loan waivers are a panacea for farm distress?(250 words)

Topic– Indian agriculture : issues

4) Critically examine whether loan waivers are a panacea for farm distress?(250 words)

Financial express

Why this question

The issue of loan waivers, comes in news repeatedly because most of the state governments see it as a low hanging fruit. The overall impact of the loan waivers is not judged. The article discusses these issues and indicates why waiving off farmers loans may not be the best idea in helping them.

Key demand of the question

The question expects us to discuss the pros and cons of loan waivers, examine the reasons why loan waivers are resorted to by state governments, and the impact that it has.

Directive word

Critically examine – When you are asked to examine, you have to probe deeper into the topic,  get into details, and find out the causes or implications if any . When ‘critically’ is suffixed or prefixed to a directive, all you need to do is look at the good and bad of something and give a fair judgement.

Structure of the answer

Introduction – Highlight the recent penchant of governments to go for loan waivers.


  • Discuss the pros and cons of loan waivers with respect to alleviating issues faced by farmers
    • Farm loans may be crop loans or investment loans taken to buy equipment. Both farmers and banks reap a good harvest when all is well. But when there is a poor monsoon or natural calamity, farmers may be unable to repay loans. The rural distress in such situations often prompts States or the Centre to offer relief — reduction or complete waiver of loans.
    • Agriculture in India has been facing many issues and farmers demand for these waivers to tide over the financial distress that befalls them
  • Discuss the ill effects of such waivers
    • Undermines an honest credit culture and discipline
    • Benefit accrues to the large farmers and hardly any benefits accrue to the small and medium ones etc

Conclusion – give your view on the penchant of politicians to announce loan waivers and discuss way forward.