All political parties agree on farm debt waiver: PC

HARD TALK: P Chidambaram explains the finer nuances of the Budget in an interview to Raghav Bahl.

        

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Keywords: Loan Waiver , P Chidambaram

With a Rs 60,000-crore loan waiver for farmers, higher income tax slabs for the middle class and a big push to stimulate consumption in the economy; Finance Minister P Chidambaram delivered a stunner with sixth Union Budget, which was also the last full Budget of the UPA Government. Chidambaram explains the finer nuances of the Budget in a special interview to the Managing Director of Network18, Raghav Bahl.

Raghav Bahl: Hello and welcome to this very special interview with Finance Minister P Chidambaram. Sir, if I was to sum up in one phrase the Budget that you have presented, it is heads I win, tails you lose. You seem to have taken all the credit for the farm waiver, but the problem seems to have been left for the next two years, for the next Finance Minister.

P Chidambaram: The next Finance Minister, I am sure, will be from the Congress party.

Raghav Bahl: But the problem is still with him.

P Chidambaram: No.

Raghav Bahl: Why do you say that?

P Chidambaram: We won’t do anything in the way Mr V P Singh or Mr Devi Lal did. We have done our homework (and) we will find ways and means to provide equivalent liquidity to the banks over a period of time during which they would have expected to recover loans that have been written off.

Raghav Bahl: Are you in a position to share some detail at least of this package?

P Chidambaram: I can’t share the details of any package, but we will find the resources — non-tax revenues. There are other resources, there are other ways to provide the liquidity.

Raghav Bahl: By when do you think we will know the contours of this package?

P Chidambaram: Let me first implement the package by June 30. Let me first do what I have undertaken to do, namely write off the loans of small and marginal farmers and then get into an OTS arrangement with other farmers.

Once this part of the exercise is done, we will have an exact idea, exact number and then we will address the issues of how to provide equivalent liquidity to banks.

Raghav Bahl: When you say equivalent liquidity? Is it going to be bonds or is it going to be, for instance, non-debt capital receipts like sale of public sector stock — something which the markets or the analyst community or even financial commentators would welcome very much?

P Chidambaram: I think there are a number of options before the government and we are examining all the options. It could be a mix of a number of instruments.

Raghav Bahl: There has been some talk about the fact that you could probably have enlarged this offering by including not only bank loans to the rural poor, but also the village money-lenders or the non-institutional form. Is there any mechanism of doing that?

P Chidambaram: How do you do that? Tell me if there is one. Nobody has told me about any such mechanism.

Raghav Bahl: Has any analysis been done as to what is the ratio of indebtedness to village money-lenders and that to the commercial banks? Are there any studies that you may have consulted?

P Chidambaram: No one knows that. There are only surveys. But these are not exact numbers which can be relied upon. Because people borrow from money-lenders for a variety of purposes — they use borrowed money partly for agriculture and partly for non-agriculture purposes. How can you make an estimate? How do you know who has borrowed from whom? How are these numbers reliable?

Raghav Bahl: What about the moral hazard argument that a lot of people are putting forth — including you yourself and your Prime Minister? When the whole issue of free power was being debated, the PM as well as you felt that this kind of economics is not something that’s going to work?