Loan waivers are bad

Loan waivers by government, whether to industrialists or farmers or anyone else are bad. After announcing Rs.60,000/- crore loan waivers there is talk of extending loan waivers to others to cover money borrowed from money lenders. There can be complicity of money lenders and farmers and false claims of loans.

People who borrow must repay the loan. A person can waive the loan if the money belongs to him/her. Governments do not own the money for which they waive loans. That money belongs to people. Ministers run the government. They do not own the treasury of the country.

Populism is bad economics. Its political benefits for any party are of short duration.

After loan waiver was announced during the budget inflation increased. Prices shot up. It is possible that many farmers who would have paid the loans spent it for buying goods and money supply went up.

Updated: July 5, 2014 — 2:19 am

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