We are in a new a phase of competitive populism. The only time the expression on Railway Minister Lalu Yadav’s face changed during Finance Minister P. Chidambaram’s budget speech was at the announcement of the Rs 60,000 crore debt waiver. Lalu Yadav was enjoying a popularity high, having announced cuts in railway fares with a Rs 25,000 crore surplus. So here was Chidambaram over complying with the FRBM Act and yet giving a Rs 60,000 crore debt waiver. Lalu Prasad may have felt outsmarted. Giveaways generate their own momentum and the race has just begun.

There is unanimity that farmers in deep distress needed a special dispensation and the loan waiver was a pragmatic way out. The more serious endemic concerns on farmer indebtedness remain. Consider the following:

• In terms of inter-sectoral deployment of gross bank credits, the share of agriculture in total credit has come down from 12.03 per cent in 2004-05 to 11.92 per cent in 2005-06. In spite of repeated pronouncements, the credit exposure to the agriculture sector has been close to just 10-12 per cent over the last ten years.

• In the relative share of borrowings from different sources the non-institutional credits has no doubt come down from 68.3 per cent from 1971 to 38.9 per cent in 2004. What is however worrisome is that reliance on non-institutional sources has in fact increased from 36.8 per cent in 1981 to 38.9 per cent in 2004 and what is worse the reliance on money lenders has increased from 16.1 per cent to 26.8 per cent during the same period.

... contd.