NEW DELHI -- After Prime Minister Narendra Modi's party took a drubbing in some local elections recently, it is coming under intense pressure to grant farmers debt relief ahead of general elections due by May in which the government hopes to win a second five-year term.
"It's done! Rajasthan, Madhya Pradesh & Chhattisgarh have waived farm loans," tweeted Indian National Congress President Rahul Gandhi on Dec. 19. Triumphant after victories in state elections, the opposition leader added, "We asked for 10 days. We did it in two."
In key regional polls held over November and December, Modi's Bharatiya Janata Party suffered a major blow and lost power to the main opposition Indian National Congress in the heartland states of Rajasthan, Madhya Pradesh and Chhattisgarh.
It was the biggest electoral setback for Modi since he assumed office in May 2014 and the result of a deepening debt crisis among Indian farmers -- a key electorate that marched on the capital four times within a year to demand loan waivers and higher prices for their crops.
INC's promise to write off agriculture loans within 10 days if elected to power worked as votes tilted in favor of the party. INC announced it would waive farm debt in the three states soon after forming governments this week. Such a move is expected to cost the state coffers over 590 billion rupees ($8.4 billion) and put pressure on the Modi government to do the same.
Already, Modi's BJP announced a series of programs in Assam to boost the farm sector -- including debt relief to farmers in the form of a 25% subsidy on loans -- which is expected to cost 10 billion rupees.
Gujarat, another BJP-governed state, announced it would write off electricity bills to the tune of 6.25 billion rupees in rural areas.
Farmers wave flags and shout slogans during a protest rally demanding loan waivers and the transfer of forest lands to villagers who have farmed there for decades, in Mumbai on Nov. 22.
© Reuters
As pressure builds on Modi's party, the BJP unit in INC-ruled Karnataka claimed the INC did not enforce loan waivers in the state despite its promises. "Eventually farmers of MP, Rajasthan & Chhattisgarh will know about your lying skills. Press statements and tweets don't really mean loans are waived off."
Victories in regional elections have revived the political fortunes of Gandhi and his party, which held power only in two big states of Karnataka and Punjab before forming governments in the states considered BJP bastions.
Now, the party is eyeing the 2019 general elections with renewed vigor. "We will not let Modi sleep till every farmer's loan is waived in the country," Gandhi told reporters on Dec. 18.
Arvind Panagariya, former vice chairman of government think tank NITI Aayog and currently a professor in Columbia University, however, said: "A sad race to the bottom has begun."
He tweeted that loan waivers would only provide temporary reprieve: "If loan waivers would fundamentally alleviate farmers' plight, waivers would be a welcome step. But if after 70 years of independence [from the British], farmers remain in distress, we need to seek different solutions."
While state governments are rushing to implement debt relief measures for farmers, the central government is yet to decide on the direction it would take.
In July, the Modi government informed parliament that "at present, [it] is not considering any loan waiver scheme for farmers."
However, whether this stance will change in the run-up to the 2019 polls remains to be seen. After winning a landslide and forming its government in the politically crucial Uttar Pradesh state last year, the BJP announced an over 360 billion-rupee loan waiver, keeping with its poll promise.
