Money for farmers will end up in party coffers: Lord DesaiFebruary 29th, 2008 - 7:58 pm ICT by admin
By Dipankar De Sarkar
London, Feb 29 (IANS) Much of the Rs.600 billion set aside to waive the public sector loans of small and marginal farmers will end up lining the coffers of political parties unless immediate steps are taken to address corruption at the state level, distinguished economist Lord Meghnad Desai warned Friday. Reacting to the Indian union budget announced Friday, Desai also said the one-time loan waiver for farmers would be “meaningless” if two key structural problems were not addressed immediately - endemic corruption and the inability of public-sector banks to serve the rural poor.
“What are you going to do six months down the line from today? We need to establish the causes of why farmers are committing suicide. Is it the under-pricing of cotton? Is it interest rates? How come after 38 years of bank nationalisation there are these huge gaps?
“We don’t know what the structural problem is,” Desai told IANS.
Desai said Indian economists familiar with the issue had spoken of “a serious problem with local corruption at the state level”.
These economists included Narendra Jadhav, vice chancellor of Pune University and former chief economic analyst of the Reserve Bank of India, who has been asked by the Maharashtra government to write a report on farmers’ suicides.
Desai also pointed to other gaps that he thought made the budget sop appear “gimmicky”, including a Rs.300 billion package announced by Prime Minister Manmohan Singh last year to alleviate rural distress.
“We don’t know what happened to this money. No one has accounted for it. There have been reports of farmers’ cheques bouncing. It is really a complete scandal.”
Desai, who caused a stir among politicians last year by proposing the privatisation of all Indian public sector banks save the largest - the State Bank of India - said Indian banks had failed the rural poor since being nationalised by the late prime minister Indira Gandhi in 1973.
“Why does the marginal farmer go the private moneylender rather than the public sector bank? It is because the moneylender knows how to attract the farmer, with individual attention.
“The moneylender knows every farmer. They will adapt the interest rate and terms of lending to make their loans attractive. By contrast, the public sector bank follows the philosophy of what I have called KYC - Kick Your Customer,” said Desai, who called for bank privatisation in a speech on the centenary anniversary of the Bank of Baroda last year.
“If I can be driven to the end of my tether in my dealings with Indian banks, you can imagine what the situation is for the marginalised farmer,” he said.
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