Farmers from various states of India like Madhya Pradesh, Maharashtra, Punjab, Gujarat etc., are right now agitating against their local state governments demanding, mainly, cancellation of their debts as well as better minimum support prices of their products. In the on-going agitation already six farmers have been killed by police firing.
This agitation is a sign of total dependency of Indian farmers on the state. The reason why they have to demand cancellation of their huge debt burden today is because in past they were given easy loans by the government’s central bank RBI and its commercial, mostly state run, banks. Specifically, these protests and killings of farmers are a making of RBI’s cheap money and credit policy. Overall, this uprising is yet another making of the failures of the state’s central planning socialist policies.
In the absence of these policies of cheap money and credit and central planning, farmers would be careful in borrowing money from the banks. More than farmers, private banks, working in a competitive environment of free market, would be extremely cautious in giving loans to sub-prime credit customers like many of the farmers who are right now agitating for cancellation of debt because they can’t repay it. Such banks will check the creditworthiness of their borrowers extremely carefully before lending them any money of their depositors. They would surely want to avoid the kind of NPA (non-performing assets i.e., unpaid loans) problems that is right now endangering the Indian banks. In a free market banking system the lending and borrowing activities will be regulated by the natural rate of interest which will be determined by the saving and consumption choices of Indians. In that system only economically viable projects will get loans from the banks, and that will definitely lower the possibilities of future debt default scenarios.
In the absence of availability of such easy artificial credit from the state run and regulated banks farmers will also be careful in starting new ventures or expanding the present ones. In the absence of minimum support price policy of the government, farmers will only do farming if they find it profitable. If some crop is unprofitable then they will either change the crop or get into some other line of business which is now profitable. The market price of agriculture products will efficiently regulate the farming sector activities. Basically, in the absence of welfare state policies, farmers will rely more on their own abilities of managing their affairs instead of looking at the government all the time for help. The way farmers in India are committing suicide is a sure sign of farmers’ inability to manage their own affairs and handle stress. Government’s years of easy money policies have corrupted hard working habits of farmers. Such policies have also destroyed local communities and self help groups which used to exist in past. Farmers together used to manage their own affairs, but now they can’t even take one step without government’s help! This situation is sad and deplorable. The welfare state has put the very welfare of farmers at risk!
The Indian welfare state, in its zeal of controlling and regulating everything, is meddling everywhere in the economy and making a mess of everything. The present suffering of farmers is just another such mess.