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Directions (1-10) : Read the following passage carefully and answer the questions given below it. Certain words have been printed in bold to help you locate them while answering some of the questions.
Political ploys initially hailed as masterstrokes often end up as flops. The Rs. 60,000 crore farm loan waiver announced in the budget writes off 100% of over dues of small and marginal farmers holding up to two hectares, and 25% of over dues of larger farmers. While India has enjoyed 8%-9% GDP growth for the past few years, the boom has by passed many rural areas and farmer distress and suicides have made newspaper headlines. Various attempts to provide relief (employment guarantee scheme, public distribution system) have had little impact, thanks to huge leakages from the government's lousy delivery systems. So, many economists think the loan waiver is a worthwhile alternative to provide relief.
However, the poorest rural folk are landless labourers, who get neither farm loans nor waivers. Half of small and marginal farmers get no loans from banks and depend entirely on moneylenders, and will not benefit. Besides, rural India is full of family holdings rather than individual holdings, and family holdings will typically be much larger than two hectares even for dirt-poor farmers, who will, therefore, be denied the 100% waiver. It will thus fail in both its economic and political objectives. IRDP loans to the rural poor in the 1980s demonstrated that crooked bank officials demand bribes amounting to one-third the intended benefits. Very few of the intended beneficiaries who merited relief received it. After the last farm loan waiver in 1990, many banks went slow on fresh farm loans for some years. This waiver will similarly slow down fresh loans to deserving farmers. While over dues to co-operatives may be higher, economist Surjit Bhalla says less than 5% of farmer loans to banks are overdue, i.e.. over dues exist for only 2.25 million out of 90 million farmers. If so, then the 95% who have repaid loans will not benefit. They will be angry at being penalised for honesty.
The budget thus grossly overestimates the number of beneficiaries. It also underestimates the negative effects of the waiver encouraging wilful defaults in future and discouraging fresh bank lending for some years. Instead of trying to reach the needy through a plethora of leaky schemes we should transfer cash directly to the needy, using new technology like biometric smart cards, which are now being used in many countries, and mobile phone bank accounts. Then benefits can go directly to phone accounts operable only by those with biometric cards, ending the massive leakages of current schemes.
The political benefits of the loan waiver have also been exaggerated since if only a small fraction of farm families benefit, and many of these have to pay bribes to get the actual benefit, will the waiver really be a massive vote-winner. Members of joint families will feel aggrieved that, despite having less than one hectare per head, their family holding is too large to qualify for the 100% waiver. All finance ministers, of the central or state governments, give away freebies in their last budgets, hoping to win electoral regards. Yet, four-fifths of all incumbent governments are voted out. This shows that beneficiaries of favours are not notably grateful, while those not so favoured may feel aggrieved, and vote for the opposition. That seems to be why election budgets constantly fail to win elections in India and the loan waiver will not change that pattern.
Political ploys initially hailed as masterstrokes often end up as flops. The Rs. 60,000 crore farm loan waiver announced in the budget writes off 100% of over dues of small and marginal farmers holding up to two hectares, and 25% of over dues of larger farmers. While India has enjoyed 8%-9% GDP growth for the past few years, the boom has by passed many rural areas and farmer distress and suicides have made newspaper headlines. Various attempts to provide relief (employment guarantee scheme, public distribution system) have had little impact, thanks to huge leakages from the government's lousy delivery systems. So, many economists think the loan waiver is a worthwhile alternative to provide relief.
However, the poorest rural folk are landless labourers, who get neither farm loans nor waivers. Half of small and marginal farmers get no loans from banks and depend entirely on moneylenders, and will not benefit. Besides, rural India is full of family holdings rather than individual holdings, and family holdings will typically be much larger than two hectares even for dirt-poor farmers, who will, therefore, be denied the 100% waiver. It will thus fail in both its economic and political objectives. IRDP loans to the rural poor in the 1980s demonstrated that crooked bank officials demand bribes amounting to one-third the intended benefits. Very few of the intended beneficiaries who merited relief received it. After the last farm loan waiver in 1990, many banks went slow on fresh farm loans for some years. This waiver will similarly slow down fresh loans to deserving farmers. While over dues to co-operatives may be higher, economist Surjit Bhalla says less than 5% of farmer loans to banks are overdue, i.e.. over dues exist for only 2.25 million out of 90 million farmers. If so, then the 95% who have repaid loans will not benefit. They will be angry at being penalised for honesty.
The budget thus grossly overestimates the number of beneficiaries. It also underestimates the negative effects of the waiver encouraging wilful defaults in future and discouraging fresh bank lending for some years. Instead of trying to reach the needy through a plethora of leaky schemes we should transfer cash directly to the needy, using new technology like biometric smart cards, which are now being used in many countries, and mobile phone bank accounts. Then benefits can go directly to phone accounts operable only by those with biometric cards, ending the massive leakages of current schemes.
The political benefits of the loan waiver have also been exaggerated since if only a small fraction of farm families benefit, and many of these have to pay bribes to get the actual benefit, will the waiver really be a massive vote-winner. Members of joint families will feel aggrieved that, despite having less than one hectare per head, their family holding is too large to qualify for the 100% waiver. All finance ministers, of the central or state governments, give away freebies in their last budgets, hoping to win electoral regards. Yet, four-fifths of all incumbent governments are voted out. This shows that beneficiaries of favours are not notably grateful, while those not so favoured may feel aggrieved, and vote for the opposition. That seems to be why election budgets constantly fail to win elections in India and the loan waiver will not change that pattern.
Why do economists feel that loan waivers will benefit farmers in distress ?
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A) It will improve the standard of living of those farmers who can afford to repay their loans but are exempted. |
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B) Other government relief measures have proved ineffective. |
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C) Suicide rates of farmers have declined after the announcement of the waiver. |
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D) Farmers will be motivated to increase the size of their family holdings not individual holdings. |
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E) The government will be forced to reexamine and improve the public distribution system. |
Correct Answer:
| B) Other government relief measures have proved ineffective. |
Part of solved SBI JuniorAssociate-3 questions and answers : Exams >> Bank Exams >> SBI JuniorAssociate-3
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Similar Questions
1). What message will the loan waiver send to farmers who have repaid loans ?
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2). Which of the following is most nearly the same in meaning to the word 'Ploys' as used in the passage ?
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3). Which of the following is most nearly the same in meaning to the word 'Aggrieved' as used in the passage ?
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4). What is the author's suggestion to provide aid to farmers ?
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5). What was the outcome of IRDP loans to the rural poor ?
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6). What are the terms of the loan waiver ? (A) One-fourth of the overdue loans of landless labourers will be written off. (B) The Rs. 60,000 crore loan waiver has been sanctioned for 225 million marginal farmers. (C) Any farmer with between 26% and 100% of their loan repayments overdue will be penalized.
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7). Which of the following is most nearly the opposite in meaning to the word 'Plethora' as used in the passage ?
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8). Which of the following is most nearly the opposite in meaning to the word 'Merited' as used in the passage ?
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9). Choose the right answer from the given options
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10). Choose the right answer from the given options
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