This year’s union budget has been touted as an election budget—making the opposition fretful, whereas government supporters are exhilarated. The government perhaps struck the right chord with the voters. To what extent this will translate into votes is not our concern. We will briefly assess the real impact of the single most crucial feature of the budgetary recommendations—the farm-loan waiver—on rural labour.

The Finance Minister emphasised that his proposal for a debt waiver was something unprecedented, as he stressed that even the Radhakrishna Committee, which studied the phenomenon of rural indebtedness, had “made a number of recommendations but stopped short of recommending waiver of agricultural loans.”

Under the Debt Waiver and Relief Scheme, all institutional agricultural loans disbursed up to 31March 2007 and overdue as on 31December 2007 will be covered. The budget proposed two kinds of measures in this regard: a loan waiver, and a one-time settlement (OTS) scheme.

The loan waiver will be applicable only to farmers holding up to two hectares of land. Under this plan, all loans contracted by these farmers that were overdue as on 31 December 2007 and unpaid as on 29 February 2008 will be completely waived.

The OTS scheme will be applicable to all loans contracted by farmers not covered under the first scheme. Under this scheme, a rebate of 25 per cent will be given against payment of the balance of 75 per cent. The cut-off dates are the same as above.

The restructuring and rescheduling of agricultural loans, undertaken by banks in 2004 and 2006 or in the normal course as per RBI guidelines, will not affect their chances of being covered by the above scheme. Further, “upon being granted debt waiver or signing an agreement for debt relief under the OTS, the farmer would be entitled to fresh agricultural loans from the banks in accordance with normal rules.” The implementation of the scheme is estimated to benefit about three-crore small and marginal farmers and about one crore other farmers. “The total value of overdue loans being waived is estimated at Rs 50,000 crores and the OTS relief on the overdue loans is estimated at Rs 10,000 crores.”

The Condition of Rural Labour in India

If we understand rural labour as those who derive a substantial amount of income from wage labour, it will include not only the landless but also a majority of marginal farmers (holding up to 1 hectare) along with a section of small farmers (holding 1-2 hectares). According to the Rural Labour Enquiry Report on Indebtedness 1999-2000, a rural labour household is one whose major source of income is wage-paid manual labour (in agriculture or elsewhere) rather than paid non-manual employment or self-employed labour. Further, of these rural labour households, agricultural labour households are those that obtain “50 percent or more of their total income from wage-paid manual labour in agricultural activities.”

Table 1 shows the distribution of farmer households in India as per farm size held. It shows that 64.5 per cent of the farmer households in 2003 were marginal households and a majority of them possessed less than 0.40 hectares of land.

Wages have become a major source of income for farmer households, contributing around 39 per cent of the total rural income.  Table 2 shows the importance of wage labour in the rural economy. For marginal farmer households, this is clearly the most significant source of income.

Indebtedness among Rural Labour Households

As mentioned above, a majority of marginal farmers own less than 0.40 hectares of land. For them, non-institutional agencies are the most important sources of credit (See Table 3). In fact, if we count marginal and small farmer households together (that is, all those who own up to two hectares of land), about half their loans (49.7%) are from non-institutional sources, none of which the proposed loan waiver scheme will cover. Hence, the scheme could have a positive impact on rural labour households only if it affected loans from non-institutional sources.

Table 3 Incidence, Amount and Source of Indebtedness by Size of Holding: 2003
Land Possessed (Hectares)	Total Households (%)	Total Indebted Households (%)	Incidence of Indebtedness (%)	Loans from
				Institutional Agencies (%)	Non-Institutional Agencies (%)
<0.01	1.4	1.3	45.3	22.6	77.4
0.01-0.40	32.8	30.0	44.4	43.3	56.7
0.41-1.00	31.7	29.8	45.6	52.8	47.2
1.01-2.00	18.0	18.9	51.0	57.6	42.3
Up to 2.00	83.9	Bibliography Author Name: Pratyush Chandra Title of the Article: Debt Waiver and Rural Labour Name of the Journal: Labour File Volume & Issue: 6 , 3 Year of Publication: 2008 Month of Publication: March - June Page numbers in Printed version: Labour File, Vol.6-No.2&3, Labour and the Union Budget (Article - Debt Waiver and Rural Labour - pp 19 - 23) Weblink : https://labourfile.com:443/section-detail.php?aid=612 Bibliography Author Name: Pratyush Chandra, Title of the Article: Debt Waiver and Rural Labour, Name of the Journal: Labour File, Volume & Issue: 6 , 3, Year of Publication: 2008, Month of Publication: March - June, Page numbers in Printed version: Labour File, Vol.6-No.2&3, Labour and the Union Budget (Article - Debt Waiver and Rural Labour - pp 19 - 23), Weblink : https://labourfile.com:443/section-detail.php?aid=612 Download PDFversion Print Keywords Debt Waiver and Rural Labour Current Labour News Two day Nationwide General Strike of Workers on 28... Labour File News Service More than 20 crore workers, employees and the rura... Labour File News Service Declaration of the Joint Front of Central Trade Un... Labour File News Service Indian and Pakistani Fishermen: Bearing the Brunt ... Manan Kumar Recent Issues Vol. 9, Issue 2 Previous Issues Vol. 8, Issue 3 Vol. 6, Issue 6 Vol. 6, Issue 5 Post Your Comments To Post Comment Please Login Comments No Comment Found Please provide your email id. We will notify when new Issues will come. Go Useful Links Home About Us Editorial Donate Contact us Contact Us The Information and Feature Trust, Lakshmi, (Kayyadam), Thondayad, Cheverambalam (PO), Calicut , KERALA - 673017 Phone:+91 - 9526577902 Website: www.labourfile.com Email: edit@labourfile.com Email: sindhumenon@labourfile.com 2024 © All Rights Reserved. Website Design by Kash Web Tech