Sunday, June 25, 2017

LOAN WAIVER....SIX SIGMA APPLICATION


Bankruptcy code has been designed to liquidate the NPA and get value proposition from the same. Bankruptcy laws are designed to safeguard the society from the deliberate creation of NPA or willful defaulters. Yes this is going to be a boon in the long terms and the central government took an excellent role to block future party funding of the opposition (as most willful defaulters are from that regime). One of the biggest industry where according to to a Bank of America Merrill lynch (bofa-ml) report, various state governments are expected to waive off $40 billion (R2,57,000 crore) of  loans in the run-up to the 2019 lok Sabha election. Well don’t be shocked this is a none other than the Vote Bank NPA named under FARM LOAN WAIVER for which no Bankruptcy code is there in the system.

Before I get into the subject I wanted to share that this is a new series on the application and adoption of Six Sigma in the Indian farmers or Indian agricultural segment. This is going to the introduction phase followed with the further episodes of the same. Farmers are one of the key important part of the Indian economy and its high time that entrepreneurs can only come up for the recovery and development of this huge industry which feeds us. Six sigma applications will derive the finest part of the research and solutions which will lead an eye opener for the plethora of opportunity for the entrepreneurs.  The strategy of SIX Sigma application will lead to some resolve of these issues even in the international context.

Over the last several decades and primarily from 2004 to 2017 –UPA I,UPA II and BJP all have played a same tune and same law where tax payers money will go for toss and will be used for winning the vote bank. The FARM Loan waiver has been one of the biggest tool to win votes and create long term economic trouble. There is now law no bankruptcy code for the farm loan segment.

An important part of Indian economy has been kept out of any legal binding where Corer of money is being wasted for winning the vote bank. UP elections and now the upcoming next year MP elections will be won by that political party who declares farm loan waiver. The point is why FARM loan waiver is being used to solve the problem of the farmers other than curing the diseases.        There is now bankruptcy code for willful defaulters and even the non willful ones suffers due to the act of willful ones.Every ruling government have used this as tool to win and now having a majority in Parliament it becomes quite easy. The real problem of farmers is hardly resolved and neither a solution is being envisaged.

IF farmers fail to pay the loan then the hit does not go to the bank since these loans are compulsory insured by Agricultural Insurance Company of India (AIC), whose liabilities are back-stopped by the Centre through budgetary support. Then this also clarifies why it’s being used as tool by the politicians to use it as vote tool.
But there are hard parts of the story too. Farmers are not well connected with the end user as many middle men used to play the game. We discuss about technology and e-commerce market but we don’t develop any e-commerce market for the farmers where elimination of the middle men will be executed.
Even if the e-commerce market is developed the middle men story will not be eliminated since they are the money lenders to these farmers. About 40 per cent of the country’s farmers do not have access to institutional credit. Hence a major part of the funding is unorganised. The demonetization eliminated this market which has resulted to a dead lock for the farmers as funding is now negligible despite of a healthy monsoon.  This unorganised funding makes life difficult. According to NSS data, over 40%  of farmers still rely on non-institutional lenders, who mostly happen to be moneylenders-cum-traders and input dealers.

Now comes the story of banks and NBFC who fund the farmers. Well that funding is limited and we don’t know how much of it reaches to the end user. We waive lakhs of funds but we don’t look upon the issues of developing the farm economy.

Farm economy which includes irrigation, agricultural research, storage, marketing, etc. Today food inflation has come down but is that the reason why farmers are dying since they are unable to get good prices. No, the middle men are squeezing them up based on the funding given and demonetization affect. The poor development of the banking and financial reforms for the framers have lead to the path of exploitation by these money lenders which is getting reflected in the system.

Now for example UP gave farm loan waiver, now for some reason over the next 3 years Indian economy don’t get healthy rainfall. Now farmers will suffer then in that case farmers will wait for another farm loan waiver.   In this cases rather going for another loan waiver over the next 3 years why not to develop the alternative source of irrigation.

As the population is increasing followed with decline in farmers as next generation is reluctant to join the farming profession is going to lead India into a disaster. Government is focused towards vote bank and less on development of the farmers market and financing mechanism.


Use of technology could attract the framing industry followed with efficient marketing and storage facility. Education quality of the farmers is highly required to be updated but in the segment other than farming. Focusing more on crop cultivation use of pesticides and insecticides are of no use. Identification of the problems of farmers and getting solution is the key aspect demanded by the long term of the Indian economy.  

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