BBC News is reporting the World Bank has approved a USD 600 million loan to India, aimed at “helping millions of poor farmers across India” (original report at Reuters). The money will go to supplement a government sponsored program, worth USD 3.32 billion, to refinance India’s cooperative banks, which would then offer cheaper loans to farmers. That program was designed, at least partly, in response to suicides across the country by farmers that were unable to repay their debts due to failing crops. The bank justifies this loan, thus:
“By providing small farmers with improved financial services, such as credit, savings, remittances and insurance, this project will play a significant role in helping India’s rural poor benefit from growth opportunities,” the bank’s country director for India, Isabel Guerrero, said.
What growth opportunities? Ms. Guerrero must be deluding himself. That farmers are killing themselves should be enough to explain that lack of credit is not the problem – it is the inability to repay credit! Pouring more money into banks that cannot collect loans, from clients that cannot pay will not solve that problem. Improving water supplies, reducing US agricultural subsidies, and removing market distortions and government intervention in the agricultural supply chain might. Maybe Reliance can fix this mess.