Mumbai: Loan waiver schemes being doled out to farmers could have a significant impact on state government finances and pose risk of further fiscal slippages, Fitch Ratings said.
Four states — Uttar Pradesh, Maharashtra, Punjab and Karnataka, which account for around one-third of India’s population — have announced farm loan waivers and other state governments are likely to feel pressure to implement similar policies, particularly in states with upcoming elections, it said.
“The farm loan-waiver schemes being discussed and rolled out across an increasing number of Indian states could have a significant impact on state government finances, and might undermine efforts to bring down general government debt,” Fitch said in a statement.
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Larger state deficits would delay an expected gradual reduction in general government debt, which includes central and state government debt.
