Loan waivers could add to the fiscal burden over the medium term as they are essentially a transfer from taxpayers to borrowers, said Mint Street Memo released by the RBI.
"Based on stylized assumptions, the total loan waiver amount that is likely to be released in 2017-18 by seven states is around Rs 881 billion (0.5 per cent of Gross Domestic Product, GDP)," it said. Mint Street Memos (MSM) are in the form of brief reports and analysis on contemporary topics, prepared by the staff of RBI and Centre for Advanced Financial Research and Learning
(CAFRAL), or drawn from one of the recent publications of the Bank.
The RBI said the views and opinions expressed in Mint Street Memos (MSM) are those of the authors and do not necessarily represent the views of the central bank.
To summarise, the paper said "if the combined fiscal deficit for 2017-18 goes up by 40 bps on account of farm loan waivers, with the budgeted combined fiscal deficit at 5.9 percent for 2017-18 and inflationary momentum remaining benign, ceteris paribus, this may lead to around 20 bps permanent increase in inflation, starting 2017-18".
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
Get Breaking news, live coverage, and Latest News from India and around the world on NDTV.com. Catch all the Live TV action on NDTV 24x7 and NDTV India. Like us on Facebook or follow us on Twitter and Instagram for latest news and live news updates.