Govt May Skip Large Farm Loan Waiver Ahead of 2019 Polls Despite Drubbing in Heartland: Report

Mumbai: Despite the electoral reverses in key states faced by the ruling BJP, the Union government is unlikely to announce any large farm loan waiver or fiscal sops ahead of general elections, Credit Suisse said on Monday.

The agricultural distress is impacting 200 million workers and can cause political churn and policy experimentation, leading to uncertainties in times of the ongoing economic slowdown, the foreign brokerage said in a report.

There has been speculation over steps the government takes for the agri sector in wake of BJP losing assembly elections in Madhya Pradesh, Chhattisgarh and Rajasthan, with some reports suggesting a farm loan waiver would be around the corner before the general elections next year.

"We do not expect any new large farm-loan waivers or other fiscal sops in the run up to elections," the report said.

The report comes days after a group of economists including former RBI governor Raghuram Rajan, pitched for doing away with farm loan waivers.

The agri distress-induced uncertainties come at a time of economic slowdown and there will be cuts to GDP growth estimates for FY20, which currently stand at 7.5-7.8 per cent, it said.

On the upcoming elections, it said in the last two decades, there have not been visible impact on market direction because of such exercises.

The brokerage said it prefers the industrial sector to perform better than consumption, which has been a mainstay for the last few years.

With the expectation of industrials doing better, it said corporate banks will also have a better showing.

It said industrials have underperformed the benchmarks by 48 per cent in the last decade, while the recent years have witnessed the sector stocks lagging despite earning recoveries. The consumption stocks are "over-priced", it said, adding that it is underweight on the sector.

On the global developments, it said they matter less for the domestic markets as the foreign portfolio investors account only for a third of the trading volumes and have not been net buyers for the last three years now.