 The political budget cycles in the presence of a fiscal rule: The case of farm debt waivers in IndiaVidya Mahambare, Sowmya Dhanaraj and Pragati Mittal Journal of Policy Modeling, 2022, vol. 44, issue 3, 701-721 Abstract: Farm debt waivers which are meant to be a one-time settlement of loans have become common in India. This paper finds, after controlling for variables related to farming distress, that the timing of waiver announcements by state governments between 2001-02 and 2018–19 is associated with the timing of elections. This points toward a pattern of policy manipulation that suggests election-year targeting of the largest special interest group in India, namely farming households. The debt waivers, either announced as policies by incumbent governments prior to upcoming elections or as election pledges by political parties which are fulfilled after winning elections, are unanticipated shocks to government revenue expenditure. We find that the waivers are associated with an increased revenue deficit, which is accommodated by a nearly 1/3rd cut in capital outlay to control the fiscal deficit, given the presence of a fiscal rule. Given its path dependence, lower capital expenditure also reduces the quality of government spending in subsequent years. Keywords: Farm debt waivers; Agriculture policy; Political budget cycle; Electoral promises; Fiscal rules (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:44:y:2022:i:3:p:701-721 DOI: 10.1016/j.jpolmod.2022.05.002 Access Statistics for this article Journal of Policy Modeling is currently edited by A. M. Costa More articles in Journal of Policy Modeling from Elsevier |
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