Indian agriculture witnessed a flourishing and phenomenal success in crop yields and farm incomes during the green revolution. This was during the late 1970s and the 1980s. But during the 1990s, the agrarian distress caused by vulnerable yields and rural indebtedness happened to be the biggest challenge in India. Unending suffering of cultivators under the burden of rural indebtedness happened to be the biggest challenge. A large number of cultivators suffering under the debt and penury have committed suicides. No doubt that the plight is still unending. In order to arrest the increasing number of farm suicides, the government of India, in 2008, implemented the Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS). Provision of the scheme was worked out to be INR 71,680 crore. The package was widely criticized to be a populist political measure proposed by the government, paying least regard to the root cause of the problem. Through the present study we attempt to analyze the impacts of the package on the beneficiary farm households in Andhra Pradesh and Maharashtra. Mainly from the farm households’ point of view, the paper attempts to analyze the impacts of debt relief on investments, productivity, cropping pattern, access to irrigation, crop insurance, debt performance, credit composition and the immediate pre and post debt waivers demand and supply pattern of farm credit. Apart from the pre and post package debt composition of institutional vs. non-institutional credit, the history and post debt waivers credit repayment pattern are looked at as a proxy of the impact of debt waivers on the financial institutions. We carry out a survey of 366 debt relief recipient farm households from two districts each of Andhra Pradesh (Anantpur and West Godawari) and Maharashtra (Nanded and Nasik) state. In addition to this 10 farm households per district were interviewed as the control group. This group consisted of farmer households which had obtained bank loan but were not the recipients of the debt relief of 2008. These households being beneficiaries of the largest debt relief scheme of India the study brings out that the package couldn’t have any positive impact on the farm yield levels and the net incomes received from cultivation. Viz-a-viz the debt waivers, apart from immediate farm credit swap could not improve the credit repayment behaviors which left banks with an option of moral hazard and adverse selection. Also the package does not improve investment or productivity climate of beneficiary households, but leads to a strong and persistent shift of borrowing from all available sources and purposes including non-formal and non-cultivation ones. The investigation further documents strong effect of debt relief on beliefs about the seniority of debt and the reputational consequences of default. The result from the entire exercise resonate with findings on personal bankruptcy and suggests that the arbitrary debt bailout programmes are of limited and immediate short term use in addressing problems of debt overhang, but have significant behavioral implications. Finally we dwell upon the possibility of the ‘Nationwide Penetration of Crop Insurance’, in the form of a policy debate i.e. the “Nationwide Crop insurance can it be the alternative to debt waivers?”
