Editorial: Loan waivers for all a terrible idea (The Economic Times)

The ministry of corporate affairs is reported to be working on a universal debt relief scheme for small borrowers. If loans can be written off for farmers and big companies, why discriminate against small borrowers? Such an argument for equality is misplaced. Writing off loans for micro enterprises might not harm banks in the short run, if the government reimburses them the loans written off, but it would damage credit culture and endanger the network of semi-formal lenders that meet a large part of the economy’s credit needs. After many borrowers in Andhra Pradesh stopped repaying their loans from microfinance institutions (MFIs), following an irresponsible loanwaiver campaign by some political parties, credit dried up for small borrowers. It would be a mistake to sponsor a similar experience nationwide.

Already, small loans given under the Pradhan Mantri Mudra Yojana to micro enterprises threaten to turn bad. A universal debt relief waiver would swamp MFIs with unserviced loans, shutting off a crucial source of credit far superior to the moneylender. In normal times, MFIs report recovery rates of over 97%. Lack of confidence in the institutional framework of capital allocation, accounting and servicing of the capital deployed explains why global savings scouring the world for profitable deployment skips, for the most part, a market like India with dire need for investment and great opportunity to make profits. Destroying credit discipline would harm the burgeoning fintech industry that has the potential to draw in tonnes of global capital. Fintech companies hold great promise for financial inclusion and access to new, low-cost services. Scarring their potential by killing credit discipline helps no one.

Small and micro enterprises need efficient bond markets and derivatives that distribute associated risks as widely as possible. New ways of assessing credit risk, based on analysis of large-scale, structured and unstructured data on borrowers and their enterprises, must replace collateral as the basis for credit decisions. Loan waivers scupper all that possibility.

Quick summary of Indian economy 1947 - 1991

Consumer’s Equilibrium

1. the TU from consuming 3 units of a commodity is 75 utils and the MU of the 4^th unit is 10 utils. What is the TU after consuming 4 units?

2. If the preference of a consumer are monotonic, then which of the bundles –3 eggs and 5 toasts or 4 eggs and 5 toasts will the consumer choose?

3. Defend or refute the following statements: Write ‘yes’ or ‘no’ with reason:

a) MU of each unit of a commodity adds to total utility.

b) Total utility will increase even when marginal utility decreases.

c) Total utility is maximum when marginal utility starts declining.

d) All attainable combinations of good X and good Y are below the budget line of a consumer.

e) A situation when MRS > MRE is better than when MRS= MRE.

4. How do prices of commodities affect the consumer’s indifference curve?

5. The marginal utility schedule of commodity X and commodity Y for a consumer is as follows:

Unit of X	MU of X	Unit of Y	MU of Y
1	8	1	14
2	6	2	10
3	4	3	6
4	2	4	4
5	1	5	2

If the total money spent by the consumer is Rs. 16 and Price of X is Rs. 2 and Price of Y is Rs. 5, determine consumer’s equilibrium if the marginal utility of money is Rs. 2.

6. If MRS is 3, is the consumer in equilibrium? Justify.

7. Why is the point of tangency between budget line and the indifference curve the point of consumer’s equilibrium?

                                                                Collection of Data

1. Census of Data is the main source of secondary data. Explain.

2. Discuss various sampling errors in data collection. Out of Sampling and Non- Sampling error which one        is more serious and Why?

3. Discuss the term ‘ universe’ and ‘ sample’ with example.

4. Do samples provide better results than surveys? Give reasons.

5. Give five examples for the following methods of primary data collection:

a) Direct oral investigation

b) Indirect oral investigation

c) Telephonic interview.

d)  Mailed Questionnaire method.