India's Maharashtra state, home to the country's financial capital Mumbai, will waive $5.27 billion of farm loans, the latest state to offer relief to farmers reeling from losses caused by bad weather. The state, ruled by Prime Minister Narendra Modi's Bharatiya Janata Party (BJP), has decided to write off debts up to 150,000 rupees ($2,326) for 8.9 million farmers, Chief Minister Devendra Fadnavis told reporters after a cabinet meeting on Saturday.
The state will settle farmers' loans with banks, making 90 percent of farmers eligible for fresh borrowing, Fadnavis said. Earlier this month, the state had announced that it would write off loans of all farmers after striking farmers cut milk and vegetable supplies to cities like Mumbai.
Modi, who had promised to double farmers' incomes over five years, remains a popular leader three years into his term. But unrest has flared in states ruled by his party, catching regional leaders flat-footed. In the central state of Madhya Pradesh five farmers were shot dead during protests earlier this month.
India's most populous state of Uttar Pradesh in April decided to waive $5.6 billion of farm loans, while northern state of Punjab earlier this week decided to write off $1.5 billion of loans to farmers. Reserve Bank of India Governor Urjit Patel has warned that such loan waivers - forecast by BofA Merrill Lynch to reach $40 billion - would weaken already-strained state finances. Economists at Merrill Lynch estimate that states will end up writing off debts equivalent to 2 percent of GDP - the bulk of all outstanding loans to farmers.