Rural Indebtedness in India
"Poverty is perhaps a major cause for rural indebtedness. The low level of rural incomes, the uncertain and primitive farming of small landholdings makes it impossible to meet the needs required for their living. Often, the rural people take debts to meet these needs."
One of the major problems concerning to the rural society is indebtedness. This problem is just not related to one individual but is passed on from one generation to the next generation. Taking or incurring debt for the purpose of agricultural production is indeed necessary as it contributes to production.
However, the rural people incur debts for nonproductive purposes such as to meet the family needs, perform social functions (related to marriages, birth, death), litigation, etc. Since money taken does not contribute to production but instead to consumption, it drags the rural people into indebtedness.
Thus, it becomes impossible to repay these loans. To clear these loans, the rural people incur debts again. In this way, they are stuck in the clutches of indebtedness, which passes on from one generation to another. For many small farmers, the agricultural production is so less that they are not able to provide for such unproductive expenditure.
Causes of Indebtedness:
Poverty is perhaps a major cause for rural indebtedness. The low level of rural incomes, the uncertain and primitive farming of small landholdings makes it impossible to meet the needs required for their living. Often, the rural people take debts to meet these needs.
Most of the rural debts of the present day are inherited from the past and which increases with the passage of time. An inheritor is liable to the repayment of the debt only to the extent of the property inherited by him.
Despite this law, the rural people continue to repay the debts of their forefathers, as they are not fully conversant with law as they are illiterate. As these people are bound by the traditions and values they regard it as their sacred social duty to repay the debts of their forefathers.
Such increasing debt is passed on from one generation to another making its repayment increasingly difficult, whenever it is passed on. Thus, the Royal Commission has rightly stated that the Indian farmer ‘is born in debt, lives in debt and dies in debt’.
Social and Religious Needs:
Villagers are mostly bound by the social traditions and customs, which are considered to be sacred and had to be performed. Some of these ceremonies are marriage, births, deaths, religious occasions, etc. The expenditure is usually very high for the performance of these ceremonies. In order to meet these needs, the villagers take loans. As their incomes are not sufficient enough, they are not able to repay these loans. Thus, they remain unpaid and increase with the passage of time.
Generally, the agriculturists in India are involved in various kinds of disputes related to land, property, etc., which force them to go to a court of law. Often, they view it important to win the case as it is related to the family prestige and honour. Such litigations involve heavy expenditure and time. In order to meet these needs, the agriculturists take loans that they are not able to repay and are caught into indebtedness.
Backwardness of Agriculture:
Indian agriculture is an uncertain business. It virtually depends on unreliable rains for the supply of water. If there are no rains or untimely rains, the entire crop is lost and the credit invested in the agriculture goes waste. As a result, the loan taken for the productive purposes also becomes a burden, leading to indebtedness of the farmers.
Excessive Burden of Land Revenue and Rent:
Land revenue, where it is levied by the government in some states and the rent payable to the landowners is becoming excessive burden on small farmers. In order to pay these land revenue, mid-rent, the farmers take loan. Sometimes, the farmers have to pay these rents and land revenues even during the floods and drought. This make the farmers run into debts.
Defective Money Lending System:
The village money lending system is very much defective. The sole aim of the moneylenders is to extract the maximum from the farmers. The moneylenders make wrong entries in their account books, charge very high interest rates and extract high prices for the goods they sell to the farmers but purchase the farmers produce at very low prices.
In course of time, as the amount debt increases, the moneylenders are much interested in seizing the farmers lands, and other valuable assets than the debt being repaid by the farmers. Thus, the farmers are trapped in the hands of the moneylenders.
Consequences of Indebtedness:
There are many economic and non-economic consequences, which are caused by rural indebtedness. They are categorized into economic, social and political consequences. Let us have a look at them in detail.
As the farmer is deprived of the substantial part of his produce in clearing the debts, payment of interests and principal amounts, he loses interest in agricultural production. This leads to low agricultural production and income.
The farmer is forced to sell all his produce to the moneylender and he is deprived of selling his produce in the open market and obtaining the prices of the market. Such a situation adversely affects the inducement for work and agricultural production of the farmer.
The trade between the moneylender and the farmer is always beneficial to the moneylender. The farmer is priced heavily for what he purchases and receives little for what he sells to the moneylender. Thus, such trade leads to loss of a substantial part of his income.
In the process of obtaining loans, payment of interest and repayment of principal to the moneylender, the farmer often loses his land, as he is not able to repay the loan. As a result, the farmer, the owner of the land, becomes a landless labourer.
The relations between the moneylenders and the farmers become venomous and poisoned the social life. Therefore, the social groups get divided into two classes—the exploiting class and the exploited class. Due to the loss of land, the farmer feels deprived and pushed down in the social hierarchy. Land ownership gets concentrated in few hands, which builds up tensions between the moneylenders and farmers.
As the farmers lose their lands, they have to render services to the farmer. Their self- respect is lost as they become slaves. Though there are many laws to protect them, they are difficult to enforce where the farmers are illiterate or do not have enough resources to go to the courts.
The indebted farmers are treated by the moneylenders as mere commodities of votes. The moneylenders use these farmers as their private property. As their economic position is not sound, they do not have a political status of their own.
Their political participation is completely dominated by the moneylenders who use them for their own political advantages. To free themselves from the clutches of the moneylenders, farmers indulge in illegal means to repay loans.
The moneylenders in their attempts to drag and squeeze the farmers indulge into all kinds of illegal practices and poison the political atmosphere of the villages. Thus, the rural indebtedness adversely affects all the aspects of rural life. It hampers the agricultural production and rural economy, reduces the farmer to a landless labourer and poisons the social and economic life of the rural people.
Measures for the Removal of Indebtedness:
The problem of indebtedness can be solved by two means. The first is to take up measure to reduce the burden of present indebtedness and the second is to prevent the evil from rising again in the future.
To reduce the present burden of indebtedness, the following measures have to be taken:
1. Canceling all the debts paid to the moneylenders by the farmers, which are more than the principal amount itself, debts which are already been repaid but still stand in the account books of the moneylenders, debts that are created by the moneylenders by fraud, loans for which repayments have been received in the form of money, produce and other services like labour from the indebted farmers.
2. Debts should be properly scaled down. According to law, the inheritors are liable to pay the debts only to the extent they have inherited. In this way, most of the debts will be reduced. Debts that are so excessive and standing are since a long time, should be settled between the concerned parties or through the village panchayats. Debts, which do not have records or exist with incomplete records, should also be reduced.
3. Apart from the above two steps, the remaining part of the debts should be handled by special institutions such as banks. Such banks pay the amount to the moneylenders on one hand and recover the same from the debtors on easy terms. These banks also collect funds and provide credit facilities to their members.
To control the problem of indebtedness in future, the following steps are recommended:
1. The income of the farmers should increase so that they could meet the unproductive expenses and are not forced to take any loan. In order to achieve this goal, it is necessary that agriculture should be conducted on scientific basis not depending totally on the natural climatic factors. Some other measures have also been undertaken such as the introduction of land reforms providing market for the agricultural produce, etc.
2. The panchayats and such other village level institutions should try to solve the village disputes and try to prevent them from going to the courts of law, which need heavy expenditure.
3. Information regarding the laws and their implementation should be given to the villagers so that they do not get into the clutches of the moneylenders for generations.
4. Adequate credit facilities on reasonable terms should be arranged to the farmers. Co-operative credit is a good solution in this regard. Private lending should be eliminated in this field.
The above-mentioned two types of measures should be carried on simultaneously. Mere prevention without any preventive measures for future would not help the situation; moreover, there is every possibility of this evil to rise again and again. Thus, both these measures should go hand in hand so that the problem of rural indebtedness vanishes completely.