Caouses of Rural Indebtedness in India (12th Economy)

9. Introduction
• Rural indebtedness is one of the severe problems of
Indian Agriculture.
• Generally, rural people borrow loans for both productive
and unproductive purposes.
• Due to lack of financial support from government,
farmers borrow loans from private money lenders.
• They impose higher interest on borrowed money. So far,
the rural debt goes on increasing continuously.
• As a result, rural farmers were unable to repay the debts
and become indebt. Hence the circle of rural
indebtedness severely effecting the Indian farmers

10. • The quantity of rural indebtedness has
been continuously increasing since 1971.
• It was proved that the average amount of
debt per rural household was Rs 500 in
1971, but it was increased up to Rs 7,539
in 2002.
•

11. • According to Royal Commission on
Agriculture, “The Indian farmers is born in
debt, lives in debts and dies in debt”

12. Causes for Rural Indebtedness
1.Ancestral Debt
• The most important cause of existing rural
indebtedness is the ancestral debt.
• Generally, farmers in India not only inherit
property, but also debts from their ancestors.
• Ancestral debt is also the cause for income
inequalities.
• Hence many of the rural poor in our country are
starting their carrier with a heavy burden of
ancestral debt which results in rural
indebtedness

13. 2.Poverty
The section of the society who are
unable to satisfy the basic needs of
life like food, shelter & cloth is known
as Poverty.
Poverty is one of the basic causes for
rural indebtedness. Generally poverty
forces the poor to borrow and the
same poverty restricts them for
repayment

14. 3.3.Natural CalamitiesNatural Calamities
 Another cause of rural indebtedness isAnother cause of rural indebtedness is
improper climatic condition.improper climatic condition.
 Frequent failure of monsoons results inFrequent failure of monsoons results in
drought. On the other hand, excessivedrought. On the other hand, excessive
monsoons damage crops.monsoons damage crops.
 All these problems force the farmers toAll these problems force the farmers to
borrow loans. As a result ruralborrow loans. As a result rural
indebtedness will arise.indebtedness will arise.

15. 4.4.Extravagance of the FarmersExtravagance of the Farmers
 The India farmers spend more on social andThe India farmers spend more on social and
religious functions like marriages, festivals, birthsreligious functions like marriages, festivals, births
and deaths ceremonies etc.and deaths ceremonies etc.
 They make expenditure beyond their capacity inThey make expenditure beyond their capacity in
order to meet these unproductive purposes.order to meet these unproductive purposes.
 Hence they borrow loans at higher interest andHence they borrow loans at higher interest and
become indebtbecome indebt

16. 5.Money lenders
• Moneylenders are the main source for the
provision of credit facilities in the rural
areas.
• Generally money lenders tempt the
farmers to borrow funds for unproductive
purposes at high rates on interest.
• They also adopt many unfair methods to
exploit the rural people.

17. 6.Small – Size land Holdings
• The average size of land holdings in India
is very small due to sub-division and
fragmentation of land holdings.
• When the holdings are small,
modernization of agriculture becomes
difficult.
• So the farmers borrowed money in
cultivation become uneconomical

18. 7.Litigations
• Litigation either civil or criminal is another
cause of rural indebtedness.
• People in rural areas commonly faces the
disputes like boundaries, pathways, fencing
etc.
• They regard winning legal battle as a matter of
personal or family prestige.
• Hence their valuable time and money is being
wasted for a cases which leads to increase
their debts.

19. 8.Passion for Land
• The peasants have a desire to make
improvements on land.
• So they try to increase the quantity of land
through borrowings.
• Hence the indebtedness arises.

20. 9.Other Causes
• In addition to the above causes, purchase
of household luxuries, spending on bad
habits, increasing cost of cultivation, lack
of support prices etc are also responsible
for rural indebtedness.