Causes OF Rural Indebtedness IN India PDF

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Poverty and debt are intertwined. Because the poor must borrow money from moneylenders, they are linked and interdependent. The poor must pay interest on their loans. The interest rate is still too high. Moneylenders take advantage of and oppress the poor in a variety of ways. Health, education, and...

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CAUSES OF RURAL INDEBTEDNESS IN INDIA

The following are the major causes of indebtedness in India's rural areas:

1. Poverty Poverty and debt are intertwined. Because the poor must borrow money from moneylenders, they are linked and interdependent. The poor must pay interest on their loans. The interest rate is still too high. Moneylenders take advantage of and oppress the poor in a variety of ways. Health, education, and other services will be limited for the poorest people. Hunger, malnutrition, and disease plague the poorest members of society. The poorest members of society are frequently marginalised, with little representation or voice in public and political debates, making it even more difficult to escape poverty. It has been observed that Indian farmers are extremely poor, with no previous savings to repay their debts or improve their land. As a result of their poverty, the cultivators are forced to increase their debt. The poor and indebted marginal and small farmers are still trapped in poverty. In the state of Odisha, this manifestation of the agrarian crisis in the form of suicides has reached dangerous levels. The severity of the problem, as well as its causes, revealed that the majority of the suicide victims were cultivators who fell into the small and marginal farmer category. Suicide rates are rising for a variety of reasons, including poverty, crop failure, indebtedness, marital discord, and alcoholism, but we believe it is primarily due to the economic crisis that the peasantry in Odisha is experiencing, which has led them to borrow heavily.

2. Defective Agricultural Structure The state of rural indebtedness has worsened as a result of a broken agricultural system. It includes issues such as a flawed land tenure system, the use of outdated techniques, increased land pressure, poor marketing, and the lack of alternative sources of income, among others. It has also been observed that tribals and other

orthodox people dislike the modern agricultural method, and traditional agriculture does not meet the needs of the people. Those who practise modern agricultural methods, on the other hand, are unable to sell their products due to a lack of a suitable market.

3. No Past Savings

The majority of Indian farmers are uneducated and have little understanding of the value of saving. They have a habit of borrowing money to improve their agricultural land. They consume everything they produce and do not save anything for the future. Because of the lack of modern mechanisation, poor irrigation facilities, and lowquality seeds, farmers are unable to produce more, and as a result, they are unable to save anything for the future.

4. Social and other Obligations Indian farmers are accustomed to lavishing large sums of money on non-productive activities such as weddings and other social gatherings. All of this has resulted in the country's farmers becoming increasingly indebted. Farmers are known to spend a lot of money on various social and religious ceremonies for which they must borrow money from money lenders. Farmers' suicides were widespread in Odisha, Andhra Pradesh, and Karnataka, and are apparently continuing in areas as far apart as Wayanad in Kerala, Vidarbha in Maharashtra, and some areas of Punjab and Rajasthan. Inability to repay past debt and thus access new loans has been widely accepted as the most significant proximate cause of the farmers' suicides that were so widespread in Odisha, Andhra Pradesh, and Karnataka. Many people are forced to enter a vicious circle of indebtedness as a result of heavy debt. After an extensive investigation, K.L. Dutta concluded that in a good year, cultivators' ignorance and imprudence caused them to spend their entire surplus on marriages and festivities. Even in good years, their prodigality on such occasions often led them to the doors of moneylenders.

5. Ancestral Debt

The most significant source of current rural indebtedness is ancestral debt. Many farmers begin their careers carrying a heavy burden of ancestral debt, which they carry for the rest of their lives as a religious and social obligation. Every time the debt is thus passed on, the burden on the inheritors increases. The Royal Commission on Agriculture put it succinctly when it said that the farmer "is born in debt, lives in debt, and dies in debt." It has been observed that the majority of rural debts are inherited from the past and grow in size over time. An inheritor is only responsible for repaying the debt to the extent of the property he has inherited. Rural people continue to repay their forefathers' debts because they are illiterate and lack a thorough understanding of the law. These people regard it as their sacred social duty to repay their forefathers' debts because they are bound by traditions and values. The debt is passed down from generation to generation, trapping the son or grandson in a cycle of poverty. 6. Unscrupulous Moneylender:

Moneylenders in India are also a major contributor to the country's rising rural indebtedness, as they encourage Indian farmers to borrow, charge exorbitant interest rates, and manipulate their accounts. Private money lenders are known to engage in a variety of unethical practises. a) They have been charging high interest rates ranging from 40% to 60% per year. b) They've also been caught with fake accounts. c) They are more interested in forcing borrowers to sell their land by encouraging farmers to borrow money from them and mortgage their land to them. d) They have been buying the farmers' crops at a very low price when they approach them to sell their crops in order to pay off their debts. e) When the farmers' debts have accumulated to a sufficient level, the borrowers' land is taken away. Like a fly caught in a web, the farmer caught in the clutches of the moneylender has a hard time escaping.

7. Uncertain Monsoon

The monsoon is extremely important to Indian agriculture. Rainfed agriculture accounts for about 65 percent of all agricultural operations. Agricultural operations have become a gamble in monsoon because rain is so unpredictable. In India, where rainwater is used to irrigate more than 60% of agricultural land and the average farm size is only 3.5 acres, a failed monsoon can result in the complete loss of a crop. Suicides among heavily indebted farmers have increased recently, highlighting the extreme desperation in some areas. The failure of the monsoon season could have a significant impact on food prices and India's overall economic growth. The poor monsoon this year, for example, has resulted in price increases in sugar, legumes, and potatoes, and many analysts predict that India's GDP growth rate will drop by a full percentage point.

8. Illiteracy of Farmers

The majority of farmers in India are illiterate. Unscrupulous moneylenders, known as mahajans, take advantage of farmers' vulnerability to create a vicious cycle of debt. In India, the majority of farmers are illiterate. They're trapped in a vicious cycle of debt created by mahajans and traders. Their income earning capacity is limited due to illiteracy, and they are unaware of the institutional sources of concessional credit.

9. Fragmentation of Land

Land fragmentation is common in India, and it is thought that the fragmented nature of land holdings may play a significant role in explaining low agricultural productivity. Sub-division and fragmentation of land holdings are becoming

increasingly common, resulting in low income for Indian farmers. Farmers are forced to become more indebted as a result of their low income.

When landholdings are divided into parcels, the size of the landholdings gradually shrinks. When a fragmented landholding is further fragmented into several parcels at the same time, this process becomes more difficult. This is a common occurrence in South Asia, and it is attributed to the equal sub-division of various qualities of land parcels, such as irrigated and non-irrigated, that make up a landholding among household heirs. Land fragmentation causes physical dispersion of parcels in addition to making each land parcel smaller and smaller over time. 10. Litigation

There is a growing trend of litigation among Indian farmers, which has exacerbated the country's indebtedness problem. In general, agriculturists in India are involved in various types of disputes involving land, property, and other issues, which force them to go to court. It is frequently important to them to win the case because it is linked to the family's prestige and honour. Litigations of this nature require a lot of money and time. In order to meet these demands, agriculturists take out loans that they are unable to repay, trapping them in debt. 11. Defective Marketing

Poor agricultural marketing systems, such as a lack of storage, transportation, unfavourable mandis, unregulated markets, and institutional finance, all lower people's economic standards, forcing them to become indebted. In India, agricultural marketing is severely lacking. Farmers are never paid a fair price for their produce, and are sometimes forced to sell their crops at a distress sale. This situation is largely to blame for the rise in poverty and indebtedness among Indian farmers.

12. Natural Calamities

Natural disasters such as floods and droughts, as well as agricultural backwardness, are all contributing to the country's growing rural indebtedness. Natural disasters wreaked havoc on small business owners. They had to borrow even for basic necessities like seeds, cattle, and clothing due to the circumstances. If the harvest was poor, the cultivator had no choice but to go to the moneylender the following year. Despite the fact that land sales are generally frowned upon, the cultivator was persuaded by the moneylender to sell his mortgaged property to him and pay off his debt.

13. High rates of interest

The cultivators are also compelled to borrow because of the high interest rates. The interest rates vary from state to state, but due to the peasants' poor economic situation, interest accumulates every year. Even interest charges can be extremely difficult to eliminate on their own. "It is not that the agriculturist" repays too little, as the Bombay Banking Committee correctly observes, "but he frequently repays too much." The high rate of interest and the money-lenders' malpractices tend to keep him in debt. The government has now enacted strict regulations against money lenders who charge farmers exorbitant interest rates. Money lenders were recently arrested in Bhanja Nagar, Ganjam district, Odisha, for allegedly giving illegal loans to poor locals at a high rate of interest. In Odisha's Angul district, the police have launched a major offensive against illegal money lending business, arresting seven people, against the backdrop of unabated farmer suicides in the state, mostly due to alleged failed crops and pressure to repay debts. 14. Excessive Burden of Land Revenue and Rent

Land revenue was set at a high level during British rule. As a result, the farmers were unable to pay on time. As a result, they had no choice but to borrow. Even in postindependence India, excessive land revenue and its strict collection procedures are

directly responsible for exacerbating the problem of rural debt. For small and marginal farmers, paying rent is a challenge. Due to the fixed dues, they are obligated to pay even if production suffers as a result of floods or droughts. As a result, farmers are forced to take out loans in order to make these payments. As a result, the indebtedness burden grows. Once their personal guarantee for credit had run out, petty landowners were frequently forced to mortgage their small plots of land and revert to tenancy or wage labour. The landless were frequently unable to obtain loans at all, particularly if they were only wage earners with no crop to offer as security.

15. Addiction to drinking: In two ways, drinking contributes to rural indebtedness. For starters, it causes a slew of disputes and crimes, all of which end up in court. Litigation, as we all know, is an unnecessary expense. Second, drinking is an expensive habit, and it consumes a significant portion of a peasant's income. In Odisha's tribal areas, the traditional drink Handia is in high demand during the summer. Handi was consumed by both men and women. Handia was sold to tribals for a high price by the money lender. Tribals have been known to take out loans on their agricultural land in order to drink handia. It leads to a state of indebtedness.

16. Inadequate infrastructural facilities and institutional arrangements:

Inadequate infrastructure makes it difficult for farmers to improve their economic situation. Due to a lack of marketing facilities, he has no choice but to sell the produce as soon as it is harvested at exorbitant prices. The farmer's heavy debt burden also makes it difficult for him to store the produce for later sale at a profit....