Question

Explain the problems of the ‘indebtedness’ of Indian farmers.

Answer 1

Indebtedness is a persistent problem in Indian agriculture, with farmers unable to repay loans, resulting in a “debt trap”. The key problems are:

1. Low and Fluctuating Income: Due to small landholdings and low production, farmers frequently earn barely enough for survival, leaving no excess to repay debts.
2. Dependence on Informal Sources: Many small farmers lack access to bank credit and must rely on local moneylenders. These lenders demand excessive interest rates and frequently engage in unethical behaviour.
3. Crop Failures: Erratic monsoons, droughts, and pest attacks can cause crop loss. Without insurance or savings, the farmer is compelled to take out a new loan to pay off the previous one.
4. Rising Cost of Inputs: The increasing price of high-quality seeds, fertilisers, and diesel increases the initial outlay, driving farmers into debt even before the season begins.
5. Social Obligations: A significant portion of debt is sometimes incurred for non-productive reasons, such as weddings, festivals, or medical emergencies, which create no income for repayment.