Rural indebtedness is in fact a very important problem of the Indian rural life. The money lender or Sahukar who has a capacity to advance loans as and when the village people need it holds an important place in village life and is an important institution of the Rural Society.
Several efforts made by the State Governments and the Government of India to solve the problem of rural indebtedness have a course loosened the hold of money lenders from the village economy but even today the institution has not vanished.
Village people are living in such conditions that they need ready money on several occasions. They need money to purchase bullocks and other agricultural implements seeds manures etc, they may need money to fulfill various social obligations and meet the requirements of the social customs and traditions.
Even when the legislations have been enacted to provide credit to the farmers for agricultural purposes, provision has not been made to get them loan from banks and other financial institutions for meeting the needs of the social customs such as marriages, funerals, post funeral diets etc.
Because of these factors the verdict of the Royal Agricultural Commission that “an Indian is born in debt loves in debt does in debt and passes it over to the successors after his death” is true to a very great extent even to today. Rural society of India is even today in the grip of the user and money lenders now the tradition of loan has become strict. The person who borrows money has to mortgage ornaments of certain things that can secure the loan given to him. The recent legislation to free village people from the debts has created further problems for village people.
Now money lender wants more dependable security in the other hands alternative methods for loans to farmer for agricultural needs have been provided but the machinery for them is not very efficient. Village people are therefore even today under debt. This debt has been estimated by various economists in various figures ranging from 300 crore rupees to 2000 crore rupees. Authentic figure cannot be put forward because the money loaning business is carried out in a very secret and clandestine manner and so exact figures are not available. Under the circumstances the cases of indebtedness need to be studied.
Causes of rural indebtedness:
Causes of rural indebtedness are various important amongst them are-
1) Ancestral debt 2) Defective social customs and traditions 3) No alternative method of borrowing for the farmer 4) Laws against cheating by the money lenders are not strict and elaborate; 5) The economic condition of the village is not sound; 6) Defective agricultural system; 7) Too much of pressure on land 8) Lack of village industries 9) Litigation 10) Habit of extravagance amongst farmers.
Let us take up these causes one by one:
1) Ancestral debt:
Most of the villages are under the ancestral debts. They have inherited debt and they have to repay it. Because of certain social customs and also the economic conditions they cannot disown that debt. The interest on the loans in the villages is very high which makes it impossible for Indian farmer to pay the debts.
2) Defective social customs and traditions:
In India particularly in the Rural Society the social customs are extremely defective because of which people have to spend lot in marriages and other social customs and ceremonies the income and the savings of the farmers are not sufficient to enable them to meet the expenses of these expensive ceremonies and social customs. This invariably results in debtless of the rural folk.
3) No alternative method of borrowing for the farmers:
Farmers do not have an alternative method for borrowing. In villages there is not scientifically planned network of the co operative credit societies. Loans from banks and other financial institutions are available for agricultural purposes but not for meeting the expenses of the marriages and other ceremonies and rites.
Government have realised the problem of rural indebtedness and they have also passed laws to free the villages from the clutched of the money lenders, but because of red tapism and alternative machinery for providing loans to the farmers has not been fully developed. This leaves the money lender free to charge exorbitant sales of interest and keep the village people under his hands.
4) Laws against cheating by the money lenders are not strict and elaborate:
Money lenders, because of their economic status are able to get the facilities of the lawyers and know exactly what the laws against them are the laws that have been framed are not so for proof to check the hold of the money lender and save village people from indebtedness. The process of the realisation of loan is also quite complicated and illiteracy of the villages comes in their way. In village no machinery has been evolved that can provide protection to these farmers against there moneylenders.
The legislature has been enacted and the weaker sections have been freed from the debt. But the position is still far from satisfactory.
5) The economic condition of the village people is not sound:
Village people are not able to earn enough trough agriculture of the farmers, the income is hardly sufficient to enable them to keep their soul and body together. Because of this condition of any emergency arises the farmers have to run for a loan, and it is the money lender only who provides this facility. This makes life of the village people miserable.
Since the economic condition of the village people is not good because of low income, they are not able to leave their agriculture and other occupations. This again creates the problem for them.
6) Defective agricultural system:
The agricultural system of India is very defective. Because of this defective agricultural system, village people are not able to have sound economic condition. This necessities the borrowing. The defective system of the agriculture may be enumerated under the following heads
a) Small uneconomic holding b) Weak health of the farmers and their poverty. c) Traditional method of agriculture d) Too much of dependence on nature. e) Too much of pressure on land etc.
7) Too much pressure on land:
Because India has a very large population and very small percentage of the land is used for agriculture there is good deal of pressure on land. About 80 percent of the population of the country is directly or indirectly depends on land while the cultivable land is very small is area as compared to the population. This creates the problem of bad economic condition of the farmers and so they have to borrow money to meet in emergency or exigency.
8) Lack of village industries:
In village there are very few industries through which the people can subsidies there income. Agriculture as well as all know leaves a good deal of denture for the village people and of they can use this leisure gainfully they can improve their economic condition. Because of death of cottage and village industries, there farmers are not able to augment their income. During the period when he has no work on his field, the income is also meager and so the farmer has to depend on loan.
Village people go to the courts on very minor disputes. Even today most of the courts have the cases from village people. Litigation is an expensive on account of the village people. This makes their economic condition worse and compels them to borrow money for meeting the expenses of the cases in the courts.
10) Complicated system of revenue:
The revenue system of this country is quite complicated farmers have to pay higher price for things that they need while they are not able to get comparably high prices for their products. This creates several problems and complications for them. Because of this they have to borrow money.
11) Habit of extravagance of the farmers:
Farmer because of their superstitions illiteracy and faith in customs and traditions has become extravagant. They spend beyond their means on these religious and social functions and ceremonies. Because of this they have to borrow money.
Really speaking there is no system for providing credit to the farmers as to cover all aspects of the life of the farmers. He also does not have the facility for marketing his goods. When the farmers go to the market he has to cross several hurdles and so the price that he gets is very meager to his needs. Because of this economic condition becomes bad.
It is the rate of interest charged by the money lenders is very high. Once he has fallen a pray he is not able to extricate himself from the clutches of the money lender throughout his life. This is what has been said in the report of the Bombay Banking Enquiry Commission a few lines from which are quoted below:-
“It is not that the agriculturist repays too little he often repays too much. It is the high rate of interest and the malpractices followed by the money lenders that tried to perpetuate the indebtedness.”