A Profile of Rural Indebtedness
With the introduction of the /green revolution'strategy of securing increases in agricultural production through technological advance, involving large investments in expensive inputs, there is growing evidence that the process of differentiation of rural society has became more intense. An important element of this increasing differentiation is the growth of rural indebtedness. This note attempts to examine the current position with regard to such indebtedness, based on the official surveys of debt and investment in rural India.
For our purpose, we can categorise rural indebtedness into two broad categories based on the nature of the borrower. The upper stratum of the rural sector, consisting of the landlords and rich peasants, resort to credit essentially for investment in their substantial holding on which they produce mainly for the market and it is they who secure the lion's share of institutional credit. Hence the very formidable growth of institutional credit, the bulk of which goes to these classes, is not a reflection of growth of poverty or even indebtedness in the true sense. Their cultivation being mainly based on hired labour, these credits help them to increase productivity. However, with the intensification of the agrarian crisis, the returns per unit of land and investment of even this section of the fural population has come under pressure. With increase in support prices not covering their rising costs of production, the terms of trade are becoming increasingly unfavourable to them. These factors have certainly resulted in an increase in the incidence of failure to repay loans in the case of this section of the rural population as well.
The second category of borrowers consists of the large mass of the rural poor. By 'poor' we mean both asset and income poor—those whose total income from assets (including land owned and operated) as well as employment, is less than the minimum needed for their subsistence. They include landless agricultural labourers, poor peasants, artisans and other rural workers. The gap between income and household expenditure is naturally filled by taking loans. As they have almost no access to institutional credit these loans are obtained from landlord/rich peasant employers, moneylenders, neighbours and