Nearly 69% of Indian population is still rural according to the 2011 Census. More than 83 crore of India’s population resides in its six lakh villages.

Nearly 69% of Indian population is still rural according to the 2011 Census. In absolute terms, more than 83 crore of India’s population resides in its six lakh villages. A majority of rural population is still dependent on agriculture to sustain them. The obvious fallout of a long lasting agrarian crisis in the non-green revolution states is rural indebtedness. Often other factors like illiteracy and ignorance exacerbate rural indebtedness.

According to the NSSO 70th round survey on ‘SituationAssessment Survey of Rural Households in India’, which covered 35,000 households’ reveals that about 52% of rural households in India are indebted. It also reveals that majority of the poor Indian farmer keeps deteriorating with the passage of time, during the last decade, the bloated debt of Indian agricultural households increased almost 400 percent even the number of heavily indebted households steeply increased during this period.

The data states that the average loan per agriculture household is Rs.47,000, though the average income of these rural households has increased by 318% from 2002-03 to 2012-13, most worryingly, total debt per household also increased by 273.5% during the same period, proving that while income from sale of agricultural products increased due to a price advantage during the last one decade, but it has not translated into a reduction in rural indebtedness.

Loan patterns shows that it is 60% institutional loans was from sources like government, cooperative societies and banks and 40% non-institutional loans. Money lenders make up most of the non-institutional lenders, lower the land holding higher is the probability of anon-institutional loan, thus rural indebtedness has become a persistent problem in India.


Andhra Pradesh is identified as the highest with about 92.9% of its rural population indebted. It is followed by Telengana, which has about 89% indebted rural households and Tamil Nadu having about 82.5% rural indebtedness. The most serious consequence of existing rural indebtedness is further indebtedness.
The key reason for rural indebtedness is linked to the inherent crisis of Indian agriculture, as large portion of the country’s farmers are small and marginal farmers, who have exposed to severe poverty. Farmers borrow more loans often to procure seeds or equipment and repay less debt thus falls to prey of a vicious cycle of indebtedness. As time goes on, the scale of indebtedness is accumulated and it becomes an ancestral debt. Many farmers start their agrarian lives with heavy burden of ancestral debt.

Unable to repay these debts at a time, these farmers are compelled to borrow more loans to clear the old loans, thus fall in the net of indebtedness over a period of time. Addiction to alcohol has also one of the reasons for indebtedness in India. Exorbitant, showy expenses during social events such as marriages also contribute largely to indebtedness. To successfully deal with rural indebtedness social consciousness must be improved.
More than 70% of Indian agriculture holdings are small which is having less than five acres. To have major economic yields in such holdings large scale of modern farming is needed to produce maximum production, but majority of Indian farms remains with traditional farming, as a result, the yield is minimal forcing the farmers to mortgage their lands when farmer is unable to repay the debt. Moneylenders play a havoc role to worsening these problems, as they force the farmer to mortgage their lands making the farmers landless. Thus farmers forced into further debt. Apart from this, illiteracy, ignorance and long lasting litigations can be seen as major contributors to the continuing indebtedness in rural India.
Indebtedness is a major barrier to modernization of agriculture. Since the scope of capital accumulation remains low, there is no opportunity to modernize farming as it requires heavy capital investment. This affects small and marginal farmers more acutely.
This has serious political fallouts as well. Impoverishment of farmers often fans anti-national political and separatists movements. The resurgence of Naxalism in Andhra Pradesh can be linked to its mammoth level of rural indebtedness. Simultaneously, it has a severe impact on heath and standard of living of the nation’s rural population.

The National Crime Records Bureau (NCRB) in a report states there had been 5,650 cases of farmer suicides in India in 2014. The report states 20.6% of the suicides can be attributed to bankruptcy and prolonged indebtedness. The report also highlights that the states with a higher level of indebtedness record a higher number of suicides. Three of the highly indebted states, namely, Andhra Pradesh, Telengana, and Tamil Nadu account for about 20% of the nation’s farmer suicides. Additionally, Maharashtra, where cotton farmers are exposed to acute crisis has recorded 2568 cases of farmer suicides.

To deal with this crisis, the government must recognize its enormity. The first step that needs to be taken is to significantly increase the scope and ambit of institutional credit in rural India. The state must also effectively deal with money lenders, who are often centres of political and economic influence in rural India and making the small and marginal agriculturists aware of their rights needs more focus from governmental agencies. Co-operative societies and Self Help Groups (SHGs) can be successfully used to control and facilitate micro borrowings.
The state must also promote agro-based products. This will help in economically uplifting farmers. Promoting organic farming and incentivizing the same can be an effective means of debt reduction. Organic products have a huge export market. Large scale production of organic products by small and marginal farmers can be a way to economic prosperity. The state should facilitate selling of organic products and take interest in making these products ready for the export market. Better storage facilities and transportation facilities can also indirectly reduce debts as a large amount of agricultural products are wasted due to lack of storage facilities.

By G Rajendra Kumar

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