Page 92 - Understanding Economics for Class 10

In rural India, cheap and affordable credit helps in the development of agriculture and other
related activities. We know that a bulk of farmers are poor. They do not have money to buy
seeds, fertilisers, and expensive pesticides. Credit enables them to carry out these activities.
Along with farming they can also invest money in non-farming activities like transport,
Goyal Brothers Prakashan
dairy etc. cheap and affordable credit is crucial for country’s economic development.
7. Mr “X” borrowed money from a money lender at a high rate of interest, as he could not
pay the interest. Mr “X” was forced to borrow from another landlord to settle the amount
for the interest borrowed, to the money lender. State the consequences he may face in this
situation.
Ans. Mr “X” has fallen into “Debt trap”, He is in a situation where he will not be able to repay the
debt incurred because: the Informal sector was the source of credit opted by Mr “X”, where
(i) The rate of interest is high,
(ii) No proper documentation is sought,
(iii) No set of rules and regulations will be followed
(iv) The lenders were often punished and will be ill treated
(v) The prime motive of the informal sources of this kind of credit is to make profit
He may face the following Consequences:
(i) Mr. "X" may face ongoing harassment and physical harm from the men sent by the
money lender.
(ii) He will not be able to make regular interest payments or repay the full amount borrowed.
This could lead to significant stress and anxiety, as well as potential physical injuries.
(iii) Borrowing from another landlord to repay the original loan may create a cycle of debt
for Mr. "X", particularly if the interest rates on the second loan are also high.
Mr. "X" may experience personal consequences, such as mental stress, anxiety, and
depression due to the constant pressure of repayments and harassment from the lenders.

8. “Self–help groups eliminates poverty and empowers women”. Substantiate with suitable
answer.
Ans. (i) Self Help Groups help the poor to become self-reliant in terms of savings and generating
income.
(ii) They avail the facilities of loans from formal sources like banks at low rate of interest.
(iii) They do not demand collateral and so it is easy to access by the poor.
(iv) Self-help groups are exclusively meant for rural women to make them economically
independent through self-employment opportunities.
(v) Helps to improve other development factors such as literacy levels, improved healthcare
and better family planning.
(vi) Economic empowerment: SHGs provide women with a platform to save and access
credit at affordable rates, which enables them to start and expand small businesses.
Thus improving the standard of living.
(vii) Skill development: SHGs in India have also been successful in providing skill
development and training opportunities to women. Through training programs, women
are equipped with the necessary skills to start and run successful businesses.
(viii) Social empowerment: By providing a platform for women to come together, share their
experiences, and support each other, SHGs have empowered women to take charge of
their lives and become active participants in their communities.

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Economics Class X E-83