Page 71 - Understanding Economics for Class 10

 They first met a small farmer, Shyamal. He is from Sonpur, a small irrigated village.
 Shyamal needs loan for cultivating his 1.5 acres of land every season.
 Till few years back, he was borrowing from the village moneylender at an interest rate of
5% per month (60% per annum).
Goyal Brothers Prakashan
 Shyamal has started borrowing from an agricultural trader in the village for the last few
years at an interest rate of 3% per month.
 The trader supplies the farm inputs on credit at the beginning of the cropping season,
which is to be repaid when the crops are ready for harvest.
 To ensure that the money is repaid fast, besides paying the interest rate, Trader has also
asked the farmer to sell his crops to him.
 The trader is able to make a profit by buying the crop at a low price from the farmers (since
the crop prices are low after the harvest) and then selling it later when the price has risen.
They next meet Arun, who is supervising the work of one farm labourer.

 Arun owns 7 acres of land and is one of the few persons in Sonpur to receive bank loan
for cultivation.
 The interest charged by the bank on the loan is 8.5% per annum, and repayment can be
done anytime in the next three years.
 After harvest Arun plans to repay the loan by selling a part of the crop.
 He has a plan of storing the rest of the potatoes in a cold storage and then against the
cold storage receipt, he plans to apply for a fresh loan from the bank.
 This facility is offered by banks to farmers who have taken crop loan from them.
They next meet Rama
 Rama works as an agricultural labourer in a neighbouring field.
 Rama does not have work during the several months of the year and to meet her daily
expenses she needs credit.
 If there is any sudden illnesses or family functions, expenses on these are also met through loans.
 Rama takes loan from her employer who is a medium landowner in Sonpur.
 The interest charged by the landowner is 5% per month
 By working for the land owner, Rama repays the loan.
 Rama has to take a fresh loan most of the time, before the repaying of her previous loan.
 At present, she owes the landowner `5,000. She is being ill -treated at work by the landowner
but still she continues to work for him since he is the only source of credit for her.
 In Sonpur, only source of credit for the landless people are the landowner employers.

Loans from cooperatives
 Besides Banks, Cooperative Societies(or Cooperatives) are the main source of cheap credit
in rural areas.
 In certain areas, resources of all the members of cooperatives are pooled for cooperation.
 Various types of cooperatives are possible like farmers cooperatives, weavers cooperatives,
industrial workers cooperatives, etc.
 Near Sonpur, Krishak Cooperative functions in a village having 2300 farmers as members
 Deposits are accepted from its members and used as a collateral to get loan from the bank.
 The Cooperative has obtained a large loan from the bank by using these deposits as
collateral.
E-62 Economics Class X