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Indian Farmers Trapped in Debt Cycle Amid Dowry and Distress
Table of Contents
- Indian Farmers Trapped in Debt Cycle Amid Dowry and Distress
- The Kisan Credit Card Scheme: A Double-Edged Sword
- Dowry: A Social Evil Fueling Debt
- The Cycle of Indebtedness
- Farmer Suicides: A Tragic Consequence
- Corruption and Lack of Oversight
- Evergreen Insights: The Past Context of Indian Agricultural Debt
- Frequently Asked Questions About Farmer Debt in India
Meerut, India – Mohammad Mohsin, a farmer in northern India, took a loan under the Kisan Credit Card (KCC) scheme in 2023, not for agricultural purposes, but to fund his sister’s dowry. This common practice highlights a deeper crisis in rural India, where farmers are forced to divert agricultural loans to meet social obligations and emergencies, pushing them into a cycle of debt and despair. The KCC scheme, designed to provide accessible credit for farming, is now often used as a lifeline for families struggling with poverty and societal pressures.
The Kisan Credit Card Scheme: A Double-Edged Sword
The KCC scheme, launched in 1998, aimed to modernize rural credit by offering short-term, low-interest loans to farmers.With an annual interest rate of 4 percent, it is one of the most accessible financial instruments for millions of farmers. Though, the scheme has increasingly been used for non-agricultural purposes, notably for dowries, healthcare, and education. This diversion of funds leads to a “progress debt trap,” where farmers struggle to repay loans and invest in their farms, according to Vijoo krishnan, a farmers’ union leader and politburo member of the Communist party of India.
Did You Know? The average farm size in India is only 1.08 hectares (2.67 acres), making it difficult for many families to sustain themselves solely through agriculture, according to the 11th Agricultural Census (2021-22).
Mohsin’s story is a stark example. He borrowed approximately $1,440 (₹120,000) to meet dowry demands,including a car and cash. When the marriage fell through, he was left with a car he couldn’t afford and a growing debt. The interest rate on his loan jumped to 7 percent after he missed payments, further exacerbating his financial woes.
Dowry, the practice of the bride’s family providing gifts and money to the groom’s family, remains prevalent in India, despite being illegal as 1961 under the Dowry Prohibition Act. According to the National Crime Records Bureau,India recorded a dowry-related death every 30 hours in 2024. This social evil forces families like mohsin’s to take drastic measures to secure a marriage for their daughters.
Aman,Mohsin’s sister,completed her Islamic theology course and awaits marriage. Her mother, Amina Begum, stated, “In our part of the world, no dowry means no groom,” highlighting the deeply ingrained nature of this practice. The family faces the daunting task of negotiating new dowry demands, perhaps pushing Mohsin further into debt.
Pro Tip: Microfinance institutions (MFIs) can provide choice credit options for farmers, but it’s crucial to compare interest rates and repayment terms carefully to avoid falling into a debt trap.
The Cycle of Indebtedness
When farmers fail to repay KCC loans, they frequently enough turn to local middlemen who charge exorbitant interest rates (2-5 percent per day) to help them renew the loans. This creates a vicious cycle of indebtedness, where farmers are perpetually struggling to repay their debts. Thomas Franco, a former general secretary of the All India Bank Officers’ Federation, notes that the KCC scheme, while expanding credit access, has also created a debt trap.
The Indian government’s data shows that the KCC scheme disbursed over $120 billion (₹10 trillion) by 2024, a important increase from $51 billion (₹4.25 trillion) in 2014. However, this masks the reality of renewed loans without actual repayment, inflating the success numbers, according to Franco.
Farmer Suicides: A Tragic Consequence
The mounting debt and financial distress have lead to a tragic increase in farmer suicides across India. In 2023, Maharashtra, India’s richest state, reported the highest number of farmer suicides at 2,851. the Marathwada region of Maharashtra saw a 32 percent increase in suicides in the first three months of 2025 compared to the same period in 2024. Similarly, Karnataka reported 1,182 farmer suicides between April 2023 and July 2024, primarily due to drought, crop loss, and debt. Uttar Pradesh witnessed a 42 percent rise in farmer suicides in 2022.
Critics argue that without structural reforms, such as better public healthcare, quality education, and profitable farming practices, schemes like the KCC will remain short-term solutions. Jayati Ghosh, a development economist, emphasizes that the agricultural credit system is out of sync with the realities of farming. she advocates for subsidized, decentralized lending designed around real-world conditions.
India’s public healthcare spending remains low, consistently under 2.5 percent of the GDP, placing a significant burden on poor families during medical emergencies, according to the World Bank. This lack of support forces farmers to rely on loans for essential needs.
Corruption and Lack of Oversight
The KCC scheme has also been plagued by loan scams. In Haryana, farmers used forged documents to secure nearly $88,000 (₹7.3 million) in loans. In Uttarakhand, a dealer created fake bills and ghost loans worth $1.2 million (₹100 million). In Uttar Pradesh, bank managers sanctioned fraudulent KCC loans worth $792,000 (₹66 million) using forged land records. These cases highlight the weak oversight and systemic issues within the scheme.
A loan disbursal agent affiliated with NABARD, speaking anonymously, confirmed the lack of systemic checks in the KCC scheme.Dharmendra Malik, the national spokesperson of the Indian Farmers’ Union, argues that easy loans alone cannot solve agrarian distress and calls for investment in irrigation, storage, education, and guaranteed crop prices.
Mohsin, like many other farmers, faces an uncertain future. He has not been able to renew his family’s KCC loan for over two years and struggles to repay the existing one. Looking at his browning sugarcane fields, he questions whether farming has any future at all.
| Indicator | Value | Source |
|---|---|---|
| Average farm Size | 1.08 hectares (2.67 acres) | 11th Agricultural Census (2021-22) |
| KCC Disbursements (2024) | $120 Billion (₹10 Trillion) | Indian Government Data |
| India’s Public Healthcare Spending | Under 2.5% of GDP | World Bank |
| Dowry-Related Deaths (2024) | 1 every 30 hours | National Crime Records Bureau |
What steps can be taken to break the cycle of debt for Indian farmers?
How can the KCC scheme be reformed to better serve its intended purpose?
Evergreen Insights: The Past Context of Indian Agricultural Debt
The issue of agricultural debt in India is deeply rooted in historical and socio-economic factors. For centuries, farmers have relied on informal credit systems, often at exorbitant interest rates, leading to cycles of indebtedness. The introduction of formal credit schemes like the KCC aimed to address this issue, but systemic problems and social pressures have undermined their effectiveness.
The Green Revolution in the 1960s and 70s,while increasing agricultural productivity,also led to increased dependence on fertilizers,pesticides,and irrigation,further increasing farmers’ costs and vulnerability to debt. Climate change, with its erratic rainfall patterns and increased frequency of droughts and floods, has exacerbated the situation, leading to crop failures and financial distress.
Moreover,the lack of adequate infrastructure,such as storage facilities and market access,forces farmers to sell their produce at low prices,making it difficult to repay loans. The combination of these factors has created a complex and challenging situation for Indian farmers, requiring complete and lasting solutions.
Frequently Asked Questions About Farmer Debt in India
- What is the Kisan Credit Card (KCC) scheme?
- The KCC scheme is a government initiative to provide farmers with easy access to credit for agricultural purposes, such as buying seeds, fertilizers, and equipment.
- Why are Indian farmers using KCC loans for dowries?
- due to social pressures and the prevalence of dowry in marriages, farmers frequently enough divert KCC loans to meet dowry demands, pushing them into debt.
- How does debt lead to farmer suicides in India?
- The inability to repay loans, coupled with crop failures and financial distress, creates immense pressure on farmers, leading some to take their own lives.
- What are the main challenges facing Indian agriculture?
- Key challenges include small landholdings, climate change, lack of infrastructure, and inadequate access to markets and fair prices.
- What reforms are needed to address farmer distress in India?
- Reforms should focus on improving public healthcare,education,irrigation,storage,market access,and ensuring fair prices for crops.
- How can the KCC scheme be improved to better support farmers?
- The KCC scheme needs better oversight, reduced interest rates, and flexible repayment terms that align with the realities of farming.
- What role do middlemen play in the Indian agricultural debt crisis?
- Middlemen often exploit farmers by charging high interest rates to help them renew KCC loans, perpetuating the cycle of debt.
Disclaimer: This article provides general facts and does not constitute financial or legal advice. Consult with a qualified professional for personalized guidance.
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