Economics
Why will Arun have a higher income from cultivation compared to Shyamal?
Money & Credit
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Answer
Following are the reasons, why Arun will have a higher income from cultivation compared to Shyamal:
- Arun gets a loan from a commercial bank at the interest rate of 8.5% per annum, whereas Shyamal gets loan from a village moneylender at the interest rate of 5% per month (i.e., 60% per annum).
- Arun is not restricted to sell his product at a low price. He has the benefit of selling his product at market rates.
- He can keep his product in cold storage and wait for the prices to rise.
- He can also avail fresh loans against his produce.
- Arun has more land than shyamal.
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Related Questions
Underline the various uses of credit in Sonpur in the above passages.
Compare the terms of credit for the small farmer, the medium farmer and the landless agricultural worker in Sonpur.
Can everyone in Sonpur get credit at a cheap rate? Who are the people who can?
Tick the correct answer.
(i) Over the years, Rama’s debt
- will rise.
- will remain constant.
- will decline.
(ii) Arun is one of the few people in Sonpur to take a bank loan because
- other people in the village prefer to borrow from the moneylenders.
- banks demand collateral which everyone cannot provide.
- interest rate on bank loans is same as the interest rate charged by the traders.