The following points highlight the top five government policies to relieve the farmers from indebtedness. The policies are: 1. Measures to Avoid Unnecessary Debts 2. Improvement in Civil Law 3. Measures for Restricting the Alienation of Land 4. Debt Conciliation and Liquidation 5. Future Supply of Credit.
1. Measures to Avoid Unnecessary Debts:
It was felt that the best way of relieving rural indebtedness was not by enlarging the means of credit but rather by accompanying every increase of credit by, an attempt to educate the, masses in thrift and mutual control. Otherwise, the more, money they could get, the greater would be the expenditure by the farmers on their customary extravagance. Hence the greatest need has been of controlled credit.
It was also necessary to enable the farmers to take a more business-like view of their indebtedness and to face the moneylender on a more equal thresh old. Suspension of land revenue in years of scarcity and the starting of village post-office savings banks to promote, thrift have gone some way in avoiding unnecessary debt.
2. Improvement in Civil Law:
To shield the farmer many alterations were made in the civil law in the matter of executing the decrees against farmers. Their implements, cattle and materials of the agriculturists household were exempted from attachment or scale. The farmer was exempted from arrest from a decree of the court and was given concession of the repayment of his debt.
(i) The Deccan Agriculturists Relief Act 1879:
It permitted the courts to go behind the contract and change it in favour of the farmers so far as to reduce high interest rate to prevent the sale of land unless specifically pledged and to restore the land to the farmer even when there was a sale-deed between farmer and the money-lender.
The Act made it obligatory on the money-lenders to show accounts and to give receipts. But the Act has not been found to be effective and has been found positively injurious. It led to abuse of concessions on the part of famers, enhanced litigation, made the money-lenders more guarded and resulted in the decline of rural credit.
According to the Famine Commission (1901) the Act had been followed by the more frequent transfer of property by both sale and mortgage. The Bombay Banking Enquiry Committee recommended its repeal and being replaced by a new. Act containing a few provisions to safeguard the interests of only small and actual farmers.
(ii) The Usurious Loans Act, 1918:
As amended in 1926, it restrained the extortion of money-lenders by fixing the maximum rate of interest and by enabling the mortgagor to insist on his right of redemption. The Royal Commission on Indian Agriculture held that the Act was practically a dead letter. But the Central Banking Enquiry Committee held that the Act was capable of being worked to the advantage of farmers and should be retained.
(iii) A Simpler System of Insolvency:
There was an increasing public opinion in favour of a simpler system of insolvency and this view received the support of such high authorities as the Royal Commission on Indian Agriculture, the Civil Justice Committee and the Madras Committee on Cooperation, 1940. The Bombay Agriculture Debtor’s Relief Act, 1947, empowered the courts to declare the debtors insolvent if their assets were such that liquidation of the debt in 12 installments was not possible.
(iii) Legislation regarding the Licensing and Control of Money lenders:
The Punjab Regulation of Accounts Act 1930, obliged all persons, whether money-lenders or shop-keepers who advance loans in money or in kind at interest to keep an account for each debtor and to supply him every six months a signed statement of the account of principal and interest and detailing all the loan transactions of the past six months. If a separate account was not kept for a debtor, the creditor on, selling him was liable to lose his interest and was not to be awarded his costs.
The Royal Commission, on Indian Agriculture as well as the Central Banking Enquiry Committee appreciated the principle underlying this Act. A similar Act was passed in Madras. But under the Madras Act, the creditor was to furnish a statement of accounts to his debtor only if the latter asked for it. The Bihar Money-lenders Act required all money-lenders to register themselves.
The Bombay Money-lenders Bill, 1938 required to regulate money-lending in a more thorough going manner. But this bill did not become law. In 1931 the Punjab passed the Regulation of Money-lenders Act. United Provinces, Orissa and Bengal enacted legislation in 1939 towards the same end. These Acts provided for the rates of interest and other miscellaneous aspects.
3. Measures for Restricting the Alienation of Land:
The Famine Commission stated that the increase of debts was due to the full power of alienation to prevent further indebtedness. As a result of this Act, the population of the Punjab was classified under groups known as farm tribes. A member of the non-farming tribes was not permitted to obtain land from a farmer. He could not take a mortgage for more than twenty years.
Transactions between members of the farm tribes were not affected by the Act. The Act, while successful in preventing the expropriation of the peasant proprietor by the money-lander, retarded the flow into agriculture of enlightened outside enterprise and led to contraction of credit and the appearance of the renter and the agriculturist money-lender. In 1903, Bundelkhund Land Alienation Act was passed to restrict the right to transfer land. Similar restrictions were imposed on the alienation of land by an original tribes in C.P. and Bombay.
4. Debt Conciliation and Liquidation:
Granting of some immediate relief to the farmers from their indebtedness became a serious problem during the 1930’s because of the heavy fall in the price of farm products. Debt Conciliation Act. were passed in C.P. and Barar in 1933 and soon in other provinces.
In 1936 Madras passed the Madras Debt Conciliation Act. Some native States like Travancore, Cochin and Mysore also passed such laws. It must be noted that Conciliation Boards have had no coercive powers to force agreement.
Under the Madras Act, if the creditor did not agree the debtor was given a certificate which relieved him from paying the expenses of a civil suit, if the creditor went to the Court. The creditor could not get more than 60% interest after conciliation had failed.
In 1938 Madras passed the Debt Relief Act providing for the compulsory sealing down of debts. The Central Provinces and Berar Relief of Indebtedness Act 1939 introduced compulsory methods of lowering down the debt.
The Bombay Agricultural Debtor’s Relief Act, 1939 was put into force in 1941 as an experimental measure. This Act also provided for the compulsory reducing of agricultural debts. The U.P. Agriculturists Debt Redemption Act, 1939 was also passed with the object of effectively scaling down the debt.
5. Future Supply of Credit:
(i) Takavi Loans:
Takavi loans, were granted to farmers under the Land Improvement Act (1883) providing for the grant of long-term loans for permanent improvements on land such as wells and embankments, etc. and under the Agricultrissts’ Loans Act (1884) providing for short-term loans for current agricultural needs such as the purchase of seeds, cattle, manure; implements, etc.
A fundamental defect of the Land Improvement Act was that no loan could be given under it for the redemption of old debts or consolidation of holdings. Under the amending Acts passed in Madras (1935) and LLP. (1934) loans could be given in these provinces for the redemption of old debts. As a genuan means of financing agriculture the system was a failure.
The Sub-Committee appointed in 1944 under the chairmanship of Prof. Gadgil, in accordance with the recommendation of the Policy Committee on Agriculture, Forestry and Fisheries, to report on the ways in which indebtedness could be scaled down and finance both long-term and short- term provided, made detailed recommendations.
The recommendations covered adjustment, reduction and compounding of old debts, mode and extent of State finance in normal times co-operative movement, private financial agencies and their regulation and rehabilitation
(ii) Supply of Controlled Credit:
The MacLagan Committee, the Agricultural Credit Department of the Reserve Bank of India and the Madras Committee on Co-operation were unanimous in their opinion that further credit should be controlled. To extricate the farmer without guarding against a relapse into debt was a sheer waste of effort.
The only effective means of controlling the debt is to fortify the farmer against future debt. This can be attained only by increasing farm income with the help more efficient methods of production and better marketing and by reducing the improvident expenditure and increasing thrift.
System of controlled credit can do a great deal here. Co-operative movement, is capable of great service in relieving the peasant of existing body as well as in preventing future debt.
The Royal Commission on Indian Agriculture remarks, “We have no hesitation in recording our belief that the great hope for the salvation of the rural masses from their crushing burden of debts rests in the growth and spread of a healthy and well organised co-operative movement based on a careful education and systematic training of the villagers themselves.”
In practice, it is noticed that this protection is not of much use. This is because the ignorant and illiterate farmer does not know the provisions of these legislations. He does not have the money to go to the court of law for protection. The social status of the borrower is also much lower than that of the money-lender.
Hence, most of the borrowers do not feel strong enough to challenge the money-lenders in courts of law. Therefore, most of the provisions have remained on paper. Further, it is said that prevention is better than cure. Hence attempts should be made to prevent farmers from taking loans. This can be done by impressing on the farmers to cut down their social expenditure on marriages, funerals, etc.