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On what terms did Savita get a loan from Tajpal Singh? Would S... - Economics
On what terms did Savita get a loan from Tajpal Singh? Would Savita’s condition be different if she could get a loan from the bank at a low rate of interest?
Terms of the loan from Tejpal Singh:
Savita, a small farmer, obtained a loan from Tejpal Singh (a large farmer) on the following harsh terms:
High Interest Rate: The interest rate was 24% for four months, which is very high.
Labour Commitment: Savita had to agree to work on Tejpal Singh’s field as a farm labourer during the harvest season.
Low Wages: She was paid only ₹100 per day for her labour, which was much lower than the prevailing market wage.
Difference if she had taken a loan from a bank:
Yes, Savita’s condition would have been much better if she could get a loan from a bank:
Low Interest Rate: Banks charge a much lower and reasonable interest rate compared to private moneylenders.
No Forced Labour: She would not have been required to work on someone else's field at low wages as a condition for the loan.
Better Productivity: She could have focused all her time and energy on her own small plot of land during the peak harvesting season, potentially improving her own crop yield and family income.