A case of two loans – Tractors at 15.9% and Mercedez Benz at 7%…

P. Sainath the perennial critique of lopsided Indian growth story has another hard hitting article in EPW.

He points to two kinds of loans in Aurangabad:

Tractor loans at 15.9 per cent trapped Aurangabad farmers like Hirabai in debt. But Mercedes Benz loans in Aurangabad were going for 7 per cent at the same time. Yet, sales of both were seen as rural progress…

He narrates the tale of how these loans were disbursed and asks about this illusion of rural progress:

Tractor sales in India trebled between 2004-14. Industry data suggest that in 2013, India produced 619,000 tractors–almost a third of the world output. Several saw this as a “mirror of rural progress” or an “important barometer” of how rural India was doing. Sure, a rise in income for some sections helped that spurt. However, it was also enabled by hard-selling crazy loans. As the Socio Economic and Caste Census data show, in only 8 per cent of rural households does the highest earning member make more than Rs. 10,000 a month. (Tractor-owning families are much less than even that 8 per cent figure). Still, quite a few economists and columnists cling to the notion that tractor sales figures are a reliable proxy for how all of rural India is doing. So now, when dealers in Aurangabad report a 50 per cent decline in sales, that becomes the definitive sign of “rural distress” for the desktop analysts.

True, the tractor is a productive instrument, unlike the Mercedes Benz, which is a luxury buy. But seeing the loan-driven tractor sales of the 2004-14 period as a symbol of rapid rural progress is as silly as the idea that the sale of 150 Mercedes Benz on a single day marked the arrival of Aurangabad on the global map. At Rs. 64,330, Marathwada still has the lowest per capita income of any region in Maharashtra. That’s about 40 per cent lower than the rest of the state. And almost 70 per cent less than Mumbai’s figure.

Meanwhile, a new bankruptcy crisis could be in the making. This time involving excavators which are increasingly used in states like Maharashtra where governments are happy to deploy more machinery and less manual labour.

“A lot of people are going to lose a lot of money and go bankrupt,” says Haji Akbar Baig, a contractor and former municipal council chief of Khultabad in Aurangabad district. “In my little town of 19,000 people,” says Baig, “there are at least 30 JCBs (J.C. Bamford excavators). Who knows how many there are across the state? Since these are being used in schemes like the Jalyukt Shivar Abhiyan (the flagship water conservation scheme of the state government), many people have got carried away. They have taken huge loans from private banks and non-banking financial companies, and bought JCBs costing up to Rs. 29 lakhs a piece. I was one of the first to buy one. But I raised my money without a big bank loan, by selling a lot of my earlier equipment and borrowing some amounts from family members.

“To be left with a worthwhile amount after paying your loan instalments and high maintenance costs, you need to get work worth Rs. 1 lakh a month at least. Which might be possible in this season, but will come to an end with the monsoon. Let alone 30, there won’t be enough work for three JCBs in this town. What do you do then? People with no background in the field are also investing in Poclain hydraulic excavators that sometimes cost twice what the JCBs do. Again, taking loans that will crush them. That’s true across the region, I suspect. Only a few connected businessmen with contacts will still get contracts. Maybe 10 out of 100 will survive. The rest will go bankrupt.”

Most people who talk of rural progress have barely visited a rural place in their lives. Just armchair analysis works though and is seen as good enough as well.

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