Are We Pushing Rural India Into Debt Trap With Loans Against Properties?

The Modi government, including Finance Minister Nirmala Sitha-raman, have always been painting a rosy picture of the economy despite the rising unemployment and prices and unchecked inflation. Rupee is sinking to lower and lower levels by the day. The GDP growth has dropped to 5.4 per cent during the July-September 2024 period, the lowest in seven quar-ters

Manohar Mewada from Sehore, Madhya Pradesh, took a Rs 10 lakh loan from a bank against his property by using the property cards obtained under the Svamitva (Survey of Villages Abadi and Mapping with Improvised Technology in Village Area) scheme. He set up a dairy farm which he says enhanced his family income. He makes a paltry sum of Rs 30,000 a month from the dairy with five cows and a buffalo and pays Rs16,000 a bank EMI.

Meet Rachana, another Svamitva beneficiary from Shri Ganganagar, Rajasthan. She had been living in her small house for 20 years without any property documents. Now that she got the property documents, she took a loan of Rs7.45 lakh and started a shop. She is also a beneficiary of Swachh Bharat scheme and took a loan of Rs8 lakh under the PM Mudra Yojana and was also working under the Aajeevika scheme as well as the family benefited from Ayushman scheme. She wants to send her daughter for higher studies to Australia. There are many such stories that were narrated when Prime Minister Narendra Modi distributed over 65 lakh property cards under Svamitva Scheme to property owners in over 50,000 villages in more than 230 districts across 10 States and 2 Union territories on January 18, 2025 through video conferencing. He said that the property cards have empowered the village people to unlock the land values and improve their lives. It is also notable that the beneficiaries, save for Jammu & Kashmir, are from BJP ruled states.

The scheme sounds good on the face of it, but when you analyse it you get a feeling whether the so-called unlocking is actually pushing rural India into a debt trap, much as the credit card trap in urban areas.

It is always easy to get loans against properties but repayment is not. In Manohar Mewada’s case, he spends half of his income on his EMI that too from his dairy business which is fraught with risks. What happens if he defaults?

Take Rachana’s case. PM Modi wishes her luck when she says she wants to send her daughter to Australia for studies. He doesn’t ask about the study details, but merely says, showing his excitement, “… Australia, so this will be possible for you because of the Swamitva Yojana”.

Rahana’s daughter is preparing for AILET (All India Law Entrance Test). And why couldn’t the PM advise her to try and study Law in India itself? Modi and his government are obviously oblivious of the fate of thousands of students who go abroad for studies, with the loans taken by their parents, and land in misery when they do not get jobs. The global economy is not in a good shape. There is already a backlash against foreign immigrants getting jobs in the US and Canada amid local talent getting ignored. The US and Canada are already laying off people and the job losers include Indians.

To quote Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics, the next 25 years will be a tougher slog for developing economies than the last 25 years. Most of the forces that once aided their rise have dissipated. In their place have come daunting headwinds: high debt burdens, weak investment and productivity growth, and the rising costs of climate change. In the coming years, developing economies will need a new playbook that emphasizes domestic reforms to quicken private investment, deepen trade relations, and promote more efficient use of capital, talent and energy.

The Modi government, including Finance Minister Nirmala Sitharaman, have always been painting a rosy picture of the economy despite the rising unemployment and prices and unchecked inflation. The Rupee is sinking to lower and lower levels by the day. The GDP growth has dropped to 5.4 per cent during the July-September 2024 period, the lowest in seven quarters. Even if we consider GDP growth, the per capita income has not dramatically risen. The government has failed to create the 2-crore-jobs-per-year the BJP had promised and nobody talks about the Agniveer and other schemes that were aimed at creating employment.

Private consumption expenditure is not rising to facilitate money circulation which is essential for the economy to flourish. Simply put, people do not have money to spend. This is evident from the fact that the political parties are forced to promise freebies to win elections. Even the BJP, which has been criticising ‘revdis’, is itself trying to win the Delhi elections using the carrot of Rs 2,500-a-month payout to “eligible women”

Madhya Pradesh, Maharashtra, Karnataka and Telangana which implemented welfare schemes beyond their budgetary means are already facing financial stress and Delhi will soon join this club.

Now let us look at the government expenditure on infrastructure that is supposed to create jobs and contribute to economic growth. This is yet another hollow talk since these projects have a limited impact for a very limited period. For instance, road construction through a particular area may offer temporary labour jobs in that geography. What happens to the labour after that construction is a million-dollar question since these labourers cannot be employed in another area where there is already plenty of unemployment. The construction companies employ engineers and supervisors, but in a limited number due to their lean-and-mean business practices. Thus, their contribution to consumption expenditure is limited to that extent.

Why do we have to face the crisis and distress arising out of unemployment if the rural households are all that happy as the government data seeks to highlight? Please do not forget the farmer suicides.

Deaths by suicide of those involved in farming continued to increase in 2022, reports Downtoearth.org, quoting the National Crime Records Bureau (NCRB) data. This is an increase of 3.7 per cent from 2021, when 10,281 deaths were reported. It is an increase of 5.7 per cent when compared with 2020 figures.

The figures from 2022 indicate that at least one farmer died by suicide every hour in India. In fact, farmers’ suicide deaths have been showing an increasing trend since 2019 when 10,281 deaths were recorded in NCRB data, says Downtoearth. I am not trying to downplay the government’s achievements but the officials, Ministers and the Prime Minister cannot sweep its failures and the continuing crisis under the carpet and by juggling the data.

At the risk of sounding repetitive, let me point out that we continue to feed free rations to 60 per cent of the population. This again means that these 80 crore Indians simply cannot afford to buy their food as they do not have any source of regular income. They are jobless. Period.

It is in this context also one has to look at the success of the Svamitva scheme that the Prime Minister talks about. Let us examine what else Modi said. Only half of the six lakh villages in the country have been covered. Once property cards are issued in all villages, it will unlock economic activities worth over 100 lakh crore rupees, he said and emphasised the substantial capital that will be added to the country's economy. How? By making people mortgage their lands and get into debt trap? Imagine the scenario when the loan repayment defaults begin. The rich in villages will buy the properties when banks auction them to recover loans. This has the potential to lead to another crisis.

(The columnist is a Mumbai-based author and independent media veteran, running websites and a YouTube channel known for his thought-provoking messaging.)