Debt incurred by rural areas rose to 60 NSSO report

As per the recent NSSO National Sample Survey Organization report non- business debt soars both in urban and rural India
Debt incurred by rural areas rose to 60 NSSO report

As per a government survey, there has been a significant increase in debt taken for non-business activities, such as housing, medical treatment and education increased significantly, in both rural and urban areas over the past one decade.

NSSO’s (National Sample Survey Organization) report titled ‘ Key Indicators of Debt and Investment in state’ indicates that share of debt taken for business activities in rural areas fell to 40% in 2013 from 53% a decade earlier, while in cities non-business or household activities accounted for 82% of total debt last year, up from 75% in 2003.

Easier availability of home and educational loans, fall in average interest rates, spiralling real estate prices and inflating cost of medical treatment could explain this trend.

The low investment and business activity on account of slowdown in 2012-13, with economic growth slipping to the decade’s low of sub-5% levels, could also be a reason. Pronab Sen, chairman at the National Statistical Commission, said that there is a great human capital story emerging from the survey findings. He further adds that people in rural areas may be putting money in human capital, which happens when there is expectation of returns.

Madan Sabnavis, chief economist at CARE Ratings, said that trend reflects rising consumerism in both rural and urban areas. He adds further that the borrowing profile of banks show retail loans going up. It is both a push and pull factor as people are also able to borrow more with banks focusing on retail side to avoid NPAs.

As per the NSSO report, non-business activities, which accounted for less than half the debt incurred by rural areas in 2003, rose to 60% last year.Non-business expenditure includes financial investment expenditure, expenditure on education, medical treatment, housing, litigation and repayment of debt, among others.

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