Today is our topic of discussion Introduction Of Rural Indebtedness In Bengal .
Introduction Of Rural Indebtedness In Bengal
Serious investigation into agricultural finance and rural credit of Bengal practically begins from J.C. Jack’s Economic Life of a Bengal District (1916). He undertook the arduous task of inquiring into house- hold finance in the district of Faridpur along with his survey and settle- ment operations during the years 1906-1910.
Jack hurriedly compiled his statistical data as he was “about to go to the (war) front”.2 S.C. Ray compiled Agricultural Indebtedness in India and Its Remedies in 1915 which dealt largely with official records on the problem and solution of agricultural indebtedness.
This book is mainly a collection of legis- lative measures undertaken by successive Governments to face the problem of agricultural finance. Moreover, it has dealt with the forces that led the peasantry to get involved in debt and with the possible solution of the problem in the co-operative system.
L. Burrows had made household survey into the economic condition of the Talma village (Faridpur) when he was a collector of Faridpur in 1926. Of 170 families surveyed, he found 107 families to be in debt amounting Rs. 21,780. Of this, Rs. 8,270 was borrowed from the co-operative Bank at Talma. The total debt represents an average of Rs. 214 per family.”
The Survey and Settlement Reports of the Bengal Districts from 1910 to 1930 throw great deal of light on rural indebtedness. Among these reports F.D. Ascoli’s Dacca, 1910-17; F.0. Bell’s Dinajpur, 1934-40; S.N. Ray’s Hooghly, 1930-37; F.W. Robertson’s Bankura, 1917-24; M.A. Mosen’s Jessore, 1920-24; F.A. Sachase’s Mymensingh, 1908-19 are of special importance.
However, from 1925 onward, a number of economic inquiries were undertaken by the Central and Provincial Governments. The Royal Commission on Agriculture in 1928 largely dealt with the finance of agriculture. It had collected oral and written statements from educationists, officials, economists and concerned people about rural finance.
The Royal Commission on Agriculture in India investiga- ted the problem of rural Finance in relation to the whole fabric of agriculture and dealt at some length with Taccavi system in retrospect and tried to find out causes of indebtedness. Finally the Commission maggots: “It is not borrowing, however, that leads to debt but failure to repay and for this there may be reasons quite distinct from those which led to the borrowing”.
The Economic Enquiry in the Bangpur District was made by the Settlement Department. It looked at the economic condition in 11 villages of 508 families and found then in “a noce serious condition of indebted- ness than that found in Faridpur by Mr. Jack”. The Bengal Provincial Banking Enquiry Committee was set up in 1929 with a view to investigat ing the condition of banking and to make recommendations for their Improvement and expansion. The Committee conducted a comprehensive enquiry into rural finance with the following objectives:
(1) to recomend ways and means for enabling the rural population to secure credit for improvement of land;
(2) to suggest ways and means to “stimulate the habit of investment and attract banking deposits”.
The next most important and comprehensive enquiry on all- Bengal plane was conducted by the Bengal Board of Economic Enquiry In 1934. Consequent upon depression the economic condition of the agriculturists became precarious. It was then felt that “local enquiries 8 must be made as to the extent of indebtedness”. The Board of Economic inquiry collected data on a number of Socio-economic aspects of credit e.g.,
the volume and distribution of debt in relation to the size of family, umber of earning members and dependants, size of balding, in- come and expenditure of family classifying it in three categories. The Bengal Agricultural Debtors Act was enacted on the basis of the result of some randon enquiries conducted by the Board of Economic Enquiry.
The findings of the Board suffered from one weakness. It was conducted by local officers having little or no special knowledge about agricultural statistics. The statistics and information gathered in respect of 6359 families in 16 districts showed deficit of income over expenditure of Rs.
which had indicated that the agriculturists were either incurring more debts or spending their previous savings and were thus unable to make any savings for repayment of their debta.
In 7 districts out of 15 subsequent enquiries showed some surplus. From these facts the Board case to the conclusion that much importance could not be placed on figures of income and expenditure, but there was one important fact revealed by the enquiries that in all cases the figures of debt were found to be considerably less than one year’s income in 1928.
From the average figures of debt as against income the Board answered the question raised by the Government about the repaying capacity of the cultivators that “all the families whose capital debt does not exceed twice the in- cone of 1933 can repay their debt after the conciliation or adjustment by equated payments spread over a period from 10 to 15 years”. The Board evidently lost sight of the fact that the “agriculturist with un- economic holdings could not repay their debts at all.
An agricultural Family of 5 members with 2 acres of land having an average incone of Rs. 80 ce so gely, could not possibly repay a debt of Rs. 100 as it could not possibly spare a pice for repayment of debt, its income not being sufficient even for bare living”, 10
The investigations of the Board of Economic Inquiry primarily dealt with the ralyat clase and with special reference to their debts.
The enquiry has been criticized by the Commerce Department in the follow- ing manner: It is true that these enquiries were not planned on any modern scientific basis and were conducted by officers who had neither the time nor the training for such economic investigation. In several matters, the enquiries allowed to be influenced by conscious or uncon- scious bias.
The selection of villages and families which are considered by the local officers as ‘typical’ minimised the statistical value of the enquiry”, Besides, in selecting the ralypt class families, the distressed section of cultivators were practically excluded from the scope of enquiry. It is well known that during the years of economic depression, the ralysts, who had just enough to carry on, had been gradually selling out their lands.
Consequently during investigation of the Board of Economic Enquiry, many of these raiyats had become primarily under-ralyats or agricultural labourers with perhaps a small area of land still held as raiyats. These familien were therefore ex- cluded in selecting raiyat class of agriculturists. In the second enquiry, which were conducted more carefully, disclosed some surplus in several cases. The data cannot, therefore, form the basis of any conclusion regarding the economic condition of the cultivators as such.”
But the Bengal Relief of Indebtedness Bill was based on this enquiry. Another important work on rural finance has been done by K.G. Sivaswamy. His study entitled Legislative Protection and Relief of Agricultural Debtors in India was extended to the whole of India and a considerable portion was devoted to the legislative measures undertaken by the Government of Bengal.
He discussed the tenancy legislations res tricting transfer of land in repayment of loan, and restricting the period of mortgages; the Bengal Money-lenders Act controlling the usu rious system of money-lending and finally the Bengal Agricultural Debtors Act providing exclusive provision for scaling down of debts. X.G.Sivasamy went into the details of the procedure of setting up of Debt Settlement Boards, its rules of conduct, their working and their drawbacks.
He concluded with some suggestions to improve upon them. In regard to the legislative protection of agriculturist debtors, K.G. Sivanummy commented: “Piece-meal legislation had not had sufficient effect either in protect- ing the agriculturist from his growing indebtedness, or relieving him from past-debts.
Legislation, by itself, cannot solve the problem of organising agriculture so as to improve its productive side, minimise its risks, mapply its equipment, and conserve the land-income for the benefit of the primary producer. Reform in these directions should come by the building up of a proper organisation with necessary state aid and control”.
The Land Revenue Commission, otherwise known as Floud Commission, started its investigation at a time when the Bengal Agricultural Debtors Act was in operation. It kept a few questions open to the public for their opinion about the working of the Debt Settlement Boards and also about the policies of the co-operative movement.
The Land Revenue Commission examined the operation of the Bengal Agricultural Debtors Act and the introduction of the Money-lenders Bill and its impact on rural economy of Bengal.
It is found by the Commission that “one con- sequence has been marked increase in the number of sales, and a corres- ponding decrease in the mumber of mortgages, indicating that the culti- vators are being forced to part permanently with land in order to raise the amounts they require”. In 1944-45, the Government of Bengal spon- sored a plot to plot survey of the entire land of Bengal under the direction of H.S.M. Ishaque. Along with this agricultural census H.5.M. Inhaque performed an economic survey of 77 randomly selected villages of Bengal.
This included question on the indebtedness of the rural familien. Besides the above surveys and writings, there are a few research works that deserve our attention. Sirajul Islam’s article on “The Bengal Peasantry in Debt, 1904-1945”, though a sketchy one, covers nearly the entire period of the present study.
It began with the Co-operative Societies Act of 1904 and concluded in 1945 when the Debt Settlement Boards were officially wound up. After examining briefly the several aspects of the debt legislation, Islan concluded that: “Thus we find in spite of the operation of the Debt Settlement Boards and consequent contraction of credit the total indebtedness rose to Rs. 150 crores in 1945.
It Indicates that although the protective legislation like Money- lenders’ Act and Debt Settlement Boards brought political popularity to their authors, these measures miserably failed to resture buoyancy to the peasants’ economy and to reduce their dependence on the Honey- Lenders”, Binay Bhushan Quudhuri’s article on “the Precess of De- peasantization in Bengal and Bihar, 1885-1947”, dealt with debt question quite in details.
He emphasised land transfers, price movements and large-scale emergence of bargadari systen.16 Similarly, Binay Bushan Chaudhuri’s article on “The Land Market in Eastern India, 1793-1940, part-1 has dealt to some extent with the debt settlement operation and held it responsible for large scale land sale in Bengal.17 Sugata Bose In his Ph.D.
thesis on “Agrarian Bengal” has devoted one chapter to the discussion of rural credit. He has also examined the impact of the credit crisis on the highly monetised economy of Bengal. Sugata Bose has tried to show the operation of the 1.5. Boards in Bengal with some statistical data.
According to him: “The rupture in the flow of auxey credit in the rural areas had very different implications for the history of agrarian relations and peasant politics in the different parts of Bengal”, 18 He discussed the problem in course of dealing with a large perspective of agrarian problems. But none of these research works have exclusively dealt with the operation of the Debt Settlement Boards.
The present work for the first time makes an attempt to study the problem of debt exclu- sively.
In this study the causes of rural indebtedness have been examined from several angles. The official attitude to debt was that the peasants were involved in debt because they were improvident in their spending. They spent, according to the official world, too much on religious and social ceremonies.
Though official view is always articulate about peasant spending, it remained silent about peasant earning. We find that the peasant economic structure, being conditioned by local topography, cli- mate, and local and world market, is such that the income of the agricul turists does not balance their liabilities : either their liabilities are too high or the income is too low. Often both conditions operate simultenously.
The economy of Bengal had a tumultous jolt due to collapse of the jute market during depression. The depression had also affected the political situation to a large extent. It led to a new dimension to pensant politics which was crystalined into an anti-landlord and anti- moneylender movement. In the face of mounting demands for restoration of peasant rights, the Bengal Tenancy Act, 1885 was amended giving peasants the right to transfer their holdings.
The right to transfer peasant holdings created a new problem. The land of the cultivators began to be sold away to non-agricultural interests for liquidation of their debts. In order to arrest large scale debt, land alienation, agrarian discontent and the ultimate political crisis, the Central Bank- ing Enquiry Committee made sono remedial recommendations to the Provincial Government, the most important of which was the establishment of debt conciliation Boards.
With the recommendation of the Board of Economic Enquiry, the Goverment of Bengal thus took measures for temporary relief by enacting the Bengal Agricultural Debtors Act in 1935. In addition, a series of legislative measures were undertaken by the Government of Bengal to face the probles of rural indebtedness. It is well known that most of the debts of the Bengal agriculturists were covered by the usu- fructuary mortgages.
So it was felt necessary to amend the Bengal Tenancy Act with a view to giving effective relief to the agriculturists. Accord- ingly the Bengal Tenancy Act was amended with the provision that mortgage done before or after 1928 should lapse after 15 years. Moreover, to develop future credit policy the Money-lenders Act and the Co-operative Societies Act were also amended in 1940.
The object of the Bengal Agricultural Debtors Act was to provide provisions for scaling down debts of the agriculturists and defering pay- ment of the dues so scaled down to the extent demanded by the inability of the debtors. In India two different methods have been tried for scal- ing down of debts, e.g., voluntary and compulsory. In some of the pro- vinces where the congress Government were in power, compulsory method had lately been undertaken. The voluntary method existed in Bengal, Assam, the Punjab, Central Provinces and Madras.
Earlier the system of amicable settlement had been tried at Chandpur she voluntary Debt Conciliation Boards were set up before the Bengal Agricultural Debtors Act was enacted and settled within one and half years time the claims amounting to over 11 lakhs of which the creditors received on settlement about 3 lakhs In cash or kind.
later in Madras and in the Central Provinces compulsory method had been accepted. But compulsory method is not acceptable every- where, especially in “provinces where the principal source of credit is the agriculturist himself”, 19 However, in the Bengal Agricultural Debtors Act, there were provisions for compulsory settlements of debes in dis- guise.
If the Ordinary Debt Settlement Board fails to bring about an andcable settlement owing to the unreasonableness of the creditor, the case will be referred to the Special Debt Settlement Board for compulsory settlement. It was officially noted that “once it is clear that no mount of persuation by Ordinary Debt Settlement Board will avall, Goverment of Bengal will have no hesitation in sanctioning the use of much of the compulsory powers provided under the Act as may be necessary to bring about a settlement”
In the Bengal Agricultural Debtors Act, provisions have, there- fore, been made for netting up Debt Settlement Boards of different types as and when circumstances demanded. The first type resembles those which have shown promise in Chandpur sub-division and also known as Ordinary Debt Settlement Boards.
The second type which is known as Special Debt Settlement Board granted powers to exercise compulsion in settling debts of creditors who unreasonably refuse to settle debts amicably. As the aim of the Debt Settlement Board was to induce the creditors to reduce the total debt to an amount which the debtor can repay in 10 to 20 In- stalments, it was also necessary to ascertain the repaying capacity of an agriculturist.
However, the procedure to be followed in settling cases: filing of applications, summoning the parties, determining the surplus incone of the debtor after allowing for the landlord’s rent and maintenance of his family finally bringing about a settlement in terms of this surplus.
One of the important feature of the debt legislation was its Insolvency provision. In some areas creditors had been alarmed by the provisions of the Bengal Agricultural Debtors Act regarding insolvency.
Practically the Insolvency provisions were the last resort at the hands of the Debt Settlement Boards. According to these the Debt Settlement Boards so empowered eight reduce the debtor’s liabilities to an amount payable within 20 years or sell all his property, except his dwelling bouse and one third of his land (subject to minimum one acre of land), and to make over the proceeds to the creditors to the extent of their debts and release the debtor from all his debts thereafter.
The Govern- ment of Bengal did not intend to being insolvency provision into opera- tion excepting as a last resort, or until all other uns of bringing about settlements had been exhausted.
In short, the Government of Bengal tried to check the trend among the debtors to show themselves as insolvent in order to get rid of the burden of debt. To this it was declared: “The status of an insolvent will be virtually that of a begger. The debtor will not only lose his izzat but all his credit. In future, therefore, he will not be able to borrow any money that he might urgently require”.
It was also provided further that if within 5 years of his being declared insolvent the debtur acquired any fresh property, such property should be available for distribution amongst the creditors to the extent of their debts.
There is no doubt that there had been considerable contraction of rural credit during depression. It was just a coincidence that the Bengal Agricultural Debtors Act cate into operation when the capital was almost froten.
The depression resulted in contraction of credit and in consequence the agriculturists withheld the payments of all obligatory dues including even rents. Arrears of rent formed an important problen during the period uder review. The arrears of rent was again mingled with the no-rent movement which had close connection with the Civil Dis- obedience and Non-Co-operation movement.
The no-cent campaign was launched by the Krishal-Proja leaders. As rent is the first charge upon land, the Government of Bergal undertook special measure to mitigate the sufferings of the landlords. The Government officials and legislative members were wondering whether the Debt Settlement Boards had been responsible for the shrinkage of rural credit and arrears of rent. To deal with the problem of rural indebtedness, the Goverment of Bengal, however, created a special department.
The Credit Branch of the Co-operative Credit Department was originally the office of the 8.1.C. (Rural Development Commissioner) of Bengal that came into exis- tence in 1933. With the operation of the new constitution in 1937, the post of R.D.C. was abolished and his office was converted into the Rural Indebtedness Branch of the newly created Co-operative Credit and Rural Indebtedness Department of the Bengal Secretariat.
The Rural Indebted- ness Branch took over the administration of the Bengal Agricultural Debtors Act from the R.D.C.’s office and became a full fledged branch of Secretariat Department but without any Head of the Department sub- ordinate to it. There were four Deputy Directors under the Branch who were assisted by 177 Special Debt Conciliation Officers for inspecting Debt Settlement Boards of which maxima maber was about 5000 stationed all over the province. This Rural Indebtedness Branch would control its own budget, and run its administration.
However, with the reorgani- sation of the Secretariat Offices in 1945, as a result of the recommenda tion of the Hovland’s Committee, this Rural Indebtedness Branch was re- named as the Credit Branch of the new Departint of Co-operation, Credit and Relief. This Branch had given effect to the recommendation of the Rowland’s Committee by issuing orders for the dissolution of the Debt Settlement Boards .
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