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INCOME , SAVING AND DEBT

1. Introduction

2. Components of Income

3. Income of Agricultural Labourer in sample villages

4. Saving in Agricultural Household

5. Investment in Assets

6. Debt of Agricultural Labour Household

***
 CHAPTER - 7

Income, Saving & Debt.

The socio-economic condition of Agricultural labour is well judged

by the level of income of agricultural household. Household income

constitutes the earning of all the earners in addition to the income

of the family accruing from the property, cultivation of land, live

stock and home grown product.

Income is deemed to comprise all the earnings and receipts

from any work, service, landed property, interest etc. It however

does not include capital receipts or gains.

Income of agricultural labour household sharply influences

the socio-economic condition of agricultural labour family. Income

affects the living condition of agricultural labour family in a number

of ways. Income determines the standard of living, it influences
the expenditure pattern, determines the rate of saving and capital
formation. In view of this, in this chapter attempt has been made to

study the level of income of agricultural labour household and the

extent to which it affects the socio-economic condition of agricultural

labour in sample villages.

Income influences Expenditure - Income directly influences

the expenditure. It is income which determines the purchasing

capacity. If the level of income is high, the purchasing capacity of

the income holder is more and he will be able to buy more goods
and commodities for satisfaction of his wants. Similarly if the income
level is low, the purchasing capacity is low and the ability is less to
purchase goods and commodities for satisfaction of wants. So
income not only affects expenditure, it also influences the demand
condition in the market. More is the expenditure more will be
demand in the market creating optimistic atmosphere in the market.

As a result of which production will increase leading to more

employment in the economy.

The low level of income of agricultural labour is mainly due

to two reasons. One is the low level of wage in agricultural operation

and the other is less number of days the agricultural labourers are

engaged in work. The low level of income of agricultural labour

accounts for the low purchasing capacity.

Income determines the standard of living -

Income determines the standard of living of a man. The standard

of living depends on how much of necessaries, comfort and luxuries a

man can purchase and use for consumption. There is direct co-rrelation
between income and standard of living.

It is a common knowledge that the level of income of an

agricultural labour household is insufficient to provide the family a better

standard of living. Due to shortage of money the agricultural labour
family can not afford for a better living. The agricultural labourers live
in a very unhealthy atmosphere using few goods leaving a number of
wants unfulfilled.

The standard of living of agricultural labourer directly

influences their skill and efficiency. If the standard of living is better
the labourer will have more skill and efficiency to work.

Income, Saving & Capital Formation -

Income is the major and important determinant of saving,

though there are other minor determinants like desire to save,
opportunities to save. Assuming all other factors remaining constant
higher income enables a man to save more. Saving is a differential

surplus between income and expenditure. Assuming that

expenditure remains constant in the short run it is income which

creates'the surplus. If income is more the surplus will be more, if

income is less the surplus will be less.

In case of the sample agricultural labour family the income

is low which causes low surplus after consumption. Saving is also

a habit and is a result of one’s attitude. Even a meagre saving of

individual may make the collective saving huge and the amount of

saving will be helpful to the nation. During the time of enquiry

majority of agricultural labourers were found to have negative
saving.

Components of income - There are various components of

income and the wage rate is only one of the determinants of income
and level of living. The other crucial factor is the level of
employment. True the requisite data on employment and earnings
for this group are scanty.

It is to be noted that the total income of the household is composed

of (a) net income from the cultivation of land (b) wage from agricultural
work (c) wage from non-agricultural work and (d) other sources.
 <142)

There is a significant fall in the income accruing from the

cultivation of land or from crop sharing. The income from non-

agriculturai work is very insignificant because most of the time the

agricultural labourers are in agricultural operation. Similarly income

from other sources include that from live stock like cow, goats, hens
etc. Though income from other sources are negligible still it adds
to the total income and affects the economic condition of agricultural

labourer. In order to assess the total income and income per capita

in sample agricultural labour family an attempt has been made to

collect the information directly from the head of the sample
household family about the income from different sources. In some

cases the family head is reluctant to give the information about

their income and if he gives at all it appears false. So the researcher

has been very careful about it and has cross examined to procure
the reliable data as far as practicable.

Economic condition of Agricultural labourers -

The earner population ratios and days of employment per

agricultural labourer give a fairly complete picture of the changing

employment situation of the agricultural labourers. However this

alone does not indicate the total welfare of this section of the
population. The daily wage earnings accruing to agricultural

labourers and change in them over time determine the total incomes
available to agricultural labourers. Increase in money wage earnings
is considerably eroded by inflation. In order to understand the real
economic condition of labour household three variables need to

be considered : (1) daily money wage earnings (2) the quantum of

employment available per worker in an agricultural year (3) the

consumer price index of agricultural labourer in the concerned

period.

Obviously to get a more realistic picture about condition of

agricultural labourers it is essential to take into account their

earnings from all sources instead of confining to income from

agricultural labour alone. Income from cultivation of land and crop

sharing, milk production, income from livestock, wage from

agricultural labour and non agricultural labour happen to be the
main sources of income for agricultural households. It is significant
that share of milk production in household income has increased

in sample villages while cultivation of land continues to be an

important source of income, its importance has relatively declined.
Inspite of the decline in its importance income from cultivation is

quite considerable for agricultural labour households.

Income of Agricultural labourer in sample villages -

In the sample villages though income derieved from wage is

a major source of income of agricultural labour household, the

income derieved from other sources is quite important for

determining the socio-economic condition of agricultural labourer.

The agricultural labour household derieves income from the

following sources, (a) income from wage (b) income from cultivation
of land (c) income from crop sharing (d) income from milk production
(e) income from livestock and (f) income from other sources.
(a) Income from wage -

Income of agricultural labour household has been computed

taking into account the number of days an agricultural labourer

works during a year and the average wage rate prevailing. During

enquiry it was found that the number of days an agricultural labourer

works comes to 316 and the average wage rate prevailing is

Rs.45.57. So the income from wage comes to Rs.14,401/- per

worker and the income of the entire sample households is

Rs. 48,38,441/-.

(b) Income from cultivation -

Income from cultivation is another important source of income

of agricultural labourer. Though the percentage of income from

cultivation is considerably low, it is important and very much helpful.

The income from cultivation has been computed on the basis of

the volume of product raised, multiplied by the current market price

of the product. During enquiry it was found that income from

cultivation comes to Rs. 36,460/- and the average income from

cultivation per household comes to Rs. 122/- per annum.

(c) Income from crop sharing -

Income from crop sharing is another source of income. The

percentage of income from crop sharing is negligible but it helps the

family to improve its condition. The income from crop sharing has been

computed on the basis of the crop shared multiplied by the current

market price of the product. From the survey it was found that the

income from crop sharing comes to Rs. 17,324/- and the average income
from crop sharing per household comes to Rs. 58/- per annum.

(d) Income from Milk Production -

Income from milk production is an important source of income

for agricultural labour household in the sample villages. Income

from this source increases the aggregate income and helps the

family to improve their economic condition. The income from milk

production has been computed taking into account the amount of

milk produced and the current market price of milk. The income

from milk production comes to Rs. 43,520/- and the average income

from milk production per family comes to Rs. 145/- per annum.

(e) Income from livestock -

Income from livestock is also an important source of income

for the agricultural workers in sample villages. This includes sale

of goats, sheep, pigs and hens. As per the information collected

from the agricultural labourer during investigation the amount of
income from livestock comes to Rs. 27,580/- per annum and the
average income from livestock per family comes to Rs. 92/-.

(f) Other sources -

The income of agricultural labour family from other sources

have been computed at Rs. 7,432/- in total, making the average
income per family comes to Rs. 25/-.

Aggregate Income -The aggregate income of agricultural labour

household has been calculated by adding the income from all

sources ( Y = a+b+c+d+e+f). The aggregate income comes to

Rs.49,70,757/- out of which wage income is Rs. 48,38,441/- and
non wage income is Rs.1,32,316/-. The percapita household income
comes to Rs. 16,569/- and the percapita income is Rs. 3,375/-.

A detailed description of proportion of income from different

sources is given below in Table No. - 7.1

Table No. 7.1

Proportion of income from different sources.

Classification Percentage of the Total

Non-wage Income

(a) Cultivation of land Rs. 36,460.00 (0.74)

(b) Crop sharing Rs. 17,324.00 (0.35)

(c) Milk production Rs. 43,520.00 (0.88)

(d) Livestock Rs. 27,580.00 (0.56)

(e) Others Rs. 7,432.00 (0.15)

Wage Income

(f) Income from wage Rs.48,38,441.00 (97.34)

Total income Rs.49,70,757.00

Note Figures in bracket indicate percentage to total

 Table No. - 7.1 reveals that income from cultivation of land
constitutes 0.74 percent of the aggregate income of agricultural

labour in sample villages. The income from crop sharing constitutes

0.35 percent and milk production constitute 0.88 percent, income

from livestock 0.56 percent and income from other sources

constitute only 0.15 percent of the aggregate income. Income from
wage constitute the major portion 97.34 percent of the total income

of agricultural labour in sample villages. The total non wage income

constitutes only 2.67 percent of the total income.

Household Income - The income of agricultural labour sample

households is given in the following table-

Table- 7.2
Classification of families by the amount of household
income per annum.

Income (in Rs.) No. of Households Percentage to total

10,000-11,000 Nil
11,000-12,000 Nil
12,000-13,000 8 2.67
13,000-14,000 17 5.67
14,000-15,000 24 8.00
15,000-16,000 36 12.00
16,000-17,000 62 20.67
17,000-18,000 88 29.34
18,000-19,000 48 16.00
19,000-20,000 17 5.67

Total 300 100.00

The above table reveals that the lowest income class is Rs. 10,000/-
to Rs. 11,000/- where the number of sample household nil. The
highest income class is Rs. 19,000/- to Rs. 20,000/-. Where the
number of sample household 17.The class having the highest number

of household is Rs. 17,000/- to Rs. 18,000/- and 88 households

come under this class of income.

Saving in agricultural Household -

Saving is the amount which is left after deduction of expenses

relating to consumption from income. Thus saving is the difference

between income(Y) and consumption(C) Expenditure. So S= Y-C.

On a given level of consumption, if income is more saving is more

and on a given level of income if consumption is less saving is
more and vice versa. Saving is low in the agricultural labour

household, as income is at a low level and quite insufficient to

cover necessary expenditure. The marginal propensity to consume

is at a high level leading to more consumption expenses. The

other factors which influence saving is awareness among the

people and this is found absent in agricultural labour household

due to backwardness and illiteracy of the people at large.

In order to know the extent of saving habit, attitude towards

saving, motives behind saving of agricultural labour household in
sample villages have been enquired into and the head of the labour
households were asked to supply the related informations.
Of course the house-wife of agricultural labourer has a role to play
in saving. In some of sample agricultural labour household it was
found during enquiry that the housewives keep a handful of rice

every day at the time of cooking, which accounts minimum two k.g

or Rs. 16/- at the end of the month. She can purchase a chicken in
exchange of it and within three months the chicken gives egg and
this is considered as a source of income.

Capital formation or accumulation undergoes three main

steps, (a) creation of saving (b) mobilisation of saving (c) investment

of saving.

The sample agricultural households who save also invest it,

in purchasing hen, goats, sheep and cow, few people comes to

the bank to keep this surplus in the form of deposit.

Saving in Agricultural labour Households -

The picture about saving of agricultural labour households

in sample villages is presented in Table No.- 7.3

Table No. - 7.3

Saving in Agricultural labour Household

Classification No. of Household

Saving 53 (17.67)
Not saving 247 (82.34)

Total 300

Note Figures in bracket indicate percentage of agricultural

labour household to total household.
 It is revealed that only 17.67 percent of households are able
to save out of their incomes after their expenditure. 82.34 percent

of households do not save as they are unable to save because

their income is insufficient to cover up the consumption expenditure.

During survey attempt has also been made to find out how
many households are regularly saving and how many are

occasionally saving. The finding are given below in Table No-7.4 .

Table - 7.4
Nature of saving

Classification No. of agricultural

household

Regular Saving 11
(20.75)*
(3.67)**
Occasionally saving 42
(79.25)*
(14.00)**

Total Household saving 53

(17.67)**

Total Sample Agricultural Household 300

Note Figures in the bracket indicate percentages of total

agricultural labour household who save/total sample household.
* percentage to those who save
** to total household
 Table No. - 7.4 reveals that out of the total households who
save 20.75 percent have regular saving and 79.25 percent of
households occasionally save. The households who save regularly
constitute only 3.67 percent of the total sample household where
as the households who occasionally save only 14.00 percent of
the total sample households.

Reasons for not saving -

There are a number of reasons why the agricultural labour

household in sample villages do not save. The reasons collected
during the time of enquiry has been presented in Table No. - 7.5

Table - 7.5

Reasons for not saving

Classification No. of Household

More Expenditure 128 (51.83)

Expenditure is.equal to Income 103 (41.71)

Unforeseen expenditure 37 (14.98)

No will to save 14 (5.67)

Total Household 247

Note - Figures in bracket indicate percentage to

(a) Total household who saves

(b) Some household respond more than one reason for not saving
82.34 percent of agricultural labour sample households do not save.
There are various reasons for not saving. The survey shows that
51.83 percent of sample households can not save due to their
relatively more expenditure than their income. 41.71 percent of
sample households can not save because their income are just
sufficient to meet their expenditure. 14.98 percent of household
are unable to save because of unforeseen expenditure e.g. on
births, deaths, serious illness etc. 5,67 percent of households do
not save simply because they have no will to save. There are some
households who mentioned more than one reasons for not saving.

Savings - The gross saving of sample households along with the

number of households doing saving during the year 2000-2001 with
the total income of all the sample households are presented in
Table No. - 7.6

Table - 7.6
Yearly saving in Agricultural labour sample Households.

Classification Amount of Income/Saving

Year-2000-2001

Annual income (in Rs.) 4970757.00

Saving (in Rs.) 48672.00 (53)

(0.98)*
(162.25)**

(918.34)***

Total Sample household - 300

Total household who saved- 53

Note Figures in bracket indicate

Number of households who saved

* Percentage of saving to total income of all households

** Average amount saved per household

*** Average amount saved per household which saved

Table No.- 7.6 shows that only 53 sample households saved

during the year 2000-2001 and their total savings amounted to

Rs. 48,672/- The average amount saved comes to Rs. 918.34 per
saving household. The average amount of saving comes to

Rs.162.25 per household taking all sample households into

account.

Saying Income Ratio -

The saving income ratio for sample households is obtained in the

above table. The saving-income ratio is obtained by dividing the

total savings in all households by the total income of all households.

The saving income ratio comes to 0.98 percent which is very

negligible.

Motives for saving -

During the time of enquiry the respondents were asked to reveal

the motives behind saving and as per their report the saving is

made due to different motives.

The motives due to which the sample households save are

old age (12.34), children (16.34), emergency (9.67), liquidating old
debts (41.00 percent), house repairs (35.00 percent), business 8.67
percent), social ceremonies (14.67), religious functions etc.(6.0Q

percent). Some respondents express more than one motive for

saving.

The motives expressed by the respondents reveal that the

sample households do saving mostly inorder to liquidate the

old debt. Next came house repair, children, social ceremonies and

old age.

Deposits out of Savings -

The extent of deposits made out of savings by the sample

households has been worked out. Though it was very difficult to

collect information from rural people regarding their personal

deposit, the matter was dealt with caution and care.

As observed earlier 60.00 percent of sample villages have

post office facilities. There are certain facilities provided by the post

office for keeping deposits. Only three household deposited their

savings in the saving account in the post office. The amount
deposited being Rs. 3,200/-. 15 percent of the sample villages have
rural banks like Baitarani Gramya Bank. Now a days the rural banks

are playing important role in mobilisation of surplus funds and

advancing loan to the rural people at the time of need. Only seven
households deposited their savings in rural banks. The amount
deposited being Rs. 4,700/-. Only 5 percent of the sample villages

have commercial bank ( Bank of India). Only two households

deposited their savings in commercial bank and the amount
deposited being Rs. 1,400/-. The total amount of deposit comes to
Rs. 9,300/- in different financial institutions. The average saving
per household is Rs. 175.48 on the basis of those who save and

taking all households into account average is Rs. 31/-. No sample

household invested any amount in any other form of deposits and
also did not take any Life Insurance Policy. The labourers were
found to have no idea about Life Insurance Policy nor they do not

have knowledge about Kisan Bikas Patra or National Saving

Certificate.

Investment in Assets - The sample agricultural labour

households invest their saving in tangible wealth and other assets

which are considered as property by them for their domestic uses.

The tangible wealth are plough, spade, sickle and other instruments

necessary in agricultural work, oxen, cow, goats, sheep, pigs and

hens. This wealth helps the family to earn some income and so

they are considered as income yielding assets. There are other

types of wealth on which the sample agricultural family invest their

saving. They are cycle, silver and steel utensils, bell metal goblet
and iron box, silver ornaments and gold ornaments. Very few sample
agricultural labour family have gold ornaments. These materials

are considered as assets for the agricultural labour family but they

are not income yielding. But these properties are very much useful

for the family in rainy season as they can get loan from the village
money lender by keeping them as mortgage.
 <3§)

An estimate of tangible reproducible and other assets of

sample households has also been made. The current value of the
assets has been obtained from the respondent on the basis of a

physical description of the items and their value. The average value
per unit of medium quality of material collected has been marked

out with the assistance of Agricultural Officers, Word Members and

Cultivators.

The total amount of investment on assets comes to

Rs. 37,860/- for aU household who save and the average investment

per household on asset is Rs. 714.34. Taking the total sample

household the average investment per household is Rs. 126.20.

Debt - Generally debts incurred by an individual refers to loans

raised by him. Each individual has to borrow when it’s expenditure

exceeds it’s income. In the ancient age, there was a strong

sentiment against usury. But now a days, that situation has changed

and attitudes of people towards borrowing has been changing.

People at the time of need are comming forward to borrow.

Borrowing is not always a blessing. Excessive use of it

creates a lot of problem and inconvenience to the borrower. In some

cases borrowing leads to extravagance and misuse of funds

creating hazardous situation and burden for the borrower for
repayment of interest with principal amount. Debt is considered as
a liability if it is used in unproductive manner. So it is no longer a

cake eating feast but rather efficient and careful brain is required

for its management. However if the funds borrowed are utilised

properly, cautiously in productive use it will help the borrower to
yield income and to uplift the standard of living.

During enquiry attempt has been made to study the debt

position, the desire of the worker to incur debt, extent and volume
of borrowing in sample agricultural labour families. The respondents
were asked to supply facts based on truth. However during the
time of interview some peculiar features have been marked in

regards to their borrowing. These points need analysis.

It has been'marked during the time of interview that there is

a general hesitation towards debt in rural area in general and among
agricultural labour household in particular. The feeling of hesitation

towards debt is due to the fact that they can not use it productively,

so ultimately it will cause burden of repayment. Secondly hesitation

is due to high rate of interest and difficult official procedure for

debt contract.

Thirdly even if there is general hesitation towards debt,

the agricultural labour families are forced to incur debt during

emergency like marriage of any family member or due to severe

illness and chronic disease of any member of the family. They can
not meet these extra expenses out of their current income, nor

they can reduce the current consumption. Hence they are forced
to incur debt.

The agricultural labour households incur two types of debt,

one is institutional and the other is non-institutional. Borrowing
from financial institutions like rural banks, co-operative credit
societies, commercial bank and other government sources are

known as institutional debt. Borrowing from money lenders, big

cultivators, friends and relatives are known as non-institutional debt.

In case of institutional debt the rate of interest is low but it

requires complex official procedure to obtain loan but in case of
non-institutional debt the rate of interest is high but it requires some
asset for mortgage. The sample agricultural labour families do not

have sufficient amount of asset for mortgage nor they do have the

knowledge and time to afford for institutional debt.

Another important feature of rural debt is that its repayment

causes severe problem and burden for the agricultural labourer.

In some cases the worker fails to repay the loan in time. The

compound rate of interest causes heavy burden for which the

agricultural iabourer has to sell his property like land or house to

repay the loan.

But after 1990 there is a change in the attitudes of rural

people especially among the agricultural labourers in regards to

debt. The then Chief Minister Biju Pattnaik took a memorable step

of waiving out all old loans, principal as well as interest. The rural
people now are very much hopeful and think that the government
may take similar steps when demanded.

Debt in Agricultural Labour Household -

It is observed that 86.34 percent of the sample households

desire to incur debt, and 13.67 percent of the sample households

do not desire to incur debt.The workers desire to take loan think of

investing the funds productively to increase income and to uplift
the standard of living. But they fail to procure loan due to one or
other reason. The workers not interested to incur debt are afraid of
the burden of repayment. Table No. 7.7 depicts the loan position.

Table No. - 7.7

Debt of Agricultural labour Household

Description No. of Households

Having loan 104 (34.67)

Having no loan 196 (65.34)

Total 300

Note - Figures in bracket indicate percentage to total household

Table No-7.7 indicates that only 34.67 percent of households

have taken loan and the rest 65.34 percent of households have no
loans. Of the total loan, 44.24 percent are institutional loan and
55.76 percent are non institutional loans. So the non-institutional
loan dominates the debt structure of rural area.

The workers were asked about the obstacles they face while
incurring debt. The agricultural labourers complained that they are
unable to procure loan easily. They assigned various reasons for
their inability to have loan. The details are given in Table. No. - 7.8
 <160)

Table - 7.8

Reasons of failure to procure loan

Description No. of Household

Membership Fee 36
(13.64)*
(1,2.00)**
Inability to present 113
any security (42.81)*
(37.67)**
Complicated Procedure 67
(25.38)*
(22.34)**
Party Politics 48
(18.18)*
(16.00)**

Total 264

Note - Figures in bracket indicate percentage to

* total no of household fail to incur debt.
** to total agricultural household.
Some workers give more than one reason as obstacle.

It is observed 13.64 percent express they can not afford for

membership fees in co-operative banks and for that reason they
are not able to procure loan. 42.81 percent express their inability
to present any security for a loan. To 25.38 percent of the
households complicated official procedure is the main obstacle on
the path of a loan, and 18.18 percent are of the opinion that party
politics in rural area create problem for them to have loan.

Debt position in Sample Households -

The debt structure of sample agricultural household indicate

that only 34.67 percent of Households have debt. Of the total loan
44,24 percent are institutional loan and 55.76 percent are non-
institutional loan. Table No- 7.9 presents the volume of loan taken
by different households.

Table - 7.9
Volume of debt in Sample Agricultural Households

Volume of debt. (in Rs.) No. of Household.

upto 1000 8
(13.80)'
(2.67)**
1000-2000 25

(43.11)*

(6.34)**

2000-3000 13

(22.42)*

(4.34)**
3000-4000 6

(10.35)*

(2.00)'*

4000-5000 6

(10.35)*

(2.00)**

5000 above Nil

Total 58

Note - Figures in bracket indicate percentage to

* total number of household those incur debt.
** total agricultural household

The average amount of loan per household is Rs. 1767.65

when this total loan is divided by number of loanee households.
The averageamount of loan per household is Rs. 341.67 when the
total loan is divided by all the sample agricuitural households.

***