Why are Farmers in Punjab Getting Trapped in a Vicious Cycle of Debt?

AbstractThe present study was conducted to identify the reasons why farmers are getting trapped in vicious cycle debt in Punjab State (India). The results are based on the data collected from 200 farm families representing five agro climatic zones of Punjab namely zone I (sub - mountain undulating zone), zone II (undulating plain zone), Zone III (central plain zone), Zone IV (western plain zone) and zone V (western zone) through structured interview schedule. The study revealed that majority (67.0%) of farm families had annual income less than four lakhs. Majority of farm families had availed loan from different sources. Institutional sources primarily through commercial banks became the major source (99.9%) for rural credit in Punjab. Large majority (81.6%) of families were in debt of less than 5 lakhs. It was found that the highest percentage (40.8%) of families used agricultural loan for construction of house followed by 15.2 per cent using it for marriage of a family member. Very low percentage (5.6%) used it to purchase farm input and machinery and to pay for lease to the landlord (8.8%), whereas a negligible percentage (1.6%) used it to purchase land. Its use for purchase of livestock was made by few families (2.4%) or to start some enterprise. There is a need to create a positive financial environment with ease to borrow from the institutional sources.