(B) "Cheap and affordable credit is crucial for the country's development." Justify the statement.
Generated by claude-sonnet-4-6 · 2026-06-15 06:54 · grounding rag
Model Answer
"Cheap and affordable credit is crucial for the country's development" — this statement can be justified with the following points:
- Supports agriculture: Small farmers need credit to buy seeds, fertilisers and equipment. Cheap credit allows them to invest in cultivation and increase their income.
- Promotes business and industry: People can borrow to set up small-scale industries, trade in goods, or expand existing businesses, contributing to economic growth.
- Reduces debt burden: Informal lenders charge very high interest rates (e.g., 60% per annum), pushing borrowers into debt traps. Cheap formal credit frees up income for productive use.
- Equal opportunity: When formal credit reaches the poor, it reduces their dependence on exploitative moneylenders and enables them to improve their living standards.
- Overall development: Higher incomes generated through affordable credit increase demand, production, and employment — all essential for national development.
Source: Chapter 3 — Money and Credit, Formal Sector Credit in India
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Explanation
Examiners expect 4–5 distinct, well-labelled points covering: agriculture, business/industry, debt trap avoidance, equity (poor vs. rich access), and overall development. The key textbook line — "cheap and affordable credit is crucial for the country's development" — should be supported using examples from the chapter (Shyamal, Rama, cooperatives). Avoid vague statements; each point must show a clear link between cheap credit and development outcomes.