Assertion : Credit would be useful or not depends on the risk involved in a situation.
Reason: The chance of benefitting from credit is highest in agriculture sector.Give an appropriate reason which for the assertion?(OTHER THAN THIS Assertion is correct but reason is wrong.
Credit would be useful or not depends on the risk involved in a situation and whether there is some support in case of loss.)
Dear Student,
Credit would be useful or not depends on the risk involved in a situation. Following are some examples to understand both the situations :
1. Ram is a pottery maker. As diwali approaches , he got a big order from an urban trader to make diyas in bulk amount.
However, for purchasing raw materials, the amount required is high. Further, he also plans to employ four to five people for completing the order on time. Ram, therefore, goes to a small cooperative society for getting loans to proceed with his work. The society after confirming that he has received an order from a trader for making diyas and keeping his pair of bullocks as collateral give the required loan to him. Ram with the help of the borrowed loan purchased raw materials and employed five people in diya making. In this way, he was able to complete the order on time. After receiving payments from the trader for his diyas, he repaid the bank and earned a considerable profit for himself.
2.Hari is a small farmer who has 2.5 hectares of land. For cultivation , he needed seeds and fertilizers .So , takes a loan from a moneylender at a very high rate of interest. However, midway , due to the rain fails , the crops are destroyed. Hari with no profit goes deeper in debt and has nothing to pay to the moneylender. He had to sell a small part of his land so that the moneylender can be paid.
In the above two examples, we saw that while credit proved very useful for Ram, it proved disastrous for Hari as he was gained no profit and was forced to sell a part of his land as a result of his rising debt.
Regards.
Credit would be useful or not depends on the risk involved in a situation. Following are some examples to understand both the situations :
1. Ram is a pottery maker. As diwali approaches , he got a big order from an urban trader to make diyas in bulk amount.
However, for purchasing raw materials, the amount required is high. Further, he also plans to employ four to five people for completing the order on time. Ram, therefore, goes to a small cooperative society for getting loans to proceed with his work. The society after confirming that he has received an order from a trader for making diyas and keeping his pair of bullocks as collateral give the required loan to him. Ram with the help of the borrowed loan purchased raw materials and employed five people in diya making. In this way, he was able to complete the order on time. After receiving payments from the trader for his diyas, he repaid the bank and earned a considerable profit for himself.
2.Hari is a small farmer who has 2.5 hectares of land. For cultivation , he needed seeds and fertilizers .So , takes a loan from a moneylender at a very high rate of interest. However, midway , due to the rain fails , the crops are destroyed. Hari with no profit goes deeper in debt and has nothing to pay to the moneylender. He had to sell a small part of his land so that the moneylender can be paid.
In the above two examples, we saw that while credit proved very useful for Ram, it proved disastrous for Hari as he was gained no profit and was forced to sell a part of his land as a result of his rising debt.
Regards.