CBSE Class 10 Answered

Cheap and affordable credit is important for the country’s development because

1. When money is borrowed at a high rate of interest, a larger part of income is spent on repaying the debt and a small part of earning is left for the fulfilment of one’s needs. This may result in a low standard of living.
2. Because of high interest rates, the amount of money to be repaid keeps on accumulating faster than the income of the borrower. This can lead to an increase in debts.
3. Cheap credit is required for a variety of important economic activities such as big or small investments and setting up of businesses. People who want to start a small business of their own may not do so because of high rate of interests charged on loans.
4. In the rural areas, credit helps in the development of agriculture by helping farmers purchase seeds, fertilisers, pesticides and farming machinery.
5. Manufacturers require credit to sustain operational costs, for buying raw material and to purchase plant machinery and equipment.
6. Some people may also avail credit to provide for marriage or illness.