Question

How do the medium and large farmers obtain capital for farming? How is it different from the small farmers?

Answer 1

Medium and large farmers retain a part of their produce and sell the surplus in the market. This provides them with the required capital for farming. Most of them even use these earnings to provide loans to small farmers. By charging high rates of interest on these loans, they succeed in furthering their earnings. Thus, medium and large farmers have ready capital with them from one agricultural season to the next.

The situation of small farmers is in stark contrast. They begin an agricultural season with no working capital and end the season on more or less the same note. To begin working on their farms, they take loans at high rates of interest. Due to the small sizes of their farms, their total production is small. Their produce is kept for their needs or for repaying their lenders. As a result, they have no surplus to sell in the market, and thus, have no savings.