Consider the following statements regarding the dependence of farmers on traders: 1. Farmers often depend on traders for selling their produce. 2. Farmers never borrow money from traders for personal expenses. 3. Access to formal bank loans is often difficult for small farmers. Which of the following statements are correct ?

The correct option is (c) 1 and 3 only. Explanation The relationship between small farmers and traders in the Indian rural economy is characterized by interlinked markets. This involves the interdependence of credit and agricultural marketing, where traders often function as informal moneylenders, creating a cycle of dependence for small and marginal farmers. Statement-wise Analysis - Statement 1 is Correct. Farmers often depend on traders to sell their produce. Due to a lack of direct access to mandis, transportation constraints, or pre-harvest contracts (tied loans), farmers are frequently compelled to sell their harvest to local traders, often at prices lower than the market rate. - Statement 2 is Incorrect. The statement uses the extreme qualifier "never." In reality, farmers frequently borrow money from traders and moneylenders not just for agricultural inputs (seeds, fertilizers) but also to meet personal expenses such as medical emergencies, weddings, and daily consumption needs during lean seasons. - Statement 3 is Correct. Access to formal bank loans is often difficult for small farmers. Formal financial institutions typically require collateral, extensive documentation, and credit history, which many small and marginal farmers lack. Consequently, they are forced to rely on informal sources like traders and moneylenders despite higher interest rates. Key Takeaway: Small farmers face structural barriers to formal credit (financial exclusion), leading to a reliance on informal sources like traders. This dependence often forces them to sell produce to these creditors, perpetuating a cycle of indebtedness.

NCERT Class 7 Economics — Chapter 1: A Shirt in the Market

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Consider the following statements regarding the dependence of farmers on traders:

Farmers often depend on traders for selling their produce.
Farmers never borrow money from traders for personal expenses.
Access to formal bank loans is often difficult for small farmers.

Which of the following statements are correct ?

Official previous-year question

Verified 1 Aug 2026.

Options

A1 and 2 only
B2 only
C1 and 3 only
D1, 2 and 3

Did you get this right?

Solution

The correct option is (c) 1 and 3 only.

Explanation

The relationship between small farmers and traders in the Indian rural economy is characterized by interlinked markets. This involves the interdependence of credit and agricultural marketing, where traders often function as informal moneylenders, creating a cycle of dependence for small and marginal farmers.

Statement-wise Analysis

Statement 1 is Correct. Farmers often depend on traders to sell their produce. Due to a lack of direct access to mandis, transportation constraints, or pre-harvest contracts (tied loans), farmers are frequently compelled to sell their harvest to local traders, often at prices lower than the market rate.
Statement 2 is Incorrect. The statement uses the extreme qualifier "never." In reality, farmers frequently borrow money from traders and moneylenders not just for agricultural inputs (seeds, fertilizers) but also to meet personal expenses such as medical emergencies, weddings, and daily consumption needs during lean seasons.
Statement 3 is Correct. Access to formal bank loans is often difficult for small farmers. Formal financial institutions typically require collateral, extensive documentation, and credit history, which many small and marginal farmers lack. Consequently, they are forced to rely on informal sources like traders and moneylenders despite higher interest rates.

Key Takeaway: Small farmers face structural barriers to formal credit (financial exclusion), leading to a reliance on informal sources like traders. This dependence often forces them to sell produce to these creditors, perpetuating a cycle of indebtedness.

Your note

More from Chapter 1: A Shirt in the Market

Consider the following statements regarding cotton cultivation: 1. Cotton harvesting takes time as the bolls do not burst all at once. 2. Cotton cultivation requires minimal inputs and no fertilizers. 3. Small farmers often borrow money from local traders to meet the heavy expenses of cultivation. Which of the following statements are correct ?

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Consider the following statements regarding the 'putting-out system' in the weaving industry: 1. The weavers purchase the yarn themselves from the open market. 2. The weavers are paid for their work by the merchant. 3. The finished cloth is collected by the merchant from the weavers. Which of the following statements are correct ?

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Consider the following statements regarding the advantages of the putting-out system for weavers: 1. Weavers do not have to spend their money on the purchase of yarn. 2. The weavers are responsible for selling the finished cloth in distant markets. 3. Weavers have complete autonomy to set the market price for the cloth. Which of the following statements are correct ?

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With reference to Weaver’s Cooperatives, consider the following 1. They are formed to reduce dependence on the merchant. 2. In a cooperative, each weaver procures yarn individually from the market. 3. The cooperative also plays a role in marketing the finished cloth. Which of the following statements are correct ?

medium

Which of the following best describes the function of a 'Ginning mill'?

easy

Keep practising Chapter 1: A Shirt in the Market

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The correct option is (c) 1 and 3 only.

Explanation

Statement-wise Analysis

Statement 1 is Correct. Farmers often depend on traders to sell their produce. Due to a lack of direct access to mandis, transportation constraints, or pre-harvest contracts (tied loans), farmers are frequently compelled to sell their harvest to local traders, often at prices lower than the market rate.
Statement 2 is Incorrect. The statement uses the extreme qualifier "never." In reality, farmers frequently borrow money from traders and moneylenders not just for agricultural inputs (seeds, fertilizers) but also to meet personal expenses such as medical emergencies, weddings, and daily consumption needs during lean seasons.
Statement 3 is Correct. Access to formal bank loans is often difficult for small farmers. Formal financial institutions typically require collateral, extensive documentation, and credit history, which many small and marginal farmers lack. Consequently, they are forced to rely on informal sources like traders and moneylenders despite higher interest rates.