The average value of assets owned by households in rural areas in AP and Telangana are very low as compared to those in other states. (Representational image)

Hyderabad: Telangana state and Andhra Pradesh have the highest rates of rural indebtedness in the country. As per the Household Indebtedness in India report released by the Union ministry of statistics and programme implementation, 59 per cent of the households in Telangana and 54 per cent in Andhra Pradesh are facing debts.

These rates are higher than national average of 31.4 per cent. Rural indebtedness among cultivators is the highest in Telangana and Andhra Pradesh, and they stood at 69 and 63 per cent respectively.

The reports also shows that the reach of institutional credit in both states is less than 50 per cent, which means a large percentage of people are taking loans through non-institutional sources, which might be charging higher rates of interest than institutional sources like banks.

Looking at the high indebtedness and lack of access to institutional credit among cultivators, it should not be surprising that Telangana state had the second and AP the fourth highest farmer suicides in India, as per the National Crime Record Bureau 2014-15 data. A major reason for this was found to be bankruptcy or indebtedness.

The average value of assets owned by households in rural areas in AP and Telangana are very low as compared to those in other states, including Telangana. Average Value of Assets per rural household in AP stands at Rs 4,11,939, the third lowest in the country and Telangana the ninth lowest at Rs 6,37,509.

While AP tops in Debt-Asset Ratio (DAR) at 14 per cent, Telangana state even though ninth in owning assets, comes second in DAR with 8 per cent. This means that, in both the states, rural households are borrowing much higher amount of loans in proportion to the assets they owned. For example, while average assets owned by a rural household in AP is Rs 4.11 lakh and Rs 6.37 lakh in Telangana, they have Rs 58,263 and Rs 50,692 respectively as debt. A rural household in Gujarat, by comparison, has a debt of Rs 25,536 even though assets it owned is much higher at Rs 18,42,843.

Dr D. Narsimha Reddy, former dean, School of Economics, University of Hyderabad, who has worked on agrarian crisis, says, “Farmers in both the states, especially in AP, are growing input-intensive crops. While input costs are increasing every year, the yield of crops and profits are not. Even before bifurcation, AP used to be at top in rural indebtedness. Access to institutional credit needs to be improved to pull out those stuck in the circle of debt.”