The higher cost of borrowing for the farmers means a larger part of the ____ of the borrowers is used to repay the loan.

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Detailed Solution

A higher cost of borrowing implies that a larger part of the earnings of the borrowers is used to repay the loan amount.
Hence, the borrowers have less income left for themselves. Moreover, in some instances, the interest rate charged for the loan is so high that the loan amount to be repaid may even be more than the amount an individual has earned or his income. This leads to increasing debt and a debt trap. Also, people who want to start an entrepreneurial venture and credit for the same may refrain from availing credit anymore due to the high cost of borrowing. Moreover, the farmers who depend on agricultural output for repaying their loans have no options in case the annual production in a particular year or harvest season has been low.

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