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"credit is useful as well as harmful, it depends on the risk involved."support the statement with examples.

Credit can play a both positive and negative role.$$$$ a. For example, a manufacturer taking credit during festive season in anticipation of increased demand for his product during the festival, to expand his production, to meet his production costs and later that situation has worked in his favour, as it enabled him to increase his output and sales too. In such a situation ,credit plays a positive role. As in case of Salim the shoe manufacturer, the example mentioned in the textbook. ★ $$$$ b. However, in another situation for instance, a small farmer who has taken credit for cultivation might face a problem. As crop production involves high costs on inputs life HYV of seeds, fertilizers, pesticides etc. Farmers generally take loans at the beginning of the season and repay after harvest. But the failure of the crop makes loan repayment impossible, which at times compel them to sell part of their land which worsens their situation...$$$$ Hope this information will clear your doubts about ____Credit_______

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• Credit from formal sources is useful.The formal sources of credit are the banks and the cooperatives. They are controlled by the Reserve Bank of India. The rate of interest at which the banks lend loans are also controlled. They involve collateral security, and various procedures which are time taking. $$$$ • Credit from informal sources in harmful. The informal sources of credit are the moneylenders, traders, employers, relatives and friends. No external organisations control the credit activities of lenders. The rate of interest can be really high as it depends on the wishes of the lender. They can also use unfair means to get their money back.
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