(a) Explain the position of informal institutions as a source of credit in rural India.

Informal sources of credit in rural India i.e. money lenders and traders generally exploit the landless labourers, small and marginal farmers and by charging a much higher interest rates on loans as compared to formal sources. They also tend to manipulate the accounts which pushes the poor farmers into “Debt Trap”.

The expenditure incurred by Dr. Khurana on shifting his clinic from economically backward area to the city comes under the category of “Expenditure on migration”.

Expenditure on migration is the source of human capital formation. People migrate in search of jobs that fetch them higher salaries. Technically qualified persons like engineers and doctors, migrate to other areas because of higher incomes and better opportunities.