Borrowing funds by the farmers for paying tax to the government is known as:

Correct option is B

The correct answer is (B) Productive loan

Explanation:
• In agricultural economics, loans are often categorized based on their end-use and impact on the farming business.
• A Productive Loan is one that helps the farmer maintain or increase production or fulfill mandatory obligations related to the land/production process.
• Paying land revenue or taxes to the government is considered a legal and operational necessity for maintaining the ownership and right to farm the land.
• Therefore, borrowing to pay these taxes is classified as a productive use of credit because it ensures the continuity of the farming enterprise.
• Without paying these taxes, the farmer might lose the land, hence the credit serves a functional role in production security.

Information Booster:
• Short-term productive loans are usually meant for purchasing seeds, fertilizers, or paying wages.
• Long-term productive loans are meant for permanent improvements like digging wells or buying tractors.
• In many textbook classifications for competitive exams, taxes are specifically listed under the productive category to distinguish them from social expenses.

Additional Knowledge:
• Unproductive loan (Option A): These are loans taken for purposes that do not add to income or production, such as spending on marriages, religious ceremonies, or litigation.
• Consumption loan (Option C): Loans taken for meeting daily household needs, such as food or medical expenses, which do not contribute directly to the farm's output.
• Purposive loan (Option D): This is a general term indicating any loan with a specific stated intent, but it is not a standard economic classification in this context.