Debt bondage, or bonded labor, occurs when a person offers labour in exchange for a loan or to pay off a debt inherited from a relative. Although it seems to be a standard labour contract, the worker is never able to pay off the principle and interest. Debt bondage is one of the most common manifestations of modern slavery worldwide including in India.
It is characterized by "a long-term relationship between employer and employee, and is usually solidified through a loan, and is embedded intricately in India’s socio-economic culture—a culture that is a product of class relations, a colonial history, and persistent poverty among many citizens. Debt bondage is a specific form of forced labor in which compulsion into servitude is derived from debt.
Categorized and examined in the scholarly literature as a type of forced labor, bonded labor entails constraints on the conditions and duration of work by an individual. Not all bonded labor is forced, but most forced labor practices, whether they involve children or adults, are of a bonded nature. Bonded labor is most prevalent in rural areas where the agricultural industry relies on contracted, often migrant laborers. However, urban areas also provide fertile ground for long-term bondage.
Characterized by a creditor-debtor relationship that a laborer often passes on to his family members, bonded labor is typically of an indefinite duration and involves illegal contractual stipulations. Contracts deny an individual the basic right to choose his or her employer, or to negotiate the terms of his or her contract.
Bonded labor contracts are not purely economic; in India, they are reinforced by custom or coercion in many sectors such as the agricultural, silk, mining, match production, and brick kiln industries, among others."