Indian budget to focus on rural reforms

Tuesday, 29 June 2004, 07:00 Hrs
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NEW DELHI: India's upcoming financial budget for the current fiscal year is likely to unveil a slew of measures to boost the vast farm sector and rural development to put the country on a higher trajectory of growth.

Analysts say at a time when the Indian economy is on the growth path and demand is rising across many sectors, the budgetary thrust on the agriculture sector would hasten the process of attaining robust economic growth.

Finance Minister P. Chidambaram will unveil the Congress-led coalition government's maiden annual budget July 8.

"The kind of statements that the new government has made since coming to power last month has made it very clear that agriculture and rural development are going to be its priority areas," said economist D.H. Pai Panandiker.

"The main areas that are likely to get addressed in the budget are hiking public investment in agriculture research and boosting rural infrastructure and irrigation systems in a major way," Panandiker told IANS.

"Since the farm sector accounts for a quarter of the GDP (gross domestic product) and employs close to 70 percent of the total population, a mechanism to enhance its performance will give the overall economy a major boost."

India's economy is expected to have grown by a healthy eight percent in the last fiscal year ended March 31, 2004, mainly on the back of impressive farm output.

The government, which has vowed to usher in reforms with a "human face", has announced some measures in the last one month to improve credit off-take to the farm sector.

It has unveiled a major package for farmers to raise farm credit by 30 percent in the current fiscal year ending March 31, 2005.

Promising a "new deal" to rural India, Prime Minister Manmohan Singh last week said his government would give priority to farmers who have been facing distress over the past five years.

"There has been a neglect of the interests of farmers in recent years and this is reflected in a significant slowing down in agriculture growth in the past five years," the prime minister said.

"Agriculture must receive the priority attention it deserves."

Experts say the budget is also likely to see some initiatives to ease the burden of debts and high interest rates on farm loans. A large number of Indian farmers are reeling under the burden of huge debts, forcing many to commit suicide.

"If the flow of rural credit is doubled in the next three years and coverage of small and medium farmers by institutional lending is expanded substantially, the agriculture sector will manage to reap rich dividends," said Panandiker.

The Common Minimum Programme, which forms the governance agenda of the United Progressive Alliance (UPA) government, promises to make irrigation the highest investment priority.

The budget is also likely to stress the lifting of restrictions on marketing of farm produce and freeing agricultural research from bureaucratic controls. The government may also boost rural development through infrastructure development.

"The government needs to address four key challenges to ensure sustainable and equitable growth over the next decade," said Sunil Kant Munjal, president of the Confederation of Indian Industry (CII).

"These are improving agricultural growth, empowering the youth, creating adequate employment opportunities and building world class infrastructure," he added.

Proposals to remove legislative controls that depress agricultural incomes are also likely to find a place in the upcoming budget. Farmers are likely to get greater say in the organisations that supply inputs to them.

"Larger public investment in the agriculture sector will metamorphose the rural economy," said Yogendra Modi, president of the Federation of Indian Chambers of Commerce and Industry (FICCI).

"This, in turn, will help nurture a more favourable environment for the growth of the rural economy and create more income."

Source: IANS
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