India to boost farm spending and enact food security law

The Indian government would boost agriculture spending in addition to providing farmers more time to repay loans as the farm sector emerges from one of the worst monsoon seasons last year.

 

In his budget speech in parliament, Indian Finance Minister Mukherjee outlined a four-pronged strategy - easier access to farm loans, greater focus on value addition by food-processing sector, cutting food wastage and increasing farm productivity - to boost farm sector growth.

 

The move comes after the lowest monsoon rainfall in nearly four decades hit crop output this fiscal year, fuelling a steep rise in food price inflation amid fears of food shortages in the country.

 

But critics said the budget ignored the need to further develop market mechanisms as the focus this year was mainly on removing supply-side bottlenecks.

 

"The proposals were on expected lines and the government has tried to address supply-side bottlenecks," said N Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a state-run think-tank. "However, I am slightly disappointed that there has been no focus on agricultural marketing and futures markets."

 

India's farm sector, which employs more than half the country's workforce, is tipped to shrink 0.2% in the fiscal year ending March 31.

 

"A major concern during the second half of 2009-10 has been the emergence of double-digit food inflation,'' Mukherjee said, adding bringing down inflation and better management of food security is a top priority for the government. "Four percent growth in agriculture is essential for 9% economic growth," he said.

 

Mukherjee increased the budgetary allocation for agriculture to INR208.7 billion (US$4.5 billion) in 2010-11, from INR163.7 billion (US$3.6 billion) allocated for 2009-10 and raised the target for farm credit disbursal next year by more than 15%.

 

He announced an investment of INR4 billion (US$87 million) to launch a "Green Revolution" in the country's eastern regions, which have been plagued by low farm productivity. A similar programme in the sixties and seventies encouraged a switch to high-yielding crops mainly in northern regions and helped the country become self-sufficient in food production for the first time.

 

Increased investments in agriculture and the proposal for a new food security law were announced amid widespread concern that another year of bad monsoon could badly hit the country's ability to feed its millions.

 

Among other measures, Mukherjee extended the deadline for repayment of farm loans that are overdue by six months to June 30, and reduced the interest rate for those who make repayments on time to 5%, from 6% earlier.

 

Five big food parks, in addition to 10 that already exist, will be set up in the country and the government will open up retail trade to reduce the gap between retail and farm gate prices.

 

The budget earmarked an investment of INR3 billion (US$65 million) to boost the production of pulses and oilseeds in the next fiscal year. Under the plan, the government will help pulse and oilseed farmers in 60,000 villages that depend on rainfall for water supply.