Long-term Measures by the Government

To counter the political implications of the poor farm growth and inflation risk, the government has planned or planning some long-term measures. The government has announced that a coordinated approach on agricultural indebtedness will be finalized in the near term to help the farming population and avert a further rural debt crisis in the country. According to the media reports, the government is likely to initiate a mega-farm loan-restructuring package covering bad and doubtful debt of about Rs300 billion (or US$7.5 billion) in the upcoming Union Budget to be announced in February 2008.

In the Union Budget (February 2007), the government increased its budgeted spending on irrigation by 54% and on Bharat Nirman program (covering rural infrastructure) by 38%. In addition, the government is targeting a net disbursement of USD 7.8 billion (0.4% of GDP) in the farm credit by the end of next year. The government is also relaxing regulations for private sector participation in agri value chain and many states have amended agri marketing acts paving way for direct transaction of private sectors with farmers. This coupled with emergence of the organized retailing is likely to be a significant catalyst for India’s farm sector growth.