Apart from providing loan waivers to more than four crore small and marginal farmers in the country, the Union Budget has essentially focused on revamping the rural agricultural economy through various measures such as augmenting rural credit, increasing the resource base of banks that are into priority sector lending and increasing allocation to social sector schemes under the National Rural Employment Guarantee Act (NREGA) and Bharat Nirman.
The agricultural credit of schedule banks, which is estimated to around Rs 2.4 lakh crore during the current fiscal, would go up by Rs 2.8 lakh crore during 2008-09, marking a significant 16.6% hike. The finance minister has also proposed allocation of Rs 10,200 crore for increasing the resource base of financial institutions such as National Bank for Agriculture and Rural Development (Nabard), Small Industries Development Bank of India (Sidbi) and National Housing Bank (NHB) to meet the requirement of priority sector lending.
?Financial inclusion can be carried forward by expanding the reach of these three banks,? Union finance minister P Chidambaram said. A fund of Rs 5,000 crore in Nabard would enhance its refinance operations to short-term cooperative credit institutions, he said.
There are proposals for two funds of Rs 2,000 crore each for risk capital financing and enhancing refinance capability to micro, small and medium enterprises. Besides, a fund of Rs 1,200 crore in NHB would also be created to enhance its refinance operations in the rural housing sector.
The Gross Capital Formation in agriculture as a proportion of GDP in the agriculture sector has improved from 10.2% during 2003-04 to 12.5% during 2006-07. The government targets to raise it to 16% during the eleventh plan for achieving a growth rate of 4% in the agriculture sector. It implies that more investment in the agriculture sector is in the offing during the eleventh plan period.
According to the Budget, more than Rs 1,185 crore had been released to the four states following the recommendation of Vaidyanathan committee on reviving the short-term cooperative credit structure being implemented across 17 states. There has been an agreement between the states and the Centre for implementation of the committee report on reviving the long-term cooperative credit structure. The Centre?s share will be Rs 2,642 crore or 86% of the total burden.
?All this thrust on the rural economy would definitely ensure that farmers return to the farming,? says Richard Mahapatra, coordinator, Centre for Science & Environment, a New Delhi based NGO. He added that the agriculture sector is not only the biggest employer in the country, but also plays a crucial role in sustaining the rural economy.
Besides, a higher allocation of Rs 16,000 crore for NREGA?the Union government?s flagship social programme?is expected to go a long way in reviving the agriculture sector as most of the recommended works relate to water conservation.
?Some of the key initiatives such as expansion of NREGA scheme to 596 districts in the country will have a positively impact and create livelihood options for rural youth in horticulture, biofuels, etc,? says Rana Kapoor, CEO, Yes Bank.
The Budget also announced reduction on duty on vitamin premixes and mineral mixtures from 30% to 20% with the intention of reducing the production cost of cattle and poultry feeds. The duty on phosphoric acid has been reduced from 7.5% to 5%, while duty on bactofuges is reduced from 7.5% to nil. This will boost the dairy industry.