With easy credit and more time to repay loans, farmers can continue to reap a financial harvest that first came as a windfall loan waiver of Rs 60,000 crore in 2008.
The waiver, slightly more than what is spend on our military upgrade, brought the Congress-led UPA back to power.
Finance minister Pranab Mukherjee has hiked the target for farm credit disbursal for next year by more than 15% at Rs 3.75 lakh crore for banks in 2010-11, as against Rs 3.25 lakh crore in the current fiscal.
Interest on farm credit has been brought down to 5 per cent from 6 per cent, in addition to providing farmers more time to repay loans. However, he has not lost sight of the need for fiscal discipline. Easy cash comes only for those farmers who have not defaulted.
“In the last budget, I provided an additional one per cent interest subvention as an incentive to those farmers who repay their short-term crop loan as per schedule. I propose to raise this subvention for timely repayment of crop loan from one per cent to two per cent for 2010-11,” Mukherjee said.
India’s aggressive farm credit policy—ranging from soft loans to higher support prices — has put easy cash into stressed farmhands, cushioning the impact of last year’s crippling drought, the worst in three decades.
The mammoth loan waiver of 2008, called the Agriculture Debt Waiver and Debt Relief Scheme, has been the main driver of farmers’ incomes as it has pulled them out of debt.
The finance minister said in his budget speech: “Banks have been consistently meeting the targets set for agriculture credit flow in the past few years.”
In the first nine months of 2009-10 financial year, banks have collectively released farm credit worth Rs 2.18 lakh crore, against the annual target of Rs 3.25 lakh crore.