Buoyed by the thumping 206-strong mandate, the government is now thrashing out a plan to consolidate its vote-bank in the rural hinterlands.
A new set of announcements are expected in Budget 2010, with the government planning to reduce the interest rate for farmers from 7 per cent to 6 per cent, for the kharif season.
This would involve a higher subsidy payout to commercial banks by the government. “The finer points pertaining to the quantum of subsidy will be discussed soon,” said a senior government official who did not wish to be identified.
During the past four years, the government has been paying a subsidy of 2 percentage points to banks for providing credit to farmers at 7 per cent, for kharif crop. This subsidy is now set to rise.
The economic proposal is in tune with the political — the Congress election manifesto promised it would “reduce interest rates on farm credit”.
It also said it would extend interest relief to all farmers who repay bank loans on schedule.
The opposition party, BJP, had promised to make farm credit available at 4 per cent.
In a recent interview with Hindustan Times, finance minister Pranab Mukherjee said the government’s focus on agriculture and rural development would continue.
“A cut in interest rate from the current 7 per cent is welcome as the sector is crucial for the overall growth of the country,” said R.H. Patel, associate director, Anand Agricultural University.
The government is also likely to increase the agriculture credit target for state owned banks to about Rs 3,10,000 crore against Rs 2,80,000 crore set for the previous fiscal.