The thrust on agriculture and India's rural areas continues in India's Union Budget 2007-2008, in keeping with the government's plan to marry growth with equity and social justice

A 31% hike in allocation towards the Bharat Nirman programme for upgrading rural infrastructure, from Rs 18,696 crore to Rs 24,603 crore, and a proposed Rs 225,000 crore for farm credit are some of the main outlays for rural India in Budget 2007-08.

Presented by Finance Minister P Chidambaram to Parliament on February 28, the budget proposes that an additional irrigation potential of 2,400,000 hectares be created, including 900,000 hectares under the Accelerated Irrigation Benefit Programme (AIBP).

The outlay for the AIBP is to be increased from Rs 7,121 crore to Rs 11,000 crore including a grant component to state governments of Rs 3,580 crore, up from Rs 2,350 crore over the previous budget. In the current financial year, 35 projects will be completed under the AIBP.

In the year ending December 2006, 53,370,000 new farmers were brought into the institutionalised credit system. The target for 2007-08 is set at Rs 225,000 crore with an addition of 50,000,000 new farmers accessing credit.

The National Agricultural Insurance Scheme (NAIS) will be continued for the 2007-08 kharif and rabi season, with a budgetary provision of Rs 500 crore. A weather-based crop insurance scheme will be started by the Agricultural Insurance Corporation on a pilot basis as an alternative to the NAIS, with an allocation of Rs 100 crore for 2007-08.

Rs 1,800 crore has been allocated for a water recharging scheme that will offer a 100% subsidy to small farmers and 50% to other farmers to encourage them to recharge water by diverting rainwater into 'dug wells'. The scheme will be finalised by the Ministry of Water Resources and will be transferred to NABARD, to be distributed through lead banks in the districts to the beneficiaries.

In March 2005, a pilot project was launched to restore and rejuvenate waterbodies in 13 states. The World Bank signed a loan agreement with Tamil Nadu for Rs 2,182 crore to restore 5,763 waterbodies with a command area of 400,000 hectares. An agreement with Andhra Pradesh is expected to be concluded in March 2007 to cover 3,000 water bodies with a command area of 250,000 hectares.

A special plan is being implemented over a period of three years in 31 suicide-prone districts in four states, involving a total amount of Rs 16,979 crore. Of this, around Rs 12,400 crore will be spent on water-related schemes. The plan includes a scheme for the induction of high-yielding milch animals and related activities in order to enhance livelihood options.

Other budgetary allocations and schemes for the farm sector are:

• The 2% interest subvention scheme for short-term crop loans will continue with a provision of Rs 1,677 crore.
• A Special Purpose Tea Fund to rejuvenate tea production. Financial mechanisms for replantation and rejuvenation will also be implemented for coffee, rubber, spice, cashew and coconut plantations.
• To address the problem of poor availability and quality of certified seeds, the Integrated Oilseeds, Oilpalm, Pulses and Maize Development Programme will be expanded with sharper focus on scaling up the production of breeder, foundation and certified seeds. Government will fund the expansion of the Indian Institute of Pulses Research, Kanpur, and offer other producers a capital grant or concessional financing to double production of certified seeds within a period of three years.
• Rs 100 crore allocated for the National Rainfed Area Authority set up under last year's budget.
• The Agriculture Technology Management Agency (ATMA), now in place in 262 districts, will be extended to another 300 districts. Provision for ATMA will be increased from Rs 50 crore to Rs 230 crore.
• The amount of fertiliser subsidy has been increased from Rs 17,253 crore to Rs 22,452 crore. Based on a study, yet to be conducted, a pilot programme will be implemented in at least one district in each state to deliver subsidies directly to farmers.

The budget has also allotted Rs 12,000 to the National Rural Employment Guarantee Scheme. However, since it is a demand-driven scheme, the budget will be supplemented as required. One of the government's most ambitious programmes is expected to be extended to 330 of India's poorest districts in the financial year 2007-2008.

Additionally, an amount of Rs 2,800 crore has been provided for the Sampoorna Gramin Rozgar Yojana in districts not covered by the NREGS. Allocation for the Swaranjayanti Gram Swarozgar Yojana, promoting self -employment among the rural poor, has been increased from Rs 1,200 crore to Rs 1,800 crore.

To augment its resources for refinancing rural credit cooperatives, the National Bank for Agriculture and Rural Development (NABARD) will issue government-guaranteed rural bonds to the extent of Rs 5,000 crore with suitable tax exemptions.

The corpus of the Rural Infrastructure Development Fund, which sanctions and disburses funds to state governments, is to be raised to Rs 12,000 crore from Rs 10,000 crore in the previous budget. A separate window for rural roads will continue, with a corpus of Rs 4,000 crore.

Source: PTI, March 1, 2007
www.unionbudget.nic.in, February 28, 2007
The Hindu, February 28, 2007