Govt to boost Farm sector by 4% this fiscal yr

The government will boost farm spending and lift agriculture sector growth to 4% in the medium term, Finance Minister Pranab Mukherjee said on Friday, but analysts said the Budget failed to introduce measures to curb rising food prices.

The government, in its annual Budget for the fiscal year 2010/11 beginning from April, introduced a clutch of measures aimed at spurring rural economy, including withdrawal of service tax on testing and certification of seeds and on transportation of cereals and lentils by road.

Mukherjee said farm credit target for 2010/11 would be raised to Rs 3.75 trillion from Rs 3.25 trillion in the previous year.

"The agriculture sector occupies centre-stage in our resolve to promote inclusive growth, enhance rural incomes and sustain food security," he told parliament.

Prime Minister Manmohan Singh's government, which was voted back to power in 2009 with a bigger mandate from rural India, has initiated ambitious projects like farm-loan waiver and job guarantee schemes for millions of poor in rural areas.

To manage the country's overflowing grain bins efficiently, the minister said state-run Food Corp of India could hire private warehouses for seven years instead of the current five years.

Annual food prices rose 17.58% in mid-February.

"Much expected steps to curb price rise was not seen in the Budget. Instead, increase in petrol and diesel could lead to further all round prices rise," said S. Raghuraman, a New Delhi-based independent farm analyst.

Hours after Mukherjee increased factory-gate taxes and import duties on the fuels as part of the federal budget, the oil ministry announced that petrol prices will rise 6% and diesel prices will go up by 7.8%.

Raghuraman said fuel price rise would push up food inflation and economists fear that high food prices may push broader inflation to 10% next month.

To improve farm output and productivity in eastern India, where output lags, Mukherjee said the government would usher a farm revolution.

Anjani Sinha, chief executive of the National Spot Exchange, said the focus on Bihar, Orissa and Jharkhand would increase output and help avoid import needs.