Govt raises farm subsidy to boost winter crops

Govt raises farm subsidy to boost winter crops

New Delhi: The government has raised farm subsidy by Rs288 crore ($59 million) to provide seeds to farmers to help winter crops as it tries to mitigate the impact of scanty rains on summer crops, the finance minister said on Tuesday.

Annual monsoon rains, a key factor in determining the country’s farm and overall economic growth, are 26% below normal so far in the season from June, threatening oilseeds and sugarcane crops.

The government expects early sowing of winter-sown crops over a larger area this year to offset some of the crop loss.

“To take full advantage of the winter crop, we have decided to distribute good quality seeds in time to the farmers and have stepped up the subsidies...," Pranab Mukherjee told reporters after a meeting of a panel of ministers.

The government has raised purchase prices of rice and lentils to boost supplies to encourage farmers to raise output.

Union agriculture minister Sharad Pawar said food subsidy would top Rs60,000 crore ($12.3 billion) this year, about 15% higher than what was estimated last month.

“The timely measures, which we have taken to protect the standing summer crops in some states have yielded results," Mukherjee said.

“But what would be the final outcome could be assessed only after the harvest."

Economists estimate India’s drought relief measures could push up fiscal deficit by $4 billion, or 0.5 percentage points.

In July, the government projected the fiscal deficit for 2009-10 (April-March) to be 6.8% of the gross domestic product (GDP), a 16-year high, to be funded by a record high market borrowing of Rs451 crore ($92.5 billion).

In 2002-03, the last major drought year, the federal government’s fiscal deficit came in at 5.9% of GDP, higher than the budget estimate of 5.3%.

The Reserve Bank of India expects the economy to grow by 6% or more in the current fiscal year, compared with 6.7% last year after three years averaging 9.4%.

Economists fear a poor farm output, which makes about 17% of the country’s GDP, could shave off the economic growth by as much as 2 percentage points.

So far India has declared 246 districts as drought-hit.

However, rainfall has improved in the past three weeks and was 2% below normal in the week to 19 August.

“The recent rain has improved the situation to some extent, though still there is deficiency," Mukherjee said.