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Economic Situation
Key Objectives
Small Scale Industry
Investment in Industry
Information Technology
Financial Sector
Capital Market
Expenditure Restructuring
Develop North East
Estimates for 1998
Assistance to States
New Schemes
Non Plan Expenditure
Revenue Receipts
Tax Proposals
Tax Revenues



Agriculture and Rural Development
8. As I stand here and address this August House, my thoughts wander naturally to the remote villages of India and to millions of our toiling
farmers. I have no doubt in my mind that the health and dynamism of the rural economy is central to India's economic and social development. I propose to do the following for agriculture and rural development:

Water is a critical input for agriculture. Yet, after all these years of development only 37 per cent of our cultivable area is under assured irrigation. The bulk of our poor people live in rainfed areas. We propose to accord top priority for development of rainfed areas on a watershed basis and thereby enhance agricultural productivity in a sustainable manner.

Watershed Development Programmes, currently spread across several ministries and departments, will be unified and the plan allocation stepped up to Rs.677 crore from Rs.517 crore in RE 1997-98. Furthermore, there is an increase in the provision for the Accelerated Irrigation Benefit Programme by 58 per cent over 1997-98. Next only to water is the question of rural credit and rural infrastructure. Under the Rural Infrastructure Development Fund (RIDF) managed by NABARD moneys are made available to the State Governments for rural infrastructure.

During the past three years about Rs. 2,500 crore has been allocated to it annually. I am pleased to announce RIDF IV with an enhanced allocation of Rs.3,000 crore. I invite the States to come forward to utilise this important facility. I propose to augment NABARD's share capital by Rs.500 crore in the current year. Government will allocate Rs.100 crore from the budget and the RBI will contribute the balance of Rs.400 crore. This will enable NABARD to leverage additional resource from the market to meet the credit needs of agriculture. The problem of rural unemployment and under-employment is a massive one. This can only be solved through self-employment. There is no reason why every craftsman, artisan and weaver cannot become an entrepreneur and run his own little enterprise. A major bottleneck however has been lack of credit facilities. Earlier NABARD had launched a limited scheme for promotion of Self Help Groups (SHG) as a channel for the flow of funds to the micro enterprises. I am asking NABARD to greatly extend the scope and coverage of the scheme so that 2 lakh Self Help Groups covering 40 lakh families can be assisted over the next five years through this scheme of micro credit. 10,000 Self Help Groups covering 2 lakh families will be assisted this year.

The Reserve Bank of India is also advising commercial banks to design specific loan package to meet the needs of micro enterprises. I have asked the National Housing Bank to finance one lakh rural dwelling units under the Swarna Jayanti Housing Finance Scheme as against 50,000 units last year.I am making a provision of Rs.265 crore to carry forward the process of rehabilitation and recapitalisation of the Regional Rural Banks (RRBs). Sponsor banks are being given an enlarged role in providing management, operational and restructuring support to RRBs. Farmers often face chronic problems of overdue loans due to circumstances beyond their control. They are even committed to civil prison for this default. While the repayment culture must improve, this is determined to create conditions so that no farmer goes to jail for a loan repayment default or is forced to commit suicide.

The Reserve Bank will be issuing appropriate guidelines to the banks for hassle-free settlement of old cases of overdues. Banks will be encouraged to provide relief on accumulated interest in deserving cases. The new procedure should also help in reducing the outstanding volume of Non-Performing Assets (NPAs) of the banking sector. NABARD is being asked to formulate a model scheme for issue of Kisan Credit Cards to farmers on the basis of their holdings for uniform adoption by the banks so that the farmers may use them to readily purchase agricultural inputs such as seeds, fertilisers, pesticides etc.and draw cash for their production needs.

9. The ingenuity and enterprise of our farmers is today hamstrung by numerous Central and State laws and regulations relating to the production, marketing and movement of agricultural commodities. This is clearly unacceptable. My colleague, the Minister of State for Agriculture, will soon be bringing out, under the guidance of the Prime Minister, the Government's National Agricultural Policy paper which will address these constraints in a comprehensive manner.

The Minister of Commerce is systematically reviewing existing controls on exports of all agricultural commodities except foodgrains. There is no reason why our farmers should not reap the benefits of access to wider global markets.

10. The system of agricultural cooperatives in our country is plagued by bureaucracy and political interference at many levels. As part of a concerted programme to revitalise the cooperative sector, government will shortly bring forward a model cooperative law to replace the Multi-State Cooperative Societies Act of 1984 and will encourage the States to make similar amendments in their own acts.

11. There has been a long standing demand from our farmers and the Ministry of Agriculture for the exclusion of farm implements and tools from the list of items reserved for manufacture by the SSI sector, so that farmers can benefit from a wider range of implements and tools at competitive prices and with requisite after sales service. This proposal had also been recommended by the Advisory Committee of the Ministry of Industry. Government have decided to accept this recommendation.

12. India has made commendable progress in oilseeds production in recent years. In order to establish an efficient market environment and to reduce volatility in prices in this sector, the government is planning to introduce futures trading in edible oilseeds, their oils and their cakes.

13. The existing subsidy schemes for both urea and decontrolled phosphatic and potassic fertilisers are being continued. However, for achieving optimum crop response ratio to fertiliser use, the use of all the three nutrients, nitrogen (N), phosphorus (P) and potassium (K) should be balanced. This balance has been progressively distorted over time because of the low price of urea compared with decontrolled fertilisers. The NPK balance, which was 5.9:2.4:1 in 1991-92, had changed adversely to 10:2.9:1 by 1996-97. An increase in the price of urea would help restore this balance. The increase is also justified on the ground of rising costs, which have led to a more than 50 per cent increase in the subsidy on indigenously produced urea in two years between 1995-96 and RE 1997-98. It is, therefore, proposed to increase the selling price of urea by Re.1 per kilogram with immediate effect.

14. Government is committed to provide safe drinking water to all rural habitations in the next five years. To achieve this ambitious target, a multi pronged approach to rural water supply is being adopted:

15. The allocation for the Accelerated Rural Water Supply Programme is being enhanced from Rs.1,302 crore in RE 1997-98 to Rs.1,627 crore in this regular budget. This enhanced outlay will cover about one lakh habitations. As mentioned earlier, we will give a special thrust to Watershed Development Programmes. This will also ensure better results for ground water availability and conservation. States are being encouraged to institutionalise community-based rural water supply programmes, which secure active participation of beneficiaries to own, operate and maintain rural water supply facilities. Over the years, programmes for alleviation of poverty and employment generation have proliferated. Each scheme is well intentioned but their multiplicity has led to needless duplication, high overhead costs, confusion at field levels and insufficient benefit to the people. It is proposed to unify the various programmes under two broad categories of Self Employment Schemes and Wage Employment Schemes. Funding and organisational patterns will be rationalised to achieve maximum beneficial impact of these programmes.

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