Agriculture

Initial data suggests that agricultural growth in the current fiscal year could be
significantly better than in FY08, notwithstanding a sharp fall in sugarcane
harvest. This expectation is based on a record rice harvest of 6.5 million tones, a
small improvement in cotton production during Kharif FY09, supported by the
possibility of a record wheat harvest. Initial information also raises the possibility
of a very good showing by minor crops and reasonable growth in the livestock
sub-sectors. The improvement in the kharif crops is remarkable given continued
water shortages. It suggests that better prices and credit availability may have
encouraged farmers to increase investment in crops. Further, widespread rains
during mid-December 2008, raise hopes for higher rabi plantation and harvesting.
Some important policy measures announced in the FY09 budget (and later) to
encourage farmers may have played important role. These include: (1) increase in
support prices of wheat for FY09 crop, (2) a 25 percent higher agri-credit target
for FY09 compared with the FY08 target, with enhancement in indicative per acre
credit limit for major and minor crops, orchards and fishery by an average 70
percent, (3) increase in subsidy for DAP, (4) starting of crop insurance scheme,
and (5) exemption of GST on fertilizers and pesticides etc.