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Friday, Jul 09, 2004

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A rural slant

V. Leeladhar

The insurance schemes proposed will help the banking industry to increase its flow of credit to small farmers.

THE Budget is on expected lines and shows a rural orientation. It attempts to achieve the objectives laid down in the Common Minimum Programme adopted by the Government. The major areas of focus are education, health, employment generation, and of course, agriculture and infrastructure development.

As far as the banking industry is concerned, almost all the vital aspects of growth in the agricultural sector have been addressed. Simultaneously, some critical issues such as amendments to the Securitisation Act have also been contemplated.

The Budget envisages a benign interest rate regime and is an affirmation of the Government's resolve to achieve greater fiscal consolidation. It is really a balanced approached indicating a holistic view.

Regional Rural Banks have been given their due importance with proper emphasis on the ownership of these banks. The task force proposed to examine issues pertaining to reforms in the co-operative sector is quite welcome as this is another segment of the financial sector that can play a critical role in boosting credit to the agricultural sector.

The measures proposed to revive the Rural Infrastructure Development Fund are welcome as they will boost infrastructure development in rural areas. The insurance schemes proposed will also go a long way in helping the banking industry to increase its flow of credit to small farmers. The exemption on excise duty on tractors should see a scenario in which more small farmers enhance their output.

Banks might also consider changing eligibility norms for land holdings in this regard. Another fillip to this sector is the encouragement given to agro processing industries by way of deduction 100 per cent of profit for the first five years and 25 per cent of the profit for the purpose of tax for the next five years. This will have a positive impact on agricultural production. The commercial production of fruits, herbs and medicinal plants will receive a fillip with the launch of the National Horticultural Mission on the Anand model. The proposed board for reconstruction of public sector enterprises is indicative of the Government's stand. The emphasis of the support of public sector enterprises in power, telecom, road, civil aviation, etc, will facilitate the growth of profit-making public sector enterprises. It also represents encouragement of the power sector, air and seaports, and tourism. Changes in FII investment levels in telecom, insurance and civil aviation are welcome moves as well.

Overall, the Budget has addressed structural as well as developmental issues and provides a basis for balanced growth with a distinctly rural orientation.

(The author is Chairman and Managing Director, Union Bank of India.)

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