Food inflation to come down with improvements to supply chains
The Government is not averse to providing more budgetary support for expanding farm credit in the country, J.D. Seelam, Minister of State for Finance, has said.
This remark assumes significance as robust demand for farm credit is anticipated in the wake of a favourable climate this year.
It is also likely to yield some political gains for the ruling United Progressive Alliance, which is projected to face some setback in the just-concluded Assembly elections in five States.
“We have requested the financial institutions to take advantage of good monsoon so that more and more farmers can be given credit and, if need be, by increasing our budgetary support… we are prepared to do that,” Seelam said at an Assocham event in the capital on Friday.
Indian banks are looking to disburse farm credit of about Rs 7 lakh crore this fiscal.
The Finance Ministry supports farm credit in the form of an interest subsidy for certain farm loans (say, those below Rs 3 lakh).
Most banks are currently unable to meet their priority sector requirement specified by the Reserve Bank of India. They fall short of the current requirement of mandated agricultural lending of 18 per cent of their outstanding advances. Even on direct lending to agriculture, many banks are not able to meet the specified norm, sources in the banking industry said.
Seelam expressed confidence that food inflation would come down with improvements to supply chains.
“We need to further moderate inflation. But overall, the economy is looking much better than it was last year. India’s current account deficit will remain at about $60 billion, which will be easily funded, and fiscal deficit will also remain well below the red line drawn by the Finance Minister,” he said.
Seelam also called for special steps from industry and regulators to increase the domestic investor base. More attractive and transparent financial products should be designed to bring middle class and lower-level salaried employees into the investor net.
There also has to be a better grievance redressal mechanism so that investors have some comfort about having a credible and reliable financial system.
He said a large proportion of the Indian population still lacks access to institutional finance.
“We must have a proper, transparent, regulatory and investor grievance redressal mechanism so that people looking for reliable products and instruments to maximise their investments find it a creditworthy system.”