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Farm Fresh

 The finance minister has announced that yields of pulses would be increased significantly by increasing the availability of high-quality seeds.

Mohan Natarajan | Print Edition: March 22, 2007


MOHAN NATARAJAN,
Director, Kotak Commodities
The Budget laid heavy emphasis on agriculture and improving the farmer’s lot. This was required to ensure that agricultural productivity increases and India doesn’t have to face shortfall in production leading to inflation. Some of the measures announced by the finance minister are:

• Training of farmers for effective water management
• Cheaper loans for housing under specific schemes
• Better quality seeds to be given to farmers to ensure higher productivity
• More effective way to spread fertiliser subsidies

It is also evident that the government was serious about addressing structural inefficiencies in agriculture, which have led to inflation. The finance minister has announced that yields of pulses would be increased significantly by increasing the availability of high-quality seeds for which he has mandated certain institutions. Further, he announced allocations for increasing ground water availability through harvesting and also for training farmers in effective water management. The effectiveness of these steps would depend on effective implementation and monitoring.


The other point of emphasis in the Budget was to  address shortterm inflationary issues. This has been done by using a mixture of reducing customs and excise duties.

On the flip side, the finance minister did not take up many items on the analysts’ budget agenda for the commodities industry. These include:
• Allowing banks and FIIs to participate in the commodities markets
• Treating gains made from commodities futures trading as part of business income rather than as speculative income
• Equating tax treatment for gold ETFs and physical gold

This list could be expanded substantially. The market expected P. Chidambaram to dream big, but the Budget is somewhat on the disappointing side. He could have covered his Budget canvas with many bold strokes, but chose to be rather conservative, preferring to maintain status quo or using very delicate strokes.

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