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India's Government Proposes Measures to Boost Agriculture, Cut Inflation

India says it will boost its sluggish agricultural sector to ensure that the country's rising economy brings more benefits to millions of poor people. Anjana Pasricha reports from New Delhi, the Congress-led government has also promised measures to check inflation.

Finance Minister Palaniappan Chidambaram promised Wednesday that the government will pay more attention to agriculture, which supports nearly two-thirds of India's billion-plus population.

He says India's farm sector has grown at an average rate of less than 2.5 percent in recent years. That is way behind the overall economy, which is racing ahead at around nine percent.

Presenting the government's annual budget, Chidambaram said he hopes higher spending on the farm sector will serve twin objectives: boost the incomes of India's 115 million farming families, and ensure that the country is self-sufficient in food.

"…A country with a large population has to be nearly self-sufficient in essential food items. Otherwise, supply constraints could upset macroeconomic stability and growth prospects. Hence, agriculture must top the agenda of the policymakers, and must hold the first charge on our resources," he said.

The government has announced a slew of measures to raise farm production, including cheaper credit, fertilizer subsidies, and higher spending on irrigation and rural roads.

It also slashed duties on such items as edible oils and gasoline, in a bid to rein in inflation, which is near its highest level in two years. It also plans to increase spending on health and education.

The finance minister expressed confidence that these measures will spread the benefits of the current boom without slowing the economy's momentum.

Analysts say the Congress Party-led government has turned its focus to agriculture and inflation after losses in two state elections this month. Discontent among poor people hurt by rising food prices has been blamed for the party's defeat. Congress faces more state elections this year, and general elections in 2009.