The Union Finance Bill 2006/2007 focus on rural development and economy augurs well for the entire agricultural sector, chiefs of national commodity exchanges said. For the first time, the Budget has greater focus on rural development, rural employment and rural economy in general, supported with reduced lending rate for farmers, said Mr Jignesh Shah, MD and CEO, Multi Commodity Exchange of India Ltd, reacting to the Union Budget 2006-07 announced on Tuesday. "We expect the rural economy supported with good agricultural growth to create additional demand for strengthening the economic growth," Mr Shah said. The Government had made allocation of Rs 50 crore for modern terminal market being initiated by Ministry of Agriculture, which would benefit the farmers by providing them a modern market mechanism close to their place of production, he said. Banks could use warehousing based secured lending mechanism to deliver credit to farmers at seven per cent, he said.The focus on the rural community is encouraging as there are more expenditure allocations in the areas of irrigation, rural infrastructure and credit, said Mr P.H. Ravikumar, MD and CEO, NCDEX Ltd, commenting on Union Budget 2006-07. He said the additional expenditure on setting up terminal markets in horticulture would help in the development of the cash markets.
The changes in the lending structure to farmers would also be a challenge to the banks, which will have to strike a balance between quality of assets and credit allocation given that the target for such lending has been set at Rs 1,75,000 crore, he said.