World Bank keen on farm sector

Expecting growth of 8 per cent for 2005-06, the World Bank today said it was keen to fund the agriculture sector and microfinance in the country in a big way, but wanted the government to allow greater foreign direct investment (FDI) and remove bottlenecks that restricted the role of the private sector.

"There is a very good chance of the economy to grow by 8 per cent this year. Higher growth rate was possible in the future and the distance of 8 to 10 per cent was very much achievable," Praful Patel, vice-president (South Asia), World Bank, said on the sidelines of a conference on micro-finance.

Prime Minister Manmohan Singh had recently said India should target 10 per cent growth over the next two-three years. India's GDP grew 8.1 per cent during the first half of 2005-06. "We are ready to go back to supporting India in the agriculture sector," Patel said. The bank's activities had shifted to urban development and infrastructure in the recent years.

He said the World Bank was keen to fund microfinance projects and microfinance institutions to increase the availability of microcredit to the poor. "The state governments have unreasonable interest rate caps on microcredit at 6-7 per cent that makes lending unviable. This has to be done away with," he said.

Elaborating on the World Bank's proposal, a senior executive told Business Standard: "We feel that the current corpus for microfinance created by the government with Nabard at Rs 200 crore is very low and the need is at least five times that amount. World Bank would be willing to make the funds available to the same fund or a new fund."

Commending the government for managing the fiscal deficit prudently, Patel said that with a growth rate of 8 per cent, the government had done well to contain the deficit.