Plummeting agricultural growth is weighing on India's economy and threatens the country's ability to feed itself as global food prices spiral upwards, a government report said yesterday.

The alert paved the way for the Indian budget, which will be revealed today and is expected to focus on populist measures designed to boost an ailing rural economy, including a possible £4 billion debt relief package for farmers. The left-leaning coalition government is under intense pressure to act before next year's general election as suicide rates soar among desperate smallholders yet to benefit from India's economic advance.

As many as 150,000 farmers have committed suicide in the past decade after falling behind in payments to local money lenders, according to the Tata Institute of Social Sciences.

Palaniappan Chidambaram, the Finance Minister, has already conceded that India's headline economic growth figures of close to 9 per cent do not tally with the electorate's experiences and has said supporting farmers will make India's economic renaissance more inclusive.

The official annual Economic Survey, which was drafted by Mr Chidambaram's office, said that the farming sector, on which 70 per cent of India's population depends, is expected to grow just 2.6 per cent this year, down from 3.8 per cent a year earlier.

The slowdown further flattens the growth plateau to have beset Indian agriculture since the country's “Green Revolution” - the period in the 1960s and 1970s when modern farming methods radically boosted yields and effectively eradicated famine in the sub-continent.

Most worryingly, economists say, India's ability to increase harvests of staple foods such as grains, rice and pulses now runs at less than 1 per cent a year, lagging the 1.5 per cent growth rate of its population.

“It is touch and go, whether India feeds itself,” Dinker Panandikar, of RPG Foundation, a think-tank, said. “India is richer, but as people earn more they consume more.”

In 2006 a poor harvest forced India to import grain for the first time in six years, a move that deeply embarrassed Manmohan Singh, the Prime Minister. Since then, food imports have accelerated by about 50 per cent year-on-year, according to Morgan Stanley, the bank.

“Due to uncertainties in global markets and hardening of international prices of food, the food security of India critically depends on the farm sector,” yesterday's report said.

However, experts say that investments in irrigation schemes and genetically modified plants will take years to make an impact. Having to tap global markets while subsidising prices at home is again likely to eat up a portion of India's swelling foreign reserves this year.

Domestic wheat prices increased by only 3 per cent in 2007 as government controls shielded consumers from a 75 per cent rise in global prices — a spike fuelled by emergency buying of nearly 200 million tonnes by India.

Dearer prices for foodstuffs such as imported edible oils are already hitting shoppers, prompting Mr Singh to term them “a tax on the poor”.

Pressure on the government to support small farmers is high as few are profiting from the global bull market in food. “Many are subsistence farmers who grow to survive; others see the margins go to middlemen; and if your crop fails you have nothing to sell,” D. K Joshi, an economist at Crisil, the Bombay-based rating agency, said.

Economic pressures

8.7% — Headline economic growth rate

2.6% — Expected growth in farming sector

70% — Amount of population dependent on farming sector

1% — Annual ability to increase harvest of staple foods such as rice and grains

1.5% — Annual growth in population

Source: Times archives

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