India cancels small farmers' debt

All farmers with land of less than two hectares will be able to apply

The Indian government is to cancel the entire debt of the country's small farmers in a giant scheme that will cost 600bn rupees ($15bn; £7.6bn).

The move is a centrepiece of India's latest budget, with the government also increasing education spending by 20% and health funding by 15%.

Widely seen as a populist budget ahead of elections due by May 2009, Delhi has also pledged to control food prices.

The government also said it would keep up work to control wider inflation.

The farm loan cancellations will be offered to all farmers with less than two hectares of land.

Reaction from farmers groups has so far been mixed, with some complaining that the land-size criteria is too strict, and that those with larger fields will unfairly miss out.

Mohan Manidwar of Farmers Agitation Group, which highlights the large number of impoverished farmers committing suicide, said most farmers in the Vidarbha region of central India would miss out.

'Price pressure'

Unveiling the latest budget, Finance Minister Palaniappan Chidambaram said India's annual economic growth was now running at 8.7%.

'Populist' pre-election budget

This figure, which covers the current financial year to 31 March 2008, is a slight slowdown from 9.6% in 2006/07 - India's fastest economic expansion in 18 years.

Over the past year India has increased interest rates and reduced the supply of the rupee to cool this breakneck growth.

"There is pressure on domestic prices, especially the prices of food articles," Mr Chidambaram told the Indian parliament.

"Management of the supply side of food articles will be the most crucial task in the ensuing year."

"Keeping inflation under check is one of the cornerstones of our policy."

Mr Chidambaram added that the government was determined to see India become self-sufficient in food grains.

Mr Chidambaram also announced higher spending on rural infrastructure and highways.