PREVIEW - Farmers to reap good harvest from budget

By Himangshu Watts

NEW DELHI (Reuters) - India's vital but antiquated farm sector may next week finally get the funding it needs to realise its rich potential, with likely big investments in irrigation and seeds aimed at boosting dismal productivity.

The budget will be unveiled next week by the ruling Congress party, which won a bigger mandate in May on the back of rural support and has promised "inclusive growth", making this budget more likely to be farm oriented than in the past.

Credit Suisse said in a recent report that the political environment was extremely favourable for pro-rural policies.

"We expect confirmation of this in the coming budget," it said, adding that irrigation and research and development in seeds were likely to get more funding.

Steps to boost agriculture would help meet the country's rising demand for sugar, where it is the world's top consumer, and increase wheat output in the world's second biggest producer after China.

Indian farmers depend heavily on the monsoon rains as only 40 percent of the cultivated area is irrigated, making the country vulnerable to sharp swings in crop output and a large importer or exporter of the same commodity in different years.

The country's sharp shift from being an exporter of 5 million tonnes of sugar last year to importing an estimated 2 million tonnes in 2009 has been the leading cause of a near 50 percent rise in global sugar prices this year.

"The budget is going to be rural oriented. There is hardly any doubt. It makes good economic sense and political sense," said Dharmakirti Joshi, chief economist at rating agency CRISIL.