New Delhi: In order to fight inflation by raising farm productivity, Finance Minister Pranab Mukherjee is expected to increase farm loan disbursal target substantially to over Rs 4 lakh crore in the upcoming Budget.

The government has been giving priority to the farm sector and had enhanced farm credit target by 15.3 per cent to Rs 3, 75,000 crore for the current fiscal.

The growth rate of agriculture sector, pegged at 5.4 per cent for the current fiscal, is likely to see moderation in the next fiscal. As per the forecast, the farm sector is likely to see a lower growth rate of 3 per cent in 2011-12.

In the last two fiscals, the government has raised targets in the range of about 15 per cent.

For 2008-09, the target set for the farm credit was Rs 2,80,000 crore while the actual disbursement was Rs 3,01,907 crore.

The target was increased by 16 per cent in the following year to Rs 3, 25,000 crore and banks gave Rs 3, 66,918 crore advances to the farm sector in 2009-10.

The government has set a goal of Rs 3, 75,000 crore in the current fiscal. Of this, banks have already given loans to the tune of Rs 1, 94,392 crore in the first six months.

In 2010-11 budget, an additional 2 per cent interest subsidy was announced for those farmers, who repay their short term crop loans timely.

Mukherjee in 2010-11 budget had said, "In the last budget, I had provided an additional one per cent interest subvention as an incentive to those farmers who repay their short-term crop loans as per schedule.

"I propose to raise this subvention for timely repayment of crop loans from one per cent to two per cent for 2010-11. Thus, the effective rate of interest for such farmers will now be 5 per cent per annum."