follows. firstly, irrigation is the key to the removal of indian agriculture ’ s dependence on the monsoons. the actual net irrigated area in the country is 62. 31 mh, which is only 43 % of the net sown area of the country. secondly, yield comparisons of major crops over the last 3 decades shows mixed results. while wheat yield has increased from 82 % to 93 % of world average, paddy yield has stagnated and maize yield has drastically dropped by 98 % to 40 % of world average. third, the average size of farm holdings has steadily declined. out of india ’ s 116 million farmers, about 60 % have less than 1 hectare and together they farm just 17 % of the land. thus, many of the very small farms are subsistence holdings with low investment and low productivity. fourth, the imbalance in the use of nitrogen – phosphorus – potassium ( npk ) fertilizers is creating problem of soil degradation and adversely affecting productivity. fifth, the increasing subsidies have suppressed investments. gross capital formation in agriculture relative to agriculture and allied gdp improved slightly from 11. 2 per cent in 1999 - 2000 to 14. 2 per cent in 2007 - 08. the rise is largely contributed by the public sector whose share rose from 6. 0 per cent 1999 - 2000 to 8. 2 per cent in 200607 ; the corresponding share from the private sector fell from 10. 2 per cent to 7. 0 per cent. from point of view of agricultural credit, the broad policies followed are : • mandating that 18 % of commercial bank credit is lent to agriculture of which at least 13. 5 % has to be for direct agriculture. policy of doubling of agricultural credit in three years started in 2004 - 05. • with effect from 2006 - 07, goi has provided interest rate subsidy for crop loans given by public sector banks rrbs and cooperative banks. the rate has been increased from 2 % to 3 %. subsidies for the last three years amounted to rs. 6, 019 crore. • strengthening of the regional rural banks and rural cooperative credit structure. • greater branch expansion in rural and semi urban areas and encouraging use of intermediaries and it solutions for greater banking penetration. • ridf investments against shortfall of priority sector and weaker section lending. cumulative disbursement till june 2009 was rs. 58, 041 under the various ridf since its inception in 1995 - 96. • debt waiver program of the union budget

not structural problems. they are all fixable by means of modest reforms. this is not to say that ambitious reform is not good, or is not warranted to sustain growth for the next decade. but india does not need to become a manufacturing giant overnight to fix its current problems. the immediate tasks are more mundane, but also more feasible one : clearing projects, reducing poorly targeted subsidies, and finding more ways to narrow the current - account deficit and ease its financing. over the last year, the government has been pursuing this agenda, which is already showing some early results. for example, the external deficit is narrowing sharply on the back of higher exports and lower imports. the government and the reserve bank said it would $ 70 billion this fiscal year, down from $ 88 billion last fiscal year, but recent data suggests it could be lower still. this leads me to another point. because analysts keep looking for major structural reforms to fix the deeper economic challenges, they ignore smaller steps or dismiss them as “ band aids ”. but strategically placed small steps – strategic incrementalism for want of a better term – taken together can deal with the immediate problems, thus buying time and economic and political space for the major structural reforms. put differently, when the indian authorities said they would bring the fiscal deficit below 5. 3 % last year, no one believed them. the final outturn was 4. 9 %. similarly, while we project the cad to come down to 3. 7 % this year, i think we could be pleasantly surprised. not all the actions we have taken are pretty, and not all are sustainable, but they have done the job. indeed, despite its shortcomings, india ’ s gdp will probably grow by 5 – 5. 5 % this year – not great, but certainly not bad for what is likely to be a low point in economic performance. the monsoon has been good and will spur consumption, especially in rural areas, which are already growing strongly, owing to improvements in road transport and communications connectivity. the banking sector has undoubtedly experienced an increase in bad loans, often owing to investment projects that are not unviable but only delayed. as these projects come onstream, they will generate the revenue needed to repay loans. india ’ s banks have the capital to absorb losses in the meantime. likewise, india ’ s finances are stronger than in the typical emerging - market country, let alone an emerging - market country in crisis. india ’ s overall public debt / gdp