India Pledges £7.6bn to Combat Rural Suicides

India's government moved yesterday to end the practice of suicides in bankrupted rural communities with a £7.6bn bailout for small farmers.

In a populist measure which analysts believe heralds early elections, Palaniappan Chidambaram, the finance minister, said the plan would be a "one-off" rescue package for farmers brought about by "stories of great distress".

In India millions are driven to despair by their inability to pay off loans of a few hundred pounds. Figures show that more than 166,000 farmers have killed themselves since 1997 - a death almost every half an hour. The farm sector is a key part of the economy, employing two-thirds of India's 1.1 billion population.

India has the fastest growing of the world's big economies after that of China. It grew 9.6% last year, its fastest in 18 years. Saying that the boom had seen a section of the rich "get very rich", Chidambaram said he wanted "to make growth more inclusive" for those left behind.

According to projections, the economy will cool this year. However, the finance minister said he could afford the 600bn rupee bailout to 30 million indebted farmers. "Our growth will be 8.7% ... I know other finance ministers who would give an arm and a leg for such figures," he said.

Analysts described the giveaway as the biggest in India's banking history, and said it signalled an early election.

"It is irresponsible economics. To revive agriculture you need to build canals, roads and warehouses, not indulge massive populist sops," said Mohan Guruswamy, director of the Centre for Policy Studies, a Delhi economic thinktank.

"Every government now will look at writing off loans to win votes. The neglect has to be stopped but not like this."

Farm growth is forecast to slow to 2.6% this year from 3.8% last year, raising concerns among experts about India's ability to continue to feed itself.

The current government, led by the Congress party, is expected to lose control of the upper house in April and has been in a struggle with Communist partners over foreign policy. It has appeared keen to win the support of poor voters, mainly in rural areas, who were seen as mainly responsible for its 2004 election victory.

In television interviews, many farmers said they were pleased with the government plan. But some landlords were angry that only those farmers with smallholdings - less than 2 hectares (5 acres) - would benefit from the welfare package.

Rival parties said the money was too little too late. The government's Communist allies said many farmers were indebted to private moneylenders and would not get the money, which covers only bank loans. The finance minister said the details of the scheme would silence doubters.

There were also promises to raise spending on health and education, as well as tax cuts for the urban middle class.