The Indian government says it will spend billions of dollars to help farmers and revive the rural economy. As Anjana Pasricha reports from New Delhi, the promise comes ahead of general elections scheduled for next year.

Finance Minister P. Chidambaram told parliament Friday that the government will write off the debts of 30 million small farmers, and he promised financial aid to another 10 million farmers.

Presenting the country's annual budget, Chidambaram said - amid applause from lawmakers - that the loan waivers will cost the government $15 billion.

"For marginal farmers and small farmers there will be a complete waiver of all loans, that were overdue on December 31, 2007, and which remained unpaid until February 29, 2008. In respect of other farmers there will be one-time settlement scheme," the minister explained.

India's farm sector has been facing a near crisis situation, and agricultural growth is expected to slow down to a 2.6 percent increase over the previous year. Hundreds of farmers, faced with mounting debts, are reported to have committed suicide in recent years.

The sweeping debt amnesty is being seeing as a bid by the Congress Party-led government to win support of rural voters ahead of next year's general elections.

When the government came to power in 2004, it had promised to make economic growth more inclusive and spread the benefits of India's growing economy to the impoverished countryside. But tens of millions of people continue to live in poverty.

The finance minister also announced significant increases in spending on such social sectors as education and health.

He said the government should keep an eye on inflation, due to higher global prices of crude oil, food and other commodities.

"All these trends are inflationary. There is pressure on domestic prices, especially the prices of food articles," Chidambaram said. "Consequently, the management of the supply side of food articles will be the most crucial task in the ensuing year."

The finance minister said the economy is slowing marginally: it is expected to grow at eight-point-seven percent this financial year, compared to nine-point-six percent last year.

The slower growth is attributed to a rise in interest rates that the government implemented in the last year in order to check inflation.

Despite the slower growth, India's economy continues to be the second-fastest-growing in the world.