NEW DELHI (Reuters) - India's government on Thursday announced immediate steps to ease a cash crunch for farmers amid widespread criticism of Prime Minister Narendra Modi's shock decision to withdraw high-value bills in the middle of the sowing and wedding season.
Farmers have been left stranded as traders have no cash to pay for their produce, while millions of Indians lined up outside banks and post offices for the ninth day to exchange old banknotes or withdraw rationed money from their accounts.
Modi dropped a bombshell on Nov. 8 by abolishing 500 and 1,000 rupee notes that accounted for 86 percent of cash in circulation. The move was aimed at cracking down on the shadow economy but has brought India's cash economy to a virtual standstill.
In the latest in a series of ad hoc steps, Modi allowed farmers to withdraw up to 25,000 rupees ($368) a week against their crop loans to ensure that sowing of winter crops "takes place properly", a senior finance ministry official said.
Economic Affairs Secretary Shaktikanta Das also said a time limit for farmers to pay crop insurance premiums has been extended by 15 days.
Many of India's 260 million farmers have no bank accounts and depend on local money lenders to fund sowing, which means those that have to borrow to sow winter crops like wheat or rapeseed could face debt trouble without a good harvest.
The government also slashed the amount of old money people can exchange for new notes to 2,000 rupees - or just under $30 - from a limit of 4,500 rupees.
The move sought to deter huge numbers of people queuing to swap cash repeatedly, some of whom are suspected to be acting on behalf of racketeers trying to launder "black cash" before a Dec. 30 deadline for depositing or swapping old notes.
($1 = 67.8875 Indian rupees)
(Reporting by Nidhi Verma and Neha Dasgupta; Writing by Krishna N. Das; Editing by Douglas Busvine and Michael Perry)