India’s agriculture faces persistent challenges such as inefficient marketing of high-value crops, substantial post-harvest losses, inadequate R&D investment, and rising import dependence.
While the Union Budget 2025-26 introduces incremental measures like enhanced credit access and district-wise productivity improvements, a transformative approach focusing on investment-driven growth, infrastructure, and market linkages is essential for long-term sustainability and resilience.
This editorial analysis is based on the article Ashok Gulati, Raya Das on Budget 2025: Stopping Short of the Farm, published in The Indian Express on February 3
Challenges Of India’s Agriculture
Increasing Share of Workforce
- Declining GDP Share, Rising Workforce in Agriculture: Despite agriculture’s shrinking contribution to GDP, now around 17.7%, the sector has seen an unexpected rise in workforce participation. The share of employment in agriculture, which had been decreasing, grew from 42.5% in 2018-19 to 46.1% in FY24.
- Impact on Farm Laborers: This increase in agricultural employment has resulted in lower real wages, particularly affecting farm laborers. These workers, who make up 55% of the agricultural workforce, are among the most economically vulnerable groups.
- Urban Sector’s Inability to Absorb Labor: The rise in agricultural employment signals the failure of urban non-agricultural sectors to accommodate surplus labor. This trend underscores the need for policies that encourage labor absorption in other sectors.
- Need for Labor-Intensive Growth: The Economic Survey stresses the importance of promoting labor-intensive industries and improving skill development to boost productivity and wages. However, the organized manufacturing sector has largely opted for capital-intensive methods, limiting job creation.
- Potential Solution in MSMEs: Easing regulations on micro, small, and medium enterprises (MSMEs) could provide a remedy. These businesses are the second-largest source of employment in the country after agriculture, playing a crucial role in job generation.
Marketing of High-Value Crops
- Low Farmer Earnings from Consumer Spending: Farmers receive merely 30% of what consumers pay for fruits and vegetables, primarily due to inefficiencies in the supply chain. The fragmented nature of the agricultural value chain reduces their share of profits.
- Need for a Structured Approach: A targeted strategy, akin to Operation Flood for milk, is essential to enhance the marketing and distribution of high-value crops like fruits and vegetables. This would help streamline the supply chain and ensure better returns for farmers.
Post-Harvest Losses
- High Post-Harvest Losses: A substantial portion of agricultural produce is wasted in the supply chain, with 8.1% of fruits and 7.3% of vegetables lost post-harvest. These losses make up 37% of total post-harvest wastage, translating to Rs 1.53 trillion annually.
- Need for Better Infrastructure: Expanding investments in cold storage, food processing units, and efficient logistics can help minimize wastage and improve supply chain efficiency.
- Inadequate Processing Facilities: Despite various government initiatives, the lack of sufficient processing infrastructure remains a key reason for the high losses of perishable agricultural products. Addressing this issue is crucial to reducing waste and improving farmer incomes.
Low Budget Spending On R&D
- Limited Increase in R&D Budget: The budget allocation for agricultural research and development (R&D) in FY26 has seen only a slight rise compared to the revised estimate for FY25.
- Funding Below Required Levels: Despite the increase, the allocation remains significantly lower than the recommended 1% of agricultural GDP needed to ensure sustainable growth, particularly in the face of climate change.
- Insufficient Investment in Innovation: India’s agricultural R&D spending continues to fall below 0.5% of agri-GDP, restricting long-term advancements and innovation in the sector.
Rising Import Dependence
- Dependence on Imports: India remains reliant on imports for key agricultural commodities like pulses, oilseeds, cotton, and maize due to insufficient domestic production.
- Impact of Global Price Volatility: Fluctuations in international prices add to the challenges, exposing Indian agriculture to uncertainties in global markets and increasing vulnerability to external economic shifts.
Union Budget 2025-26 Proposals
- Enhancing Agricultural Productivity and Sustainability: A targeted initiative covering 100 districts aims to boost agricultural productivity, promote sustainable farming methods, and encourage crop diversification.
- Increasing Credit Access for Farmers: The credit limit under the Kisan Credit Card scheme has been raised from Rs 3 lakh to Rs 5 lakh, improving financial support for farmers and enabling better access to resources.
- Launch of Pulses Mission and Makhana Board: A dedicated Pulses Mission has been launched to achieve self-sufficiency in tur, moong, and urad production. Additionally, a Makhana Board will be set up in Bihar to enhance the production and marketing of makhana.
- Budget Allocation for Agriculture and Allied Sectors:The total budget allocated for agriculture and allied activities is Rs 1.49 trillion, reflecting a modest 4% increase from the previous year. However, if inflation remains between 4% and 5% in FY26, the real value of this allocation may decline compared to the previous year.
- PM-Kisan Scheme Funding: The PM-Kisan scheme has been allocated Rs 60,000 crore, unchanged since 2019. Due to inflation, the scheme’s real value has been decreasing over time, affecting its effectiveness in supporting farmers.
Transformation Approach Is Needed
- Moving Towards a New Agricultural Model: The Union Budget 2025-26 introduces incremental changes rather than bold transformations in agriculture. A fundamental shift is needed, transitioning from a subsidy-driven approach to an investment-led model that enhances private sector participation and technology-driven efficiency.
- Structural Reforms for a Competitive Agriculture Sector: For Indian agriculture to become more resilient and globally competitive, significant reforms are required. These include rationalizing subsidies, strengthening infrastructure, and improving market linkages to ensure long-term growth and sustainability.