The big question from the agriculture segment of the Union Budget for FY26 is whether it can bring in climate resilience, and augment the productivity and incomes of farmers and farm labourers. There are several initiatives announced for agriculture that are likely to help the farming community. The special focus on 100 districts to augment agri-productivity, promote sustainable farming practices and crop diversification, extending credit access through Kisan Credit Cards from Rs 3 lakh to Rs 5 lakh, starting a Pulses Mission to attain atma nirbharta in tur, moong and urad, etc, are all steps in the right direction. So is the setting up of a Makhana Board in Bihar. How far they will go in achieving their objectives remains to be seen. Right now, one can talk of some budget numbers, which may indicate whether these schemes can deliver.
The budget allocated for agriculture and farmers’ welfare, as well as for allied sectors, put together is Rs 1.49 trillion. This marks roughly a 4 per cent increase over the previous year’s budget. If inflation hovers between 4 to 5 per cent in FY26, the real value of this figure may be a bit less compared to last year. The biggest scheme under the Ministry of Agriculture is PM-Kisan, the allocation for which has been at Rs 60,000 crore since 2019. In real terms, it has been declining. The opportunity to dovetail this income transfer with the direct transfer of the fertiliser subsidy, which is bigger than the budget of the Ministry of Agriculture, has been missed.
So, the real question is whether the allocation is sufficient to tackle some of the structural problems of agriculture. While agriculture’s share in overall GDP has been declining over the decades, reaching approximately 17.7 per cent in recent years, its share in the workforce, after a secular decline, reversed, and it increased from 42.5 per cent in 2018-19 to 46.1 per cent in FY24. This has depressed the real wages in the farming sector, where 55 per cent of employment is of farm labourers, who are at the bottom of the economic pyramid. This reverse trend underscores the inability of non-agricultural sectors in urban India to absorb this surplus labour. The Economic Survey has rightly pointed out the need to promote labour-intensive sectors with skill upgradation so that their productivity, and thus, their incomes, improve. The organised manufacturing sector so far has gone in for more capital-intensive choices rather than labour-intensive ones. Deregulating MSMEs is one way to move forward as they create a bulk of employment in the country, after agriculture.
The budget’s emphasis on releasing 109 high-yielding, climate-resilient varieties of 32 field and horticulture crops is welcome. However, without adequate investment in R&D and extension, productivity gains may not translate into higher farm incomes. There is only a marginal increase in expenditure on R&D in the FY26 budget over the revised estimate of FY25. This is way below the one per cent mark of agri-GDP, considered essential to ensure sustainable agriculture growth in the face of climate change. India is hovering at less than 0.5 per cent.
Marketing of high-value crops remains a challenge, given the fragmented value chain that results in farmers receiving only around 30 per cent share in the consumer’s spending on fruits and vegetables. The Mission for Vegetables and Fruits, with a Rs 500 crore allocation this year, aims to enhance production, strengthen supply chains, and boost processing to ensure farmers receive remunerative prices. This has potential if effectively implemented. But the allocation is a paltry sum while the requirement is huge. What is needed is focused attention on fruits and vegetables, as was given to milk under Operation Flood. The current programmes and allocations lack that vision, and hence, the problems will linger. Strengthening e-NAM and integrating it with the ONDC platform could improve price discovery, reduce middlemen inefficiencies, and give farmers better market access. However, logistical bottlenecks and inadequate processing facilities continue to limit this potential.
Agriculture’s challenges are deeply intertwined with global price dynamics. India continues to face shortages in pulses, oilseeds, and key raw materials for agri-processing industries like cotton and maize, leading to rising import dependence. The budget does little to address these shortages structurally. Expanding the area under pulses in rice-fallow regions and incentivising private-sector participation in oilseed production could help bridge this gap. But the structural challenge remains: Farming in India is still heavily dependent on rice and wheat, largely due to MSP-centric procurement policies that crowd out high-value crops like pulses, oilseeds and horticulture. The shift to a crop-neutral incentive structure is imperative to drive sustainable diversification.
Post-harvest losses remain a significant issue. Around 8.1 per cent of fruits and 7.3 per cent of vegetables are lost in the post-harvest value chain, amounting to 37 per cent of total post-harvest losses of Rs 1.53 trillion annually. Higher investments in cold chains, processing facilities, and logistics are needed to reduce such losses. Despite efforts to expand warehousing and cold storage infrastructure under various schemes, a significant portion of perishable produce is wasted due to inadequate processing capacity. The government has taken steps to encourage private investment in storage and marketing infrastructure, but more needs to be done. The allocation under the Agriculture Infrastructure Fund has increased from Rs 600 crore in FY25 to Rs 900 crore in FY26, which can improve the post-harvest value chain in India.
While the Union Budget 2025-26 makes some progress in addressing agricultural challenges, the overall approach remains incremental rather than transformational. A paradigm shift is needed — one that moves away from subsidy-heavy interventions towards investment-driven growth, greater private sector participation, and technology-led efficiency improvements. The path to making Indian agriculture more resilient and globally competitive requires bold reforms in subsidy rationalisation, infrastructure development, and market linkages. Only then can India achieve the goal of Vikshit Bharat and position itself as an agricultural powerhouse by 2047.
Gulati is Distinguished Professor and Das a research fellow at ICRIER. Views are personal
