As the Union Budget for 2026–27 approaches, agriculture has been articulated as the first engine of development. According to the Periodic Labour Force Survey (2023–24), agriculture and allied activities employ 46.1 per cent of India’s workforce, underscoring the sector’s centrality to livelihoods, food security, and rural demand. The question before policymakers, however, is not one of intent or aggregate spending, but of whether budgetary choices are aligned with the sector’s structural needs.
Budgetary allocations to the Department of Agriculture and Farmers’ Welfare (DA&FW) have expanded significantly in nominal terms, from ₹21,933 crore in FY 2013–14 to ₹1.27 lakh crore in the Budget Estimates for FY 2025–26. Agriculture-related spending also flows through multiple ministries, covering irrigation, renewable energy, fertilisers, rural employment, and research. This reflects sustained fiscal attention and an increasingly whole-of-government approach.
However, relative prioritisation tells a different story. DA&FW’s share in the total Central Plan outlay has declined steadily, from 3.53 per cent in 2021–22 to 2.51 per cent in 2025–26. Actual expenditure has frequently undershot budget estimates, particularly during fiscally constrained years. While allocations remain large, agriculture’s relative weight within the expanding public expenditure framework is diminishing.
Persistent productivity challenge
This trend is significant because Indian agriculture continues to face a persistent productivity challenge. Despite employing nearly half the workforce, the sector contributes less than one-fifth of GDP and exhibits lower growth than the rest of the economy. Incremental increases in outlays, without changes in spending composition, are unlikely to alter this imbalance.
A review of recent budgets shows a continued concentration of resources in income support, input subsidies, and risk mitigation schemes. PM-KISAN, for instance, has improved income predictability and strengthened direct state–farmer linkages through digital transfers. The expansion of Aadhaar-linked delivery systems and the rollout of AgriStack represent genuine improvements in targeting, transparency, and administrative capacity. These initiatives have strengthened the welfare architecture and merit acknowledgement.
But welfare efficiency is not the same as productivity enhancement. The binding constraints in Indian agriculture lie in weak seed systems, inefficient water use, deteriorating soil health, limited extension capacity, post-harvest losses, and poor market integration. Budgetary priorities continue to underweight these productivity-enhancing public goods relative to recurring expenditures.
Complementing with sustained budgetary support
Seed systems provide a useful illustration. Yield stagnation across several crops reflects slow varietal turnover, uneven quality assurance, and limited diffusion of improved genetics. The draft Seed Bill recognises this institutional gap by proposing reforms to certification, quality control, and innovation incentives. However, regulatory reform must be complemented by sustained budgetary support for agricultural research, adaptive trials, extension networks, and farmer adoption to generate measurable gains.
Risk mitigation schemes show a similar pattern. Crop insurance and credit-linked support absorb substantial resources but remain constrained by delayed settlements, uneven coverage, and weak alignment with actual production risks. Without complementary investments in irrigation, climate-resilient practices, and localised extension, these schemes function primarily as ex-post compensation rather than ex-ante resilience-building tools.
Input subsidies, including fertiliser support, further illustrate the tension. While digital monitoring has improved transparency, distorted price signals continue to encourage inefficient input use and impose high fiscal costs. Policy discourse increasingly recognises the need for rationalisation, but progress remains incremental. Reform must be sequenced and linked to productivity, soil health, and income outcomes, not treated as a narrow fiscal correction.
Public investment gaps
Public investment gaps are most evident in post-harvest infrastructure, storage, processing, logistics, and value-chain integration. Persistent post-harvest losses, particularly in horticulture, livestock, and fisheries, continue to erode farm incomes. Instruments such as the Agriculture Infrastructure Fund have demonstrated demand, but their effectiveness depends on last-mile execution and stronger integration with farmer producer organisations and markets.
The broader lesson is clear. India has built an extensive safety net for agriculture, but a weak ladder for growth. Digital public infrastructure such as AgriStack offers an opportunity to rebalance this approach, enabling differentiated support, outcome-linked incentives, and accountability. But technology cannot substitute for strategic prioritisation.
If agriculture is truly to serve as India’s engine of development, the Budget must signal a shift, from income support to income generation, from fragmented schemes to coherent value-chain strategies, and from managing distress to enabling productivity-led growth. This does not require dramatically higher spending. It requires sharper choices. The foundations are in place. What is needed now is strategic follow-through.
Bhushan is Partner, and Rajnish Kumar is Sector Lead, Agriculture and Food Systems, MicroSave Consulting (MSC).
Published on January 31, 2026
