Agriculture: A Low Priority in Fiscal Planning

Context

Agriculture is a cornerstone of India’s economy, employing over 50% of the population and contributing approximately 17% to the Gross Domestic Product (GDP). However, recent budget allocations indicate a troubling trend of fiscal neglect towards this vital sector. The Union Budget for 2025-26 has seen a cut in allocations for the Ministry of Agriculture and Farmers’ Welfare, raising concerns about the government’s commitment to addressing the real issues faced by farmers and the agricultural sector.

Overview of Budget Allocations

Recent Trends in Budget Allocations: The Union Budget 2025-26 allocated ₹1.37 lakh crore to the Ministry of Agriculture and Farmers’ Welfare, which represents only a marginal increase from ₹1.32 lakh crore in the previous fiscal year. Notably, this allocation includes a significant cut in capital expenditure, which decreased from ₹118.63 crore to ₹87.87 crore. The allocation for key schemes such as the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) remained stable at ₹63,500 crore, yet other critical areas like crop insurance saw reductions.

Historical Context: Historically, budget allocations for agriculture have fluctuated. For instance, in 2024-25, the allocation was ₹1.52 lakh crore, which followed a steady increase over several years. However, this year’s cut raises questions about sustained support for a sector that has been grappling with numerous challenges.

Key Issues Facing Agriculture

• Low Productivity and Income: Despite its significance, Indian agriculture faces persistent challenges such as low productivity and income levels. A large percentage of farmers operate on small and marginal holdings, with 86% cultivating less than two hectares of land. This unviable scale of operations makes it difficult for farmers to achieve meaningful economic returns.
• Climate Change and Resource Scarcity: Climate change poses an existential threat to agriculture in India, leading to erratic weather patterns that adversely affect crop yields. Additionally, issues related to water scarcity and soil degradation further exacerbate the situation, making it imperative for the government to invest in sustainable agricultural practices and technologies.
• Lack of Access to Credit and Insurance: Access to institutional credit remains a critical issue for farmers. Many rely on informal sources of finance that often charge exorbitant interest rates. The recent budget cuts in schemes like Pradhan Mantri Fasal Bima Yojana (crop insurance) from ₹14,600 crore to ₹12,242 crore highlight the growing risk for farmers who depend on these safety nets during adverse conditions.

Government Initiatives and Their Implications

• PM Dhan-Dhaanya Krishi Yojana: The PM Dhan-Dhaanya Krishi Yojana launched its mission to promote agricultural production across 100 districts displaying low crop intensity together with weak credit characteristics. The excellent nature of this program depends on proper budget support and proper execution methods.
• Focus on Horticulture and Specialty Crops: Horticulture and Specialty Crops receive prime attention because the government introduced thorough programs for enhancing fruit and vegetable market access while boosting horticulture production efficiency. The establishment of a Makhana Board within Bihar marks a significant effort to enhance the production and marketing activities within particular regions. These initiatives require sufficient funding support for realizing real benefits.

The Need for Comprehensive Reforms

• Structural Reforms in Agriculture: To address the systemic issues plaguing agriculture, comprehensive reforms are essential. This includes enhancing access to modern farming techniques, improving irrigation facilities, and promoting sustainable practices that can withstand climate variability.
• Strengthening Agricultural Research and Development: Investment in agricultural research is crucial for developing high-yielding and climate-resilient crop varieties. The budget allocation for agricultural research must be prioritized to ensure that farmers have access to innovative solutions that can enhance productivity while mitigating risks associated with climate change.
• Enhancing Farmer Support Systems: Improving farmer support systems through better access to credit, insurance, and market linkages is vital for creating a more resilient agricultural ecosystem. The government must focus on building robust infrastructure that facilitates these connections while ensuring that support reaches the most vulnerable farmers.

Conclusion

The recent budget allocations reflect a concerning trend of neglect towards agriculture at a time when it needs robust support more than ever. While initiatives like PM Dhan-Dhaanya Krishi Yojana show promise, they require substantial backing to be effective. It is imperative for policymakers to recognize agriculture’s critical role in India’s economic landscape and prioritize investments that address its myriad challenges comprehensively.

Source: The Hindu

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