While India has made visible progress in manufacturing, services and technology, agriculture remains the backbone of the economy both economically and socially. By FY 2023-24, agriculture and allied sectors contribute about 17.8 per cent to India’s GDP at current prices, supporting almost half of the country’s workforce. Estimates and forecast platforms suggest that for FY 2024-25, the share of agriculture in GDP will remain between 17-18 per cent. Beyond food security, the sector is now expanding into horticulture, fisheries, agro-processing, agro-technology and dairy, gradually enabling farmers to move up the value chain.
Agricultural technologies such as precision farming, regenerative and natural farming practices, crop diversification and drone-based services are improving productivity and value realization. However, these benefits are uneven, especially for small and marginal farmers, who constitute about 86 percent of India’s farming households. As the Union Budget 2026-27 approaches, the focus should shift from incremental support to structural transformation, thereby ensuring sustainable, resilient and inclusive growth.
From fragmentation to scale: production clusters
India’s agriculture remains hampered by fragmented land holdings and weak market linkages. A production cluster approach, supported through institutions such as Farmer Producer Organizations (FPOs), offers a viable route to address these structural challenges.
Clusters enable aggregation of produce, collective input purchasing, shared infrastructure and strong bargaining power in markets. Budget 2026 should deepen support for Farmer Producer Organizations (FPOs), not only by increasing their numbers but also by strengthening their functionality so that they can serve as effective platforms for professional management, access to working capital, market information and post-harvest processing infrastructure. An additional opportunity lies in leveraging community institutions such as Self Help Groups (SHGs) and Village Organizations (VOs) promoted under the National Rural Livelihood Mission (NRLM), which can promote FPOs at the grassroots level and ensure broad farmer participation. Linking clusters to area-specific crops, associated livelihoods and agro-climatic suitability can significantly improve income sustainability and efficiency of scale.
Enabling the next generation of agri-entrepreneurs and farmers
An important but underutilized opportunity lies in promoting agri-entrepreneurs; Rural women and youth who can provide services like nursery management, soil testing, input supply, market linkage and digital advisory services.
Targeted budgetary support for agri-enterprises, startup incubation in rural areas, concessional finance and skill certification can transform agriculture into a viable economic opportunity rather than a subsistence activity. Agri-entrepreneurs also act as local employment generators, strengthening the rural economy while improving service access for smallholder farmers.
Water access as the foundation of agricultural resilience
No agricultural transformation is possible without assured access to water. Despite progress under irrigation and watershed programs, a large portion of Indian agriculture remains rain-fed and vulnerable to climate variability.
Budget 2026 should prioritize targeted investments in water harvesting, groundwater recharge, micro-irrigation and solar-powered irrigation systems, especially in drought-prone and tribal areas. Strengthening community-led water governance and enabling affordable credit for water and sanitation infrastructure can directly increase productivity, reduce risks and stabilize farm incomes.
Promoting natural and climate-resilient farming
As climate risks increase, it has become necessary to promote natural and regenerative farming. These practices reduce input costs, restore soil health, conserve water and reduce farmers’ exposure to volatile chemical input markets.
Public investment should encourage structures that reward sustainable practices. Crop insurance, weather-based advisories and strengthening climate-resilient seed systems will help farmers adapt to changing agro-climatic conditions.
Leveraging flagship schemes for integrated impact
PM Dhan Dhanya Krishi Yojana, covering 100 low productivity agricultural districts, provides an opportunity to drive convergence on grassroots crop diversification, irrigation, storage and institutional credit in a mission-mode approach. Budgetary support should ensure that such schemes prioritize small farmers, rain-fed areas and women-led groups to maximize inclusive impact.
Expanding credit and financial inclusion to boost rural demand
Access to affordable and timely credit remains the cornerstone of agricultural development. The agricultural credit target should be increased to 15-20 per cent, with greater emphasis on allied activities like fisheries, poultry, livestock and dairy, which provide stable income sources for smallholders.
Strengthening the Kisan Credit Card (KCC), expanding interest subvention to smallholders and women farmers and improving last-mile delivery of institutional credit can significantly reduce dependence on informal lenders.
Unlocking value through post-harvest infrastructure
Post-harvest losses are estimated at 5-6 percent, especially in fruits, vegetables and dairy, which continues to reduce farmers’ income. Increased allocation for warehouses, cold chains, farm-gate storage and processing units is important to mitigate distressed sales and price volatility.
These factors collectively contribute to the vision of a developed India 2047, in achieving which the agriculture sector plays a vital role.
(The author is Executive Director of PRADAN)
Published on January 24, 2026
