The agriculture sector in India remains the backbone of the rural economy, employing about 46 percent of the workforce. However, its contribution to GDP is less than 20 percent. This persistent imbalance not only highlights glaring structural inefficiencies in the region, but also speaks to the urgent need for strategic recalibration. Budget 2026 provides a golden opportunity to position agriculture not just as a subsistence sector but as a flexible, diversified and value-driven engine of growth to create a ‘Developed India’.
There are many challenges, including fragmented land holdings (about 85 per cent of farmers are small and marginal farmers), which leads to low production, low productivity and inadequate infrastructure. This results in significant post-harvest losses, market access challenges, price realization problems and instability, which impacts farmers’ income. These are increasingly exacerbated by external shocks such as climate change, extreme weather events and global events, which sometimes impact domestic supply chains. The last few budgets have attempted to address some of these issues through a pragmatic mix of strategic measures and visionary initiatives aimed at correcting some of these structural inefficiencies. However, given the gravity of these issues and the vast potential of the sector that can be unlocked, there is a need for a decisive shift towards long-term interventions that will build resilience while unlocking value in agriculture and allied ecosystems.
Pay attention to climate
The first key expectation from Budget 2026 would be to focus more on climate adaptation and risk mitigation. The budget could allocate larger public investment in climate-resilient agriculture, which would include drought-tolerant seeds, water-efficient cropping systems, regenerative agriculture and region-specific farming practices. The Budget may envisage launching a “Climate Smart District Programme” wherein 200-250 districts can be converted into climate-smart agriculture zones with bundled interventions like climate resilient seeds, micro-irrigation, solar pumps, soil health restoration, etc., which can also be integrated with district irrigation plans and state action plans on climate change. Furthermore, strengthening agricultural research and extension systems, especially through climate-smart technologies and data-driven advice, should be given greater priority with higher outlays, which in turn can help farmers take informed decisions and improve their productivity and incomes. Crop insurance schemes could be re-examined, with a focus on improving coverage, transparency and timely payments, to ensure that farmers are better protected from climate-induced losses.
The second major expectation will be the initiative to give priority to crop diversification. India’s production pattern is tilted towards water-intensive grains due to historical procurement policies and price incentives. Although these have played a role in ensuring food security, they have also caused ecological stress and limited income growth. Budget 2026 can accelerate the shift towards higher value crops such as pulses, oilseeds, fruits, vegetables and millets by aligning minimum support prices, procurement mechanisms and post-harvest infrastructure with diversification goals.
More importantly, dietary patterns point to an increasing shift toward protein requirements. While protein consumption and availability has increased, there are concerns about the required quality and its distribution, highlighting the need for dietary and crop diversification. Promoting nutritious cereals and horticulture will not only improve nutritional outcomes but also increase farm incomes.
another chance
Third, allied sectors—livestock, dairy, fisheries and forestry—represent another opportunity. These areas are more resilient to climate variability and generate higher and more stable incomes, especially for small and marginal farmers. While previous budgets have emphasized on these areas, the upcoming budget may focus on dedicated steps towards improving animal health infrastructure, cold chain and value-added processing, which can significantly increase productivity and profitability. Cluster-based processing sectors for fruits, vegetables, dairy, fish and spices can be promoted using the Pradhan Mantri Micro Food Processing Enterprises Scheme (PMFME) and Pradhan Mantri Krishi Sinchai Yojana (PMKSY) schemes. Adoption of plug-and-play infrastructure (sorting, grading, IQF, packaging) operated by private players can be encouraged under PPP rental model. This could result in farmgate-level value addition, reduction in logistics costs and boost to processing and export levels.
Another key area that the budget can focus on is market reforms and value chain integration. Despite recent reforms, farmers continue to face price volatility and limited bargaining power. The focus may be on strengthening FPOs. The Budget may envisage introducing ‘One FPO – One Market-Linked Product Programme’ – where each FPO can be assigned a high-demand product (e.g., onion, tomato, milk, fish seeds, turmeric) and kept for a fixed period. Given that a large quantity of horticulture produce is also traded in APMC mandis, outlays may be earmarked in the Budget to develop some world-class APMCs, which can become models for the rest of the country.
The vision of these initiatives
Fifth, adoption of technology will be a key enabler of this change. While the government has taken initiatives to strengthen integrated digital agriculture ecosystem (Agri Stack) to enable transparent price discovery, direct procurement, land records, extension services, input subsidies, better delivery of welfare measures, etc., here are some initiatives that the upcoming Budget may envisage to accelerate adoption:
· Introduction of targeted digital equipment subsidy covering 30-40 per cent of the cost for equipment such as soil sensors, drones-as-a-service, micro-irrigation controllers, etc. through FPOs to ensure collective use and lower individual expenses.
· Launching ‘Digital Farm Services Vouchers’ to give farmers access to agri-tech services, similar to fertilizer or seed subsidies, but at concessional rates, including advisory apps, satellite-based crop insights and AI-powered pest alerts.
· Promoting shared technology centers at the Panchayat level, equipped with drones, IoT kits, handheld testing devices, operated by trained rural youth or FPOs on a pay-per-use model.
· Enhanced budgetary allocation to support agri-tech startups, public-private partnerships and strengthening last mile digital infrastructure could be a welcome step to accelerate technology diffusion across all farms.
Finally, addressing rural incomes requires moving beyond production-focused policies to a comprehensive rural development approach. Skill development, rural non-farm employment and agro-based enterprises should be part of an overall strategy. Linking agriculture to food processing, bio-energy and rural manufacturing can create jobs and absorb surplus labour, thereby reducing pressure on farm incomes.
In short, Budget 2026 presents an opportunity to move from short-term relief measures to a coherent, future-ready agriculture strategy. By prioritizing the above measures, the government can put agriculture and allied sectors on a more sustainable and income enhancing path. Such recalibration is not only desirable but necessary to ensure food security, nutrition, rural prosperity and macroeconomic stability in the years to come.
(The author is Partner, Food & Agribusiness, Business Advisory, BDO India. Views are personal)
Published on January 24, 2026
