As the Union Budget for 2026-27 approaches, agriculture has been touted as the first engine of growth. According to the Periodic Labor Force Survey (2023-24), agriculture and allied activities employ 46.1 per cent of India’s workforce, underscoring the centrality of the sector in livelihoods, food security and rural demand. However, the question facing policymakers is not one of intent or total spending, but rather whether budgetary choices align with the structural needs of the region.
The budgetary allocation to the Department of Agriculture and Farmers Welfare (DA&FW) has increased significantly in nominal terms, from ₹21,933 crore in FY 2013–14 to ₹1.27 lakh crore in the Budget Estimate for FY 2025–26. Agriculture-related expenditure is also channeled through several ministries, including irrigation, renewable energy, fertiliser, rural employment and research. This reflects sustained fiscal focus and an increasingly broad whole-of-government approach.
However, relative priority tells a different story. There has been a steady decline in the share of DA&FW in the total Central Plan outlay, from 3.53 per cent in 2021-22 to 2.51 per cent in 2025-26. Actual expenditures are often lower than budget estimates, especially during fiscally constrained years. While the allocation remains large, the relative importance of agriculture within the growing public expenditure framework is declining.
persistent productivity challenge
This trend is significant as Indian agriculture continues to face productivity challenges. Despite employing almost half the workforce, the sector contributes less than a fifth of GDP and shows low growth compared to the rest of the economy. Without changes in the expenditure structure, incremental increases in outlays are unlikely to change this imbalance.
A review of recent budgets reveals continued concentration of resources in income support, input subsidies and risk mitigation schemes. For example, PM-KISAN has improved income forecasting and strengthened direct state-farmer relationships through digital transfers. The expansion of the Aadhaar-linked delivery system and the rollout of AgriStack represent real improvements in targeting, transparency and administrative efficiency. These initiatives have strengthened the well-being architecture and eligibility acceptance.
But welfare efficiency is not the same as productivity growth. The binding constraints in Indian agriculture lie in weak seed systems, inefficient water use, deteriorating soil health, limited expansion potential, post-harvest losses and poor market integration. Budgetary priorities give less importance to these productivity-enhancing public goods relative to recurrent expenditures.
Implementation with continued budgetary support
Seed systems provide a useful example. Yield stagnation in many crops reflects slow variety turnover, uneven quality assurance, and limited diffusion of improved genetics. The draft Seed Bill recognizes this institutional gap by proposing reforms in certification, quality control and innovation promotion. However, to generate measurable benefits, regulatory reform must be complemented by continued budgetary support for agricultural research, adaptive trials, extension networks and adoption by farmers.
Risk mitigation plans show a similar pattern. Crop insurance and credit-linked support absorb substantial resources but remain constrained by delayed settlement, uneven coverage and weak alignment with actual production risks. Without complementary investments in irrigation, climate-resilient practices and local extension, these schemes function primarily as ex-post compensation rather than ex-ante resilience-building tools.
Input subsidies, including fertilizer support, further highlight the tension. While digital surveillance has improved transparency, distorted price signals encourage inefficient input use and impose high fiscal costs. Policy discussions are increasingly recognizing the need for rationalization, but progress remains incremental. Reform should be sequenced and linked to productivity, soil health and income outcomes, and not be treated as a narrow fiscal reform.
public investment gap
The public investment gap is 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 reduce agricultural income. Instruments such as agricultural infrastructure funds have demonstrated demand, but their effectiveness depends on last-mile execution and strong integration with farmer producer organizations and markets.
The broader lesson is clear. India has created a comprehensive safety net for agriculture, but it is a weak stepping stone for development. Digital public infrastructures like AgriStack provide an opportunity to rebalance this approach, enabling differentiated support, outcome-linked incentives and accountability. But technology cannot replace strategic priority.
If agriculture is truly to serve as India’s engine of growth, the Budget should signal a shift from income support to income generation, from fragmented plans to coherent value-chain strategies, and from crisis management to enabling productivity-led growth. This does not require dramatically more spending. This requires sharp choices. The foundations are in place. What is needed now is strategic follow-up.
Bhushan is Partner, and Rajneesh Kumar is Sector Lead, Agriculture and Food Systems, Microsave Consulting (MSc).
Published on January 31, 2026
