Stopping short of the Farm

The Union Budget for FY26 has outlined several initiatives aimed at addressing the challenges faced by Indian agriculture, including climate resilience, farm productivity, and income growth for farmers and farm laborers. However, while the budget includes some positive measures, questions remain about their effectiveness in tackling structural issues like labor absorption, agricultural diversification, and marketing inefficiencies.

Budget Allocation and Structural Challenges in Agriculture:

• Agriculture and Allied Sectors Funding: The total allocation for agriculture, including allied sectors, is Rs 1.49 trillion, marking a 4% increase from the previous year. However, inflation might reduce its real value, making it insufficient to address underlying structural challenges like stagnant agricultural wages and labor inefficiencies.
• PM-Kisan and Income Support: The PM-Kisan scheme continues with a Rs 60,000 crore allocation, but its real value has been declining. The absence of a more integrated approach that includes fertilizer subsidy transfers limits its potential to drive significant change in farmers’ incomes.
• Labor-Intensive Sectors and Employment: With agriculture's share in GDP shrinking, but its labor share increasing, India faces a challenge in absorbing surplus agricultural labor. The lack of sufficient growth in non-agricultural sectors adds to this, necessitating greater focus on labor-intensive industries and skill upgradation to improve farmer livelihoods.

Climate Resilience and Productivity Enhancements:

• Climate-Resilient Crops and R&D Investment: The budget proposes releasing 109 high-yielding, climate-resilient crop varieties. However, the marginal increase in R&D funding is insufficient to meet the one per cent of agri-GDP benchmark needed to sustain agricultural growth in the face of climate change.
• Market Access and Value Chain Improvements: The Mission for Vegetables and Fruits is an encouraging step to enhance production and market access. However, the Rs 500 crore allocation is limited, and logistical bottlenecks persist, which can impede the successful implementation of these initiatives.
• Pulses and Oilseeds Production: The Pulses Mission aims to reduce dependence on imports, but the budget does not address the structural issues like MSP-centric policies that favor rice and wheat over more diversified crops such as pulses and oilseeds.

Post-Harvest Losses and Infrastructure Gaps:

• Post-Harvest Losses: India suffers significant post-harvest losses, particularly in fruits and vegetables, due to inadequate cold storage and processing infrastructure. While the government is encouraging private investment in this area, the existing budget allocation under the Agriculture Infrastructure Fund (Rs 900 crore) is insufficient to address the vast needs of the post-harvest value chain.
• Cold Storage and Processing Facilities: The budget provides a marginal increase in funding for cold storage infrastructure, but it remains far from addressing the systemic inefficiencies and logistical challenges in the agricultural supply chain.
• Missed Opportunities for Reform: The incremental approach of the budget, without addressing fundamental issues such as subsidy rationalization and private sector participation, limits the potential for transforming Indian agriculture into a globally competitive and climate-resilient sector.

Practice Question:

Q. Evaluate the effectiveness of the Union Budget 2025-26 in addressing the structural challenges faced by Indian agriculture. How can the government improve its approach to make Indian agriculture more resilient, competitive, and inclusive?