Agriculture in Union Budget 2025-26: balancing continuity with change

Given that agriculture and rural development are state subjects, an inter-state council on the lines of GST Council is very important for better coordination between Centre & states

The recent Union Budget 2025-26 is the first Budget after the 2024 general elections. Although the Budget is mainly a statement of accounts, it can nevertheless send important signals about the priorities of the government. On that count, the Budget is encouraging. There is focus on continuity with some important additions. There are three encouraging features in this Budget. First is an update on the implementation status of last year’s announcements and continuance of some of the well-functioning programmes. Second is the announcement of important initiatives for lagging districts. Third is the reduction in the gap between the Revised and Budget Estimates of several programmes of the previous year (2024-25), which indicates either improvement in implementation or moderation of ambition or both.

 

A balanced allocation of resources for farming, which is the main plank of the rural economy, and other sub-sectors including animal husbandry, fisheries, food processing, public distribution, cooperation, rural infrastructure, and employment is important. Almost all these ministries received marginally higher allocations ranging between 3 and 6 per cent compared to last year. The allocations in real terms are almost unchanged. Consumer affairs saw a reduction of 58 per cent due to a substantial slashing of allocation for the price stabilisation fund. On the other hand, the food processing ministry received a hike of 33 per cent on the back of a substantial increase in allocation for micro food processing, which is very useful for livelihoods at household level.

 

Let us now turn our focus to some of the key announcements. Two complementary programmes, Dhan-Dhanya Krishi Yojana and Rural Prosperity and Resilience Programme, have been announced. The first programme aims to focus on 100 laggard districts to improve agricultural productivity, infrastructure, and credit availability. The second aims to focus on the same 100 districts and address the issues of under-employment in agriculture, and reduce migration through skilling, technology, and reinvigorating the rural economy. The importance of these programmes for the rural economy cannot be overemphasised. However, these 100 districts are unlikely to be homogenous in terms of endowments, infrastructure, skills and constraints. Therefore, a detailed district-level plan with an integrated vision encompassing agriculture and rural development needs to be evolved for each of these districts. This requires convergence not only across different programmes of a ministry but also between the two separate ministries dealing with agriculture and rural development. If such a vision is evolved and these programmes are successful, then they can serve as benchmarks for similar programmes in other districts.    

 

A six-year mission to attain self-sufficiency in pulses has been announced with an allocation of ₹1,000 crore, with a special focus on tur, urad, and masoor.  This programme is in continuation of a similar programme for oilseeds in the last Budget. Although improving productivity with technology and infrastructure are some of the objectives of this programme, the main plank appears to be price support through procurement. The present problems with open-ended procurement of rice and wheat are well-known. Given the storage constraints, only about 30 per cent of the marketed surplus can be physically procured, and for the rest, deficiency payments need to be made. Depending upon the difference between the minimum support price (MSP) and market price, the cost of such a procurement, plus the deficiency payments system of these three crops based on the 2022-23 levels of production, MSP and economic cost, works out to approximately between ₹13,000 crore (for 10 per cent difference) to ₹19,000 crore (20 per cent difference).

 

A national mission on high-yielding seeds has been announced. This is a continuation of a major programme announced in the previous Budget to increase productivity through the development of climate-resilient and high-yielding seed varieties. This is a welcome initiative and these research efforts need to be complemented with measures to make the seeds available to farmers at affordable prices. A programme for vegetable and fruit production, and value chain development has been announced with an outlay of ₹500 crore. This is a continuation and extension to fruits of a similar programme for vegetables announced in the last Budget. Similarly, the programme for deep-sea fishing lends continuity to a similar programme announced for shrimp farming last year. A mission to increase cotton productivity and the establishment of Makhana Board in Bihar are long overdue and welcome steps in the right direction.

 

But, one crucial aspect of any commodity-specific programme is marketing. All the programmes related to pulses, oilseeds, vegetables, fruits and cotton announced in the last two years can yield the desired results only if the farmers can realise remunerative prices for their produce. There is a huge variation in the density of regulated markets in different parts of the country, which varies from 119 sq km in Punjab to 11,215 sq km in Meghalaya. The all-India average area served by a regulated market is 487 sq km, against the recommendation of the National Farmers Commission (2004) that a regulated market should be available to farmers within a radius of 5 km (corresponding market area of about 80 sq km). A few years ago, the government had approved the GrAM scheme (Gramin Agricultural Market) under the Agri-Market Infrastructure Fund (AMIF) with a corpus of ₹2,000 crore with Nabard for developing and upgrading 22,000 weekly agricultural markets. This scheme was also highlighted by the Parliamentary Standing Committee on Agriculture in its Report in 2019-20. This scheme should be fast-tracked to enable farmers to realise better prices.

 

In conclusion, although the Budget is encouraging in its intent and content, an integrated vision for rural development is needed at the district level with agriculture at its core. Also, given that agriculture and rural development are primarily state subjects under the Constitution, an inter-state council on the lines of GST Council is very important for better coordination between the central government and the states. Developing agricultural markets at the village level needs to be accorded top priority.

 

The writer is professor of economics, Institute of Economic Growth, University of Delhi. He can be reached at csekhar@iegindia.org