Union Budget 2026-27: Policy support to keep agri, rural revival on track

Budget 2026-27 strengthens agriculture, MSMEs and rural infrastructure, positioning villages, Tier-II and Tier-III towns at the heart of India's Viksit Bharat vision

The road to Viksit Bharat goes through the nation’s over 665,000 villages and 268,000 gram panchayats and rural local bodies. Agriculture (and allied sectors) remain the primary source of livelihood in rural areas. Around 59 per cent of rural employment and 40 per cent of rural gross value add (GVA) is directly attributable to agriculture. Sustainable rural development requires an approach that focuses on promoting agriculture on the one hand and the diversification of the rural economy towards manufacturing and related services on the other. 

Agriculture and allied sectors 

Over the last five years, the average annual growth rate in the agriculture and allied sector has been around 4.4 per cent per annum. The Government of India has announced a number of measures to enhance productivity, competitiveness and value addition in agriculture and allied sectors in the Union Budget 2026-27. The Budget shows an increase in the allocations for agriculture and allied activities from ₹1.52 trillion in FY26 (RE) to ₹1.63 trillion in FY27 (BE) – an increase of 7 per cent. In the case of rural development, the allocation increased from ₹2.13 trillion in FY26 (RE) to ₹2.73 trillion in FY27 (BE) – a rise of 28 per cent. There are measures for three Kartavya: (a) accelerate and sustain economic growth; (b) fulfilling the aspirations of our people; (c) vision of Sabka Sath and Sabka Vikas help agriculture and rural areas. The annual budgets are a continuation of achieving the long-term goal of Viksit Bharat. 

Agri-processing and MSMEs 

Agri-processing provides an important route for rural industrialisation. Manufacturing and services are mutually reinforcing sectors, with positive and strong forward and backward linkages. Concerted efforts have been made over the last decade to promote agri-processing. Measures announced in the Budget further support MSMEs. Operationalisation of a dedicated SME growth fund and topping up of the Self-Reliant India fund aims to provide equity support for fresh investment. Measures announced to promote use of the Trade Receivable Discounting System (TReDS), like mandatory use of TReDS for institutional purchases from MSMEs by Central Public Sector Enterprises and linking TReDS with the Government e Marketplace, will provide working capital support to MSMEs. Securitisation of TReDS receivables will enhance liquidity in the market. The facilitation of Corporate Mitras or helpers, who will assist MSMEs meet compliance requirements, fills an important business need of entrepreneurs. Support announced for the textile sector will also aid producers involved in the natural fibre supply chain. 

Prioritisation of Development in Tier-II, Tier-III towns and Rural Areas 

As the boundary between rural areas and Tier-II, Tier-III towns gets increasingly blurred with rising urbanization, the timely and appropriate budgetary measures announced for accelerating economic growth in Tier-II and Tier-III towns will further the cause of inclusive and sustainable development. Appropriately designated as City Economic Regions, the Budget aims to support the economic power from agglomeration to amplify their potential and provides for generous support to develop infrastructure.

The continued support being provided to agriculture and allied sectors, MSMEs, cooperatives, infrastructure and social development should ensure that the agriculture and rural economic revival in India will continue and drive the nation towards Viksit Bharat. 

The writer is chairman, Economic Advisory Council to the Prime Minister