Agriculture sector growth dips in FY26 amid decline in current prices

Q4 growth recovers in FY26 due to good rabi harvest, say experts

Gross Value Added (GVA) in agriculture and allied activities is projected to have grown by 3 per cent in financial year 2025-26 (FY26), slightly more than the 2.4 per cent forecasted in the second advanced estimates, due to good performance of rabi crops. However, this is significantly lower than 4.2 per cent GVA growth in FY25, according to provisional estimates released on Friday.

 

The drop in GVA growth in FY26 is largely on account of a steep decline in GVA for the sector at current prices. GVA  growth for agriculture and allied activities at current prices dropped from 9.2 per cent in FY25 to just 1.4 per cent in FY26 due to low inflation.

   

The decline in current prices was due to negative inflation that could impact farmers’ earnings at a broader level.

 

In the fourth quarter (Q4) of FY26, GDP growth at constant prices for agriculture and allied sectors was projected at 3.6 per cent, up from 1.7 per cent in Q3, according to official data. GDP growth at current prices rose to 2.8 per cent in Q4, from a negative 0.5 per cent in Q3.

 

“In the second advanced estimate released on February 27, GVA for agriculture and allied activities was pegged at 2.4 per cent. But in the provisional estimates it has been revised upward at 3 per cent, which means the impact of rabi harvest has been taken into account in FY26 numbers,” said Madan Sabnavis, chief economist, Bank of Baroda.

 

However, going forward, agriculture growth in FY27 and its first quarter could come under pressure if farm production falters due to the adverse impact of an El Nino monsoon.

 

The southwest monsoon has arrived after a delay of three days over Kerala on June 4, Many experts, however, said its progress and spread over the next four months of the monsoon season could come under strain from the El Nino effect — characterised by high oceanic surface temperatures that typically lead to a delayed monsoon and heatwaves in India. The India Meteorological Department (IMD) has lowered its forecast for the 2026 monsoon to 90 per cent of the Long Period Average (LPA), from 92 per cent predicted in April, due to the El Nino effect. If the actual rains are close to the forecast, the 2026 southwest monsoon could be the driest in more than a decade.

 

India’s foodgrains production in crop year 2025-26 (July to June), meanwhile, is projected to increase to 376.55 million tonnes, from 357.73 million tonnes in the previous year, according to official data.