Budget 2026 shifts focus to allied sectors as farm economy diversifies

Despite criticism over gaps in farm support, Budget 2026-27 sharply raises allocations for fisheries, animal husbandry and cooperation, underlining the growing role of allied sectors

Though some critics have panned the Union Budget 2026 for being silent on several key challenges that the farm sector faces, one area where it seems to have done well is the allied sectors of India’s farm economy.

 

From higher budgetary allocations to easing of taxes to change in definitions, the Budget for financial year 2026-27 has a clear tilt towards these sectors.

 

Budget documents show that when it comes to actual money disbursed, while the allocation for the Department of Agriculture and Farmers Welfare has grown by a modest 6.07 per cent in the Budget Estimates (BE) of FY27 as compared to the Revised Estimate (RE) of FY26, allocation for the Department of Agriculture Research and Education (DARE) has dropped by 3.05 per cent.

 

At the same time, budgetary allocation for the Department of Fisheries has risen 59.38 per cent in the FY27 BE from RE FY26. Animal husbandry has seen an increase of 16 per cent, while cooperation has gone up almost 79 per cent.

 

What is interesting is that allocation for some of these departments has gone up in the FY27 BE despite their actual spending in FY25 being significantly lower.

 

Besides the increased outlays, multiple announcements have been made to ease the livelihood of fishermen and women, as well as that of aquaculture sector workers, and to harness the economic potential of India’s marine resources beyond its territorial waters.

 

A new Section 56A has been included in the Customs Act, 1962, to provide special provisions for fishing and related activities by an Indian-flagged fishing vessel beyond India's territorial waters.

 

These include making fish caught by an Indian fishing vessel in the Exclusive Economic Zone (EEZ) or on the high seas duty-free and treating landing of such fish at foreign ports as export of goods, and making the catch duty-free if landed at an Indian port. The announcements also included a promise to implement safeguards to prevent misuse during fish catch, transit, and transshipment.

 

For the animal husbandry segment, the Budget announced a credit-linked subsidy programme for entrepreneurship development in rural and peri-urban areas, scaling up and modernisation of livestock enterprises, enhancement of creation of livestock-, dairy- and poultry-focused integrated value chains, and boosting creation of Livestock Farmer Producer Organisations.

 

Finance Minister Nirmala Sitharaman also announced a Rs 350 crore allocation for high-value crops such as coconut, sandalwood, cocoa, and cashew in coastal areas, agar trees in the North-East, and nuts such as almonds, walnuts, and pine nuts in hilly regions.

Why are allied sectors becoming crucial to India’s farm economy?

Data shows that allied sectors comprising livestock, forestry and logging, and fishing and aquaculture together accounted for close to 46 per cent of the Gross Value Added (GVA) for agriculture and allied activities in the Triennium Ending (TE) 2023-24.

 

While the crops sector still commanded a high share in overall GVA for the farm sector in TE ending 2023-24, its share has been on a steady decline.

 

According to a chapter by NITI Aayog Member Ramesh Chand titled ‘Agriculture in Meeting the Aspirations of Rising India', published in the Quarterly Journal of the Indian Association of Social Science Institutions (IASSI), the share of crops in total agriculture GVA declined from 64 per cent in TE ending 2014-15 to 54 per cent in TE ending 2023-24, an annual decline of one percentage point.

 

During the same period, the share of livestock increased by close to 8 percentage points from 23 per cent to 31 per cent while that of fishing and aquaculture increased by 2.2 percentage points from 5.17 per cent to 7.44 per cent.

 

“At this pace, share of crops in total agriculture income will reduce to less than half by the year 2029-30,” Chand predicts.

 

As Chand shows in his paper, the average growth rate in GVA of agriculture and allied activities clocked one of its best decades in the 2014-15 to 2023-24 period at 4.45 per cent (at 2011-12 prices) largely on the back of the performance of the allied sectors. 

 

During this period, agricultural sub-sectors showed wide variation in growth. While the GVA of the crop sector recorded 3 per cent growth in the decade from 2004-05 to 2013-14, it decelerated to 2.80 per cent during 2014-15 to 2023-24. In contrast, livestock and fisheries witnessed much higher growth rates.

 

“Even during 2004-05 to 2013-14, growth of livestock was more than double the growth of the crop sector. This gap widened in the next decade,” Chand's paper points out.

 

He said growth in forestry was negative during 2004-05 to 2013-14, but it jumped close to 4 per cent in the decade after 2014-15. The fisheries sector witnessed close to 9 per cent growth, which is more than three times the growth in the crop sector.

 

Chand concludes that the divergent performance of various sub-sectors — where allied sectors performed far better than the core farm sector — changed the composition of Indian agriculture in a big way in the decade from 2014-15 to 2023-24. 

 

This trend in non-crop segments of Indian agriculture might continue into the future. According to a 2024 working group report of NITI Aayog, the demand for milk in India is projected at 480 million tonnes (MT) in 2047-48 in the BAU or ‘business as usual’ scenario, and at 527-606 MT in HIG or ‘high income growth’ scenarios.

 

As per the NITI report, BAU is a scenario where economic growth continues at an annual rate of 6.34 per cent (achieved between 2011-12 and 2019-20) while HIG is a scenario where growth jumps to 7-8 per cent. 

 

By 2047-48, demand for eggs, meat and fish is estimated at 16, 21 and 37 MT, respectively, in the BAU scenario, while a HIG scenario could see demand in the 18-21, 24-29 and 41-48 MT ranges, respectively.

 

In 2019-20 (which was the base year for all calculations), India produced 198 MT of milk, 14 MT of fish, 9 MT of meat and 6 MT of eggs.

 

“The increased attention to livestock and fisheries in FY27 Budget is especially significant as these sectors will not only diversify the income streams for average farmers but can also help mitigate the risks due to weather conditions and other uncertainties,” said Amit Singh, partner at Deloitte India.

 

He said the GVA contributions from the livestock sector alone have been remarkable; within it, the milk industry is at the forefront, generating over Rs 11.16 trillion in revenue.

 

Singh said the livestock and agriculture sector naturally complement each other, and the Budget’s provisions attempt to optimally capitalise on their interdependency to benefit farmers.

 

The announcements for the animal husbandry sector, such as the credit-linked subsidy programme, may provide the much-needed momentum to encourage entrepreneurship in the livestock sector.

 

“When clubbed with institutional support, this could result in robust convergence, ensuring that those who receive formal credit are also absorbed in their respective regional dairy cooperatives,” he said.

 

However, Singh cautioned that no matter how good the announcement and intention is, execution challenges may limit their impact.

 

“The success of these initiatives for strengthening the end-to-end value chain will depend upon achieving seamless convergence between multiple stakeholders. This would require institutional collaboration, from credit institutions to cooperatives and technical institutions to create a region-specific plan. This entails inviting expertise to understand what livestock mix works for the respective region and how a combination of different species could help achieve the intended benefit,” he said.