Budget 2026's Farm Sector Neglect: Agriculture Growth Slows Amid Subsidy Dominance
The first advance estimates for GDP in 2025-26 reveal a concerning trend for India's agricultural sector. While overall GDP growth is projected at a robust 7.4 per cent, agriculture growth is expected to decelerate significantly from 4.6 per cent in FY25 to just 3.1 per cent in FY26. This slowdown occurs despite agriculture employing 45 per cent of India's workforce and contributing approximately 17 per cent to the national GDP.
Budget Allocations: Subsidies Overwhelm Developmental Spending
The Union Budget 2026 has largely maintained a business-as-usual approach, with subsidies continuing to dominate over much-needed developmental expenditures. The farm and allied sectors have received a total allocation of Rs 1.63 lakh crore. Specifically, the Ministry of Agriculture and Farmers' Welfare (MoAFW) has been allocated Rs 1.4 lakh crore for FY27 (budget estimate), representing a modest 5.4 per cent increase from the previous year's revised estimate of Rs 1.33 lakh crore.
Within this ministry, concerning trends emerge. The Department of Agricultural Research and Education has actually seen a 3 per cent decrease in funding. Meanwhile, the Ministry of Fisheries, Animal Husbandry, and Dairying received a substantial 26.7 per cent increase in allocation—a positive step, but insufficient to counterbalance broader sectoral challenges.
The Subsidy Conundrum: Welfare Measures vs. Productive Investment
The bulk of support to the rural-agrarian sector, amounting to Rs 6.7 lakh crore (12.6 per cent of the total Budget of Rs 53.5 lakh crore), focuses primarily on welfare measures and subsidies. Food and fertiliser subsidies together constitute nearly 7.45 per cent of total Budget expenditure.
- Food subsidy remains largely unchanged at Rs 2.27 lakh crore
- Fertiliser subsidy is pegged at Rs 1.7 lakh crore, showing a decrease from the previous year's revised estimate of Rs 1.86 lakh crore
- The Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) received Rs 95,692 crore
This allocation pattern reveals a fundamental imbalance. The higher share of welfare measures and subsidies compared to MoAFW's developmental budget does little to advance the goal of creating a stronger, more productive rural economy—essential for realizing the Viksit Bharat vision.
The Research Investment Imperative
India's agricultural research and development spending remains critically low at less than 0.5 per cent of agricultural GDP, well below the 1 per cent benchmark associated with sustained productivity growth. Research from ICRIER demonstrates stark contrasts in effectiveness:
- Every million rupees spent on fertiliser subsidies lifts only 26 people out of poverty
- The same amount invested in agricultural research and extension can lift 328 people out of poverty
- Each rupee spent on fertiliser subsidies generates just Rs 0.88 in agricultural GDP return
- Agricultural R&D investment yields Rs 11.2 return per rupee spent
Despite these compelling figures, public spending priorities continue to favor politically expedient subsidies over long-term research investments that deliver substantially higher returns.
Sustainability Challenges and Missed Reform Opportunities
Current subsidy structures remain problematic. Fertiliser subsidies continue to be input-linked and price-based, encouraging excessive use of nitrogenous fertilisers while discouraging balanced nutrient application that would be more ecologically sustainable. As the Economic Survey has noted, a gradual shift from product-based subsidies to per-acre, crop and agro-climatic zone-linked income support—combined with investments in soil testing and extension services—would better protect farmers while reducing market distortions.
India's farmers face multiple challenges including variable monsoons, rising input costs, and natural resource constraints. Climate change, groundwater stress, declining soil quality, and biodiversity loss make the current subsidy-heavy model increasingly unsustainable.
The Path Forward: Redirecting Resources for Sustainable Growth
To achieve Viksit Bharat's vision, India must redirect a portion of subsidy expenditures into targeted transfers, agricultural research and extension, and region-specific ecological recovery programs. This approach would sustain farmer incomes while making agriculture more productive, resilient, and sustainable.
The current budget's failure to address these fundamental issues suggests the government's "reform express" has bypassed large parts of the farm sector. With food subsidy remaining dominant at Rs 2.27 lakh crore despite significant poverty reduction, there appears to be irrationality in allocating scarce budgetary resources.
A genuine reform agenda would prioritize investments that yield higher returns for both farmers and the national economy, creating a stronger foundation for India's rural transformation and overall development goals.
