The Economic Survey 2025-26, presented in Lok Sabha on January 29, has put forward several transformative ideas for India's agriculture and rural development sectors. With Finance Minister Nirmala Sitharaman set to present her ninth consecutive budget, the crucial question emerges: will these key proposals find their way into the budget announcements?
The Agricultural Context
Agriculture and allied sectors remain fundamental pillars of the Indian economy, employing approximately 46.1 percent of the workforce and contributing about one-fifth of the national income at current prices. Finance Minister Sitharaman has previously described agriculture as the "first engine" of the economy, highlighting its strategic importance in national development planning.
Key Reform Proposals from the Economic Survey
1. Per-Acre Based Urea Subsidy Direct Transfer
The Survey proposes a significant overhaul of the current urea subsidy system. Under the existing regime, urea is heavily subsidized with retail prices fixed at Rs 242 per 45 kg bag. The new approach suggests a modest increase in retail prices while transferring equivalent amounts directly to cultivators on a per-acre basis.
This innovative mechanism aims to maintain farmers' overall purchasing power while bringing nitrogen prices closer to their actual agronomic cost. According to the Survey, this creates predictable behavioral changes: farmers who already apply nitrogen efficiently benefit from receiving full transfers while spending less, while those who over-apply face clear incentives to shift toward balanced fertilization practices.
The Survey recommends a phased "Agronomic Transition" approach, initially rolling out this system across limited agro-climatic regions covering irrigated, rain-fed, and mixed farming systems. This would allow careful calibration of crop- and zone-specific benchmarks before potential national expansion.
2. Financial Support for Crop Diversification
A calibrated strategy proposed in the Survey would utilize savings from improved stock management to support voluntary crop diversification without altering the current Minimum Support Price (MSP) system or weakening procurement mechanisms.
Farmers could be offered financially attractive alternatives for part of their rice and wheat acreage, particularly in regions where procurement volumes remain high but farm profitability stays modest. The initial phase would focus on eastern and central regions where rainfall patterns, soil conditions, and market access make crops like pulses, oilseeds, and maize economically viable.
Agriculture Ministry officials note that the economic cost of rice cultivation reaches approximately Rs 1.36 lakh per hectare after factoring in FCI expenses on MSP-based procurement, milling, transport, and storage. Leaving one hectare of rice fallow or growing non-procured crops could generate resource savings of Rs 1,36,000 per hectare for promoting alternative crops.
3. State-Level Diversification Missions
The Survey introduces the concept of state-level diversification missions where both Centre and States share financial responsibilities for crop diversification initiatives. The Centre's contribution would originate from procurement, storage, and interest savings, while States would fund their share from complementary gains such as reduced input subsidies and existing incentive frameworks for sustainable agriculture.
Where necessary, transitional financing could be provided conditional on verified acreage shifts and documented subsidy savings, creating accountability mechanisms within the proposed framework.
4. Revival of Village Commons
Highlighting the importance of rural common lands, the Survey emphasizes reviving "village commons" including grazing fields, ponds, and water bodies that constitute approximately 15 percent of India's geographical area. The document stresses that reviving these commons is crucial for rural India's economy and livelihoods.
To achieve this revival, the Survey suggests officially incorporating "village commons" as a distinct land-use category with sub-categories, enabling accurate estimation, monitoring, and informed policy interventions.
Budget Implications and Future Directions
As the government prepares for the Union Budget presentation, these agricultural reform proposals present both opportunities and challenges. The Economic Survey's emphasis on direct benefit transfers, crop diversification, and cooperative federalism through state-level missions reflects a comprehensive approach to transforming India's agricultural landscape.
The success of these proposals in budget announcements would depend on multiple factors including fiscal considerations, implementation feasibility, and political consensus. However, the detailed framework provided in the Survey offers concrete pathways for addressing long-standing agricultural challenges while maintaining food security and farmer welfare as central priorities.
