Budget 2025-26 has rightly prioritised structural, medium- to long-term issues in the farm sector. These reforms can ensure that the farm sector remains a key engine of growth, raising average farm income progressively while entrenching food and nutrition security.
The Prime Minister’s Dhan-Dhaanya Krishi Yojana aims at addressing structural impediments encountered in 100 districts, to be selected in terms of low farm productivity, post-harvest losses, inadequate access to irrigation and credit, lack of crop diversification, and lag in adoption of environmentally sustainable cropping practices.
Besides augmenting the growth potential of low crop productivity districts, it is also important to raise the overall productivity of Indian agriculture. The National Mission on High-Yielding Seeds would help further strengthen the country’s research ecosystem.
Food inflation
High food inflation, led by vegetables and pulses, and the resultant elevated headline inflation have been a constraint to growth in recent years because of the associated loss of purchasing power and subdued growth in real wages, a key driver of consumption demand.
While India faces persistent deficits in pulses, in vegetables it is the supply chain inefficiency, large post-harvest losses, and the rising impact of extreme weather events that have led to both high inflation and large price volatility. Recognising the nature and dimension of this challenge, the Budget announced the launch of a 6-year ‘Mission for Aatmanirbharta in Pulses’, with a special focus on tur, urad, and masoor. A critical component of this mission will be that two central agencies — the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) and the National Cooperative Consumer’s Federation of India Limited (NCCF) — will provide procurement assurance for these three pulses during the next four years. In the case of vegetables, a comprehensive programme focusing on production, supply chain, and remunerative prices for the farmers will be launched, for which the appropriate institutional mechanism will focus on engaging other key stakeholders such as the State governments, farmer producer organisations (FPOs), and cooperatives for effective implementation.
Credit intensity of agriculture, i.e., annual disbursement of farm credit (short-term and long-term) as a per cent of annual farm GDP, has increased from less than 30 per cent in 2010-11 to more than 53 per cent now. Over time, with the rising cost of cultivation, however, there was a need for raising the scale of finance made available to the farming community, particularly small and marginal farmers. In December 2024, the RBI announced an increase in the limit for collateral-free agricultural loans from ₹1.6 lakh per borrower to ₹2 lakh.
The Budget enhanced the loan limit under the MISS to ₹5 lakh from ₹3 lakh for loans taken through KCC. These measures could be expected to help achieve near 100 per cent institutional coverage of farm credit, going ahead. The Budget also announced that public sector banks will develop a ‘Grameen Credit Score’ framework to serve the credit needs of self-help group members and people in rural areas, while also simplifying the know your customer (KYC) process by rolling out the revamped Central KYC Registry in 2025, which will help improve further the credit market conditions in rural areas.
The challenges of raising value addition in farm output and promoting innovations at the grassroots level require a multi-pronged approach. Recognising that, the Budget aims at targeted interventions in the form of establishing a National Institute of Food Technology, Entrepreneurship, and Management, which would promote food processing activities in the eastern region.
The Budget should guide all key stakeholders to bring about the needed structural transformation in agriculture.
The writer is Chairman, NABARD. Views are personal
