Budget 2025 Expectations: Agriculture

Anand Ramanathan, Partner and Consumer, Products and Retail sector Leader, Deloitte India

Current environment

• India’s Gross Value Added (GVA) from agriculture stands at INR23 lakh crore with a share of 18 percent in the total GVA. Agriculture and allied sectors employ 46 percent of the country’s population, making Agriculture the backbone of the Indian economy.

• India contributes 11 percent to global agricultural production. Nevertheless, its share in the overall export of food products is modest, ranging at 2–3 percent, and the export share in the processed food category is even lower, falling within the range of 1–2 percent.

• Agriculture exports in India stood at INR2.2 lakh crore in FY2024, reflecting a decrease of 5 percent compared with FY2023 due to a ban on exports of non-basmati rice and stringer regulations for other key agricultural commodities.

• The government has been proactively supporting the sector through various schemes such as Rashtriya Krishi Vikas Yojana and Mission for Integrated Development of Horticulture, which focus on strengthening the entire agricultural value chain. Targeted schemes such as Per Drop More Crop, Sub Mission on Agriculture Mechanisation and Agriculture Infrastructure Fund are helping solve challenges related to irrigation, mechanisation and agriculture infrastructure. Various efforts are also being made to integrate technology in agriculture through the Digital Agriculture mission, Agristack and other initiatives.

• With rising per capita incomes and changing consumption patterns, the consumer focus has now shifted towards high-nutrition food products such as horticulture, dairy, poultry, fisheries and processed food. A simultaneous shift in the production pattern is also taking place slowly through focused crop diversification and the development of value-added infrastructure; however, significant additional efforts are still needed.

• The pre-existing challenges of low average productivity, fragmented landholdings, low mechanisation, poor soil health and lack of primary value addition remain pertinent and need to be looked at from a new lens to ensure maximum benefits for farmers. The government has achieved ~90 percent of its target to form 10,000 Farmer Producer Organisations by March 2025. These organisations can be crucial in developing the right capabilities to tackle these challenges at the farmer level and facilitate resource pooling. Therefore, it is crucial to strengthen them to effectively address farmers' challenges.

• Transformative measures are needed to improve the availability of quality seeds, strengthen the extension mechanism, facilitate post-harvest management and ensure market access for farmers.

Expectations

Top three asks

Ask #1: Comprehensive programme for yield improvement

• Specific measure: Crop-wise programmes for selected crop clusters with support for the use of specialised machinery, the right package of practices, availability and affordability of inputs, as well as timely crop advisory and extension services for farmers/crop-focused Farmer Producer Organisation (FPOs). Nomination of model farmers to ensure effective knowledge transfer for best practices at the block level.
• Measurable outcome: Increased awareness of advanced package of practices, cross-sharing of knowledge through progressive farmers and improved yield across key crops.
• Rationale: In India, wheat and paddy occupy ~60 percent of the area under food grains, while ~15 percent of pulses consumed in the country are imported. To ensure self-sufficiency across food categories, there is a need to diversify into other crops, such as pulses, oilseeds, maize and millet. This is possible only when the area under paddy and wheat is available for different crops. Yield improvement can help free more areas without risking food security. Also, the country’s population is expected to reach 160 crore in the next decade substantially increasing the household demand for food. With limited land, water and other resources, higher productivity levels will have to be achieved to ensure self-sufficiency and nutritional security for the nation.

Ask #2: Creation of enabling seed ecosystem

• Specific measure: Streamlining the launch, multiplication and distribution of seeds for newer varieties through ICAR and other research institutions to ensure maximum spread and adoption by farmers. This can be achieved by developing the appropriate enabling infrastructure that supports innovation and R&D in seeds by both public and private entities. Such infrastructure includes creating a demand aggregation framework to ensure proper planning and availability of seeds, setting up seed distribution programmes, dedicating extension and outreach initiatives to replace farm-saved seeds, etc.
• Measurable outcome: Improved Seed Replacement Rate (SRR) and Varietal Replacement Rate(VRR) enhance the yield of agricultural and horticultural crops.
• Rationale: India, despite being a leading producer, lags in productivity across multiple crops. ICAR and other research institutes have developed several new and improved varieties through decades of research. These varieties have multiple beneficial traits, such as stress tolerance, heat resistance, drought resistance and insect/pest resistance, and they can give maximum yields in certain agro-climatic zones. However, most of these varieties have been limited to the research institutions or nearby areas. To ensure higher yields across the country, seeds of such varieties must be brought into mainstream production.

Ask #3: Fast-tracking adoption of digital agriculture

• Specific measure: To safeguard the rights of various stakeholders, it is crucial to speed up the creation and integration of robust agri-databases across the country, develop agri-exchanges for efficient data exchange and consent management and establish the right framework for agri-data management. This will help private players create new solutions for farmers and validate them quickly. Integrate digital agriculture and technology solutions into the vast extension machinery existing in the country to build trust and acceptability among farmers. Educate the staff at Krishi Vigyan Kendras and Agriculture Technology Management Agencies, the Agriculture Officers, Technical Assistants as well as other stakeholders to enable efficient information transfer to farmers for enhancing digital literacy and rapid trust building.
• Measurable outcome: Increased adoption of agri-tech services and solutions by farmers to obtain timely and right information while aiding accurate and informed decision-making. This will enable farmers to reduce costs, increase farm yields, improve produce quality and obtain better price realisation.
• Rationale: The government has taken multiple steps, such as the development of farmers, crop and land registries, setting up of the agriculture accelerator fund and Krishi Decision Support System to improve the technology integration in Agriculture. Several private players also offer technology solutions across the agriculture value chain, which help improve farm productivity and produce quality, reduce costs and establish market linkages. However, the implementation on the ground largely depends on farmers' adoption of agri-tech solutions. Though farmers have started using technology, the adoption rate is low and is growing slowly. The integration of digital agriculture and technology solutions into the vast extension machinery existing in the country is crucial to building trust and acceptability among farmers.

Ask #4: Strengthening of Farmer Producer Organisations (FPOs)

• Specific measure: Capacity building and incentives for FPOs to enable produce aggregation, storage and value addition and developing right market linkages with private players or institutional buyers. Facilitating linkages of FPOs with financing institutions to help members access institutional credit. Development and execution of regular training programs and workshops for FPOs at the district/ state level and basic online modules for FPO managers. FPOs can become the most effective instruments for uplifting small and marginal farmers through dedicated efforts and the right checks and regulations.
• Measurable outcome: More active and long-functioning FPOs with better operations and higher profits for member farmers.
• Rationale: FPOs can play a vital role for small and marginal farmers by providing support at every stage of the crop value chain. While promoting the formation of FPOs is necessary, it is equally important that these FPOs run smoothly to ensure profitability for their farmer members. Hence, it is imperative that the managing members possess basic managerial and financial capabilities.

Policy recommendations

Recommendation #1: Adopting cluster approach for better execution

Details: India is a large country, and implementing country-wide schemes is cumbersome and has a lower impact. Therefore, it is recommended that a cluster approach be followed.

Expected impact: Clusters of selected commodities can help focused diagnostics of the challenges across the crop value chain. It can support dedicated yield improvement initiatives by focused extension services, increased produce quality and value addition through investments in storage, processing and quality infrastructure, and demand-driven market linkages through targeted commercialisation in domestic and international markets. Clusters can help disseminate region-specific advisory, develop the skills of FPOs and build trust in novel technologies through collective responsibility.

Recommendation #2: Revamping the post-harvest infrastructure

Details: Creation and linking of storage, grading and cooling units across the country at high-demand areas such as mandis, ports and airports, as well as promoting micro-cold storages at farmgate and village levels. Existing schemes such as AIF can be used to develop these facilities and build stakeholder capacity in collaboration with private players to ensure efficient operations. Initiatives such as the Agriculture Infrastructure Fund (AIF) and the Mission on Integrated Development of Horticulture (MIDH) are commendable steps towards addressing the country’s post-harvest infrastructure needs. However, the limited uptake of the AIF indicates the need to revisit its provisions and those of similar schemes to enhance their financial viability and encourage greater private-sector participation.

Expected impact: It will help reduce losses, promote grade-based pricing of produce, leading to better prices, reduce transportation costs and eliminate distress selling by farmers.