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Informist, Monday, Feb. 2, 2026

 

By Pallavi Singhal

 

NEW DELHI – The Union Budget for the financial year 2026–27 (Apr-Mar) has failed to tackle the challenges being faced by the agricultural economy, which have been identified in the Economic Survey for FY26, exposing a disconnect between policy issues and fiscal action, according to economists and policy analysts.

 

The Survey, which was released three days before the Budget was presented in Parliament, has warned that Indian agriculture is entering a period of heightened vulnerability marked by climate volatility, stagnant yields in key crops, declining soil health, and falling groundwater levels. However, the Budget's allocations and policy announcements suggest a preference for continuity in welfare spending than for a decisive shift towards structural reform, investment in research, or climate resilience, say analysts.

 

Budgetary allocations for the Department of Agriculture and Farmers' Welfare are pegged at INR 1.30 trillion, only modestly higher than the FY26 Budget estimate of about INR 1.27 trillion and the revised estimate of INR 1.23 trillion. The lower revised estimate itself indicates that actual spending in FY26 fell short of the allocation.

 

The divergence is more striking when viewed against the government's own commitments made a year earlier. While presenting the Budget for FY26, Finance Minister Nirmala Sitharaman had described agriculture as the "first engine" of economic growth, outlining priorities such as productivity enhancement, crop diversification, post-harvest infrastructure, and strengthening of the agricultural research ecosystem. Economists say those stated goals find limited reflection in the financial choices made in the Budget for FY27.

 

"The Economic Survey clearly laid out the problems that plague Indian agriculture. One would have expected the Budget to take cognisance of these challenges, but it has not," said G Chandrashekhar, agricultural economist and policy commentator. "There is a severe disconnect between the Survey and the Budget proposals. It appears the government either has no answers to these issues or has chosen not to address them."

 

CLIMATE RISKS

The Survey repeatedly highlighted climate change as a central risk to farm output, warning that erratic monsoons, rising temperatures, and extreme weather events could increasingly disrupt agricultural production. Despite this, the Budget for FY27 has made no announcement for a calibrated response to climate-induced agricultural stress.

 

Economists noted that the omission contrasts with the FY26 Budget speech's emphasis on building resilience and sustainability in agriculture. "Climate change continues to play havoc with Indian agriculture, and there is a high probability of El Nino conditions developing in 2026," Chandrashekhar said. "The absence of any mention in the Budget is striking."

 

WELFARE VS. INVESTMENT

Budget documents show the government has continued to prioritise income support and food security programmes. The allocation for the Pradhan Mantri Kisan Samman Nidhi remains at INR 635 billion while total food subsidy spending stands at INR 2.10 trillion, including INR 1.35 trillion for the Food Corp. of India and INR 750 billion for state governments.

 

In contrast, allocations aimed at modernising agriculture or addressing long-term productivity constraints are limited. The Department of Agricultural Research and Education has been allocated INR 99.7 billion, marginally lower than the FY26 revised estimate and accounting for less than 0.3% of agricultural GDP. This comes despite the FY26 Budget speech stressing the need to strengthen the agricultural research ecosystem and develop climate-resilient, high-yielding crop varieties--an emphasis that economists say has not translated into higher or even sustained funding.

 

In the Budget for FY26, the finance minister had highlighted research and innovation as central to improving farm productivity. The latest Survey also stated that continuity in research with focus on innovation in agricultural practices and improved seed varieties that are resistant to pests, diseases, and climate stress "will be key to enhancing long-term productivity".

 

However, even as climate risks intensify and yield gaps persist, the allocation for the Department of Agricultural Research and Education has declined from INR 104.7 billion in the Budget for FY26. "If public institutions do not invest adequately in R&D at a time when water tables are falling and soil health is deteriorating, private players are unlikely to step in," Chandrashekhar said. "Reducing research outlay will be consequential."

 

"For a sector that supports about 46% of India's workforce and faces severe climate headwinds, this level of R&D funding is clearly inadequate," said Deepak Pareek, an agricultural economist. "The Survey's ambition of structural transformation is simply not matched by the Budget's allocations."

 

FERTILISER-HEAVY APPROACH

The Budget allocations show the country's continued reliance on chemical fertilisers though the Survey warned against it. "For more than three decades, Indian agriculture has been grappling with a steadily worsening imbalance in the use of plant nutrients... continued divergence between nitrogen and other nutrients has now begun to undermine soil quality, crop response, and environmental stability... As long as one nutrient is vastly cheaper than others, its overuse is structurally embedded, regardless of monitoring or enforcement," according to the Survey.

 

However, the Budget has gone ahead and allocated INR 1.17 trillion for urea subsidy, while the nutrient-based subsidy for phosphatic and potassic fertilisers is INR 540 billion, taking total chemical fertiliser support to nearly INR 1.71 trillion. On the other hand, the National Mission on Natural Farming has been allocated just INR 7.5 billion.

 

"A more durable correction... requires re-anchoring fertiliser decisions in soil and crop requirements rather than in administered price distortions," the Survey suggested. 

 

"The Survey talks about sustainability and soil health, but the Budget completely bypasses structural reform in fertiliser use," Pareek said. "Instead of incentivising optimisation, we are doubling down on distortionary subsidies."

 

POLICY INCOHERENCE

Analysts also flagged the inconsistencies between policy announcements and trade actions. As an example, Chandrashekhar pointed to the government's decision to cut import duties on edible oils in the same year that it announced an oilseeds mission. "There is also no clarity on outcomes," he said. "Last year's Budget speech was long on announcements, but this year's Budget does not tell us what happened to them. Budgets should be about outcomes, not just intentions."

 

The Survey explicitly pointed out that pulses and oilseeds are structurally important to India's consumption basket and nutritional outcomes, yet these are sliding down the priority order for the nation's cultivators. Chalking out a roadmap to become independent in these areas, the Survey suggested "accelerating yield improvements in pulses and oilseeds to restore their relative profitability, avoiding distortions in input and output markets that confer an undue advantage to specific feedstocks".

 

HIGH-VALUE CROPS

While the Budget speech highlighted support for "high-value agriculture" such as coconut, cashew, cocoa, and nuts, economists say the references are superficial. "The Budget says coconut is a high-value crop, but markets make crops high-value, not government declarations," Chandrashekhar said. He said ageing coconut plantations in the country's coastal belts of the country require a structured replantation programme with clear financial backing rather than just broad statements.

 

The Budget documents show allocation for support to high-value agriculture stands at INR 3.5 billion, a fraction of overall agricultural spending.

 

MISSED OPPORTUNITY

The Survey underlined the importance of positioning India as a reliable global food supplier amid geopolitical disruptions, noting that in an increasingly contested global economy, "the ability to ensure continuity of critical supplies--including food--assumes growing importance". However, analysts say the Budget for FY27 offers little clarity on export policy.

 

"There is no PLI-style push for food processing, no major fund for agri-export logistics, and no serious attempt to subsidise the cost of meeting global sanitary and phytosanitary standards," Pareek said. PLI stand for production-linked incentives, offered by the government for the manufacturing sector. "The Survey diagnoses the problem and last year's Budget articulated the intent," he said. "This year's Budget signals business as usual. That gap is where the real concern lies."  End

 

Edited by Rajeev Pai

 

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