Budget sows seeds of change for agriculture but gaps remain

The budget undertook long awaited reforms under institutional credit by enhancing loan limits under Kisan Credit Cards (KCC) scheme.
The budget undertook long awaited reforms under institutional credit by enhancing loan limits under Kisan Credit Cards (KCC) scheme.

Summary

  • Union budget 2025 reflects a commitment to agriculture with reforms like higher Kisan Credit Card limits and a focus on self-sufficiency in pulses. However, a 3,500 crore budget cut and insufficient funding for horticulture present challenges.

The Economic Survey called agriculture the “sector of the future" and the FM echoed this sentiment in her budget speech, emphasizing garib, youth, annadata and nari. Despite this focus, key gaps remain. Firstly, there is a budget cut for agriculture ministry. Despite the rhetoric, the Ministry of Agriculture and Farmers' Welfare (MOA) saw a 3,500 crore budget cut—a 2.5% reduction from last year.

The budget undertook long awaited reforms under institutional credit by enhancing loan limits under Kisan Credit Cards (KCC) scheme. Under its ongoing Modified Interest Subvention Scheme (MISS), the centre provides concessional short-term loans to the farmers practicing crop husbandry and other allied activities like animal husbandry, dairying, and fisheries. It is available to farmers availing short-term crop loans up to 3 lakh at an interest rate of 7% per annum for one year. 

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An additional 3% subvention is also given to the farmers for prompt and timely repayment of loans thus reducing the effective rate of interest to 4% per annum. Access to these affordable loans is critical for the farmers as average rate of interest paid on non-institutional loans is about 9-21% annually. The budget raised loan limits under MISS from 3 lakh to 5 lakh, yet the financial allocation remains unchanged at 22,600 crore, hinting at lower anticipated credit disbursal.

Leveraging India Post locations as a rural reform catalyst is a welcome announcement. Currently, there are about 1.5 lakh rural post offices, the India Post Payment Bank, and 2.4 lakh Dak Sevaks. They serve as critical access points for banking and other essential services in remote areas. Dak Sevaks (rural postal workers) are equipped with smartphones and biometric devices to provide doorstep banking services. The scope of India Post will now expand to logistics, microfinance, insurance, DBT, and EMI pick-ups—benefiting MSMEs, self-help groups, and rural entrepreneurs.

Beneficial to landless cultivators

The introduction of Grameen Credit Score will benefit India’s landless cultivators who miss access to institutional credit because of lack of collateral and thus have no credit history, keeping them off the formal institutional credit system. A credit score would provide a framework for providing loans to rural families and self-help groups.

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Further, the budget announced two separate missions—one for pulses another for perishables—with different priorities. The Mission for Aatmanirbharta (self-sufficiency) in pulses will be a six-year initiative with an FY26 budgetary allocation of 1000 crore. Its focus is to increase domestic production of pulses like tur, urad and masoor. The focus of FM’s efforts is heavily on self-sufficiency and import substitution, through targeted initiatives for these three pulses. The mission emphasizes increasing domestic production through long-term procurement strategies and enhancing farmer incomes by guaranteeing market access. The mission for vegetables and fruits with an annual budget allocation of 500 crore, has a stronger focus on creating a robust supply chain, storage capacity, and enhancing market linkages for farmers, to ensure that growing demand for nutritious foods is met.

Guaranteeing market access

Unlike pulses, where increasing domestic production through long-term procurement strategies and enhancing farmer incomes by guaranteeing market access is the focus, the emphasis under the horticulture mission is to create a robust supply chain, storage capacity, and enhancing market linkages for farmers. But the budget for this mission is insufficient. In 2022-23, India’s fruits and vegetables production was valued at 9.1 lakh crore, while pulses were valued at 1.5 lakh crore (according to data from ministry of statistics). The allocation of 500 crore for fruits and vegetables seems insufficient, especially considering the government’s recent experience with Operation Greens, which had a similar budget.

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Indian agriculture struggles with low crop yields, partly due to seeds that cannot withstand emerging pests, fluctuating temperatures, and erratic rainfall. Recognizing this, the finance minister emphasized seed development, announcing a National Mission on High-Yielding Seeds to advance climate-resilient seed varieties. Additionally, over 100 seed varieties released since July 2024 will now be commercially available.

While budgets set priorities, its real impact depends on policy consistency and execution. The FM rightly emphasized crop diversification but political cycles—such as election-driven paddy bonuses—often derail such efforts. Additionally, government interventions in markets (pulses, oilseeds, onions) can disrupt value chains. For lasting change, such annual planning must align with political and market realities.

Shweta Saini is Founder and CEO, Arcus Policy Research, Delhi.

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