Union Budget 2025: A step forward, but missed opportunity for transformation

In her eighth budget speech presented in Parliament, Union finance minister Nirmala Sitharaman positioned agriculture as “the first engine of growth”. She unveiled several initiatives aimed at boosting the sector, including the Prime Minister Dhan-Dhaanya Krishi Yojana, a scheme designed to target regions with low farm productivity.
The plan, in partnership with states, aims to reach an estimated 10.7 million farmers.Other initiatives include a six-year mission for pulses self-sufficiency, a five-year mission to boost cotton productivity, creation of a Makhana Board in Bihar to augment production, productivity and processing, and a comprehensive programme to promote horticulture production
On the surface, the initiatives outlined in the budget appear to be a step in the right direction. Yet, while these efforts are commendable, they seem like incremental moves rather than the big, bold, transformative changes needed to revolutionize the agricultural sector in India. This budget could be seen as a missed opportunity to take a more radical approach that could significantly reshape the future of farming in the country.
The Budget allocation for the ministry of agriculture and farmers’ welfare was reduced by 2.5%. For FY26, the total allocation stood at Rs 1.37 lakh crore, a slight decrease from the revised estimates (RE) of Rs 1.41 lakh crore in FY25. This amounts to just 2.7% of the total budget expenditure (Rs 50.6 lakh crore) and 4.8% of net tax revenue (Rs 28.3 lakh crore) in FY26. This reduction is confusing as it indicates a lack of urgency in addressing deeper challenges facing the agriculture sector.
Notwithstanding this, ministry of fisheries, animal husbandry, and dairying saw a significant 37% increase in Budget allocation, from Rs 5,505.7 crore in FY25 to Rs 7,544 crore in FY26. This shift indicates govt’s intention to promote growth in dairy and fishery sectors, where India is already a major global player. India is the second-largest producer of fish and aquaculture, with seafood exports worth Rs 60,000 crore. The increased Budget allocation will be used to support sustainable fishing practices, especially in the Indian Exclusive Economic Zone and High Seas, with a particular focus on the Andaman & Nicobar and Lakshadweep Islands. This is a commendable and forward looking step.
However, upon examining the broader agri-food budget for FY26, it becomes clear that govt’s approach still heavily revolves around welfare measures and subsidies. For instance, food and fertiliser subsidies continue to consume a significant portion of the Budget. The food subsidy for FY26 has been pegged at a budgeted estimate (BE) of Rs 2.03 lakh crore, up by 3% from Rs 1.97 lakh crore in FY25 (RE). This focus on consumer subsidies overlooks the fundamental issues that farmers face.
While the FM announced reopening of three dormant urea plants in the eastern region and setting up of a new plant with annual capacity of 12.7 lakh tonnes at Namrup, Assam, these are positive steps toward improving self-sufficiency. However, more pressing question remains whether the current fertiliser subsidy policy is effectively promoting the right usage of fertilisers.
The fertiliser subsidy, meanwhile, has been reduced from Rs 1.83 lakh crore in FY25 (RE) to Rs 1.56 lakh crore for FY26 (BE). While this reduction may seem like a positive step towards fiscal prudence, the reality of this policy’s impact on farmers remains uncertain. Given that India imports around 80% of its natural gas for urea production, fluctuations in global gas prices will continue to heavily influence the cost of fertilisers. Furthermore, the heavy subsidisation of urea – often at the expense of other nutrients like phosphorus (P) and potassium (K) – has led to an unbalanced fertiliser usage pattern across the country. Recommended N,P,K dose (in kg/hectare) in Punjab is 118, 51 and 33, but actual is 190, 47.1 and 3.7. Similar distortion is there is other states, impacting soil health and productivity.
The real challenge lies in whether govt can pivot from its current fertiliser subsidy regime to a more efficient and sustainable approach. One potential solution could involve direct cash transfers to farmers. This model would empower farmers to purchase fertilisers at market prices, thereby reducing leakage (currently at 20-30%) and ensuring that the subsidy is used more efficiently.
Moreover, govt should encourage the use of technological innovations, such as nano-urea and nano-diammonium phosphate, which can help balance nutrient usage and reduce the environmental damage caused by excess nitrogen use. By allowing fertiliser prices to be determined by market forces, would not only promote better nutrient use but also help restore the right balance of nitrogen, phosphorus, and potassium in soils. However, such a shift would require strong communication efforts to build trust among farmers and ensure their understanding of the long-term benefits.
Overall, while the Budget offers several positive steps for agriculture, it does not seize the opportunity to bring about a comprehensive transformation in the sector. The focus on welfare measures and subsidies, though important, may not be enough to drive lasting change. Now is the time to shift the focus from short-term relief to long-term sustainability.
(Gulati and Juneja are distinguished professor and fellow, ICRIER, respectively. Views are personal)
In her eighth budget speech presented in Parliament, Union finance minister Nirmala Sitharaman positioned agriculture as “the first engine of growth”. She unveiled several initiatives aimed at boosting the sector, including the Prime Minister Dhan-Dhaanya Krishi Yojana, a scheme designed to target regions with low farm productivity.
The plan, in partnership with states, aims to reach an estimated 10.7 million farmers. Other initiatives include a six-year mission for pulses self-sufficiency, a five-year mission to boost cotton productivity, creation of a Makhana Board in Bihar to augment production, productivity and processing, and a comprehensive programme to promote horticulture production
On the surface, the initiatives outlined in the budget appear to be a step in the right direction. Yet, while these efforts are commendable, they seem like incremental moves rather than the big, bold, transformative changes needed to revolutionize the agricultural sector in India. This budget could be seen as a missed opportunity to take a more radical approach that could significantly reshape the future of farming in the country.
The Budget allocation for the ministry of agriculture and farmers’ welfare was reduced by 2.5%. For FY26, the total allocation stood at Rs 1.37 lakh crore, a slight decrease from the revised estimates (RE) of Rs 1.41 lakh crore in FY25. This amounts to just 2.7% of the total budget expenditure (Rs 50.6 lakh crore) and 4.8% of net tax revenue (Rs 28.3 lakh crore) in FY26. This reduction is confusing as it indicates a lack of urgency in addressing deeper challenges facing the agriculture sector.
Notwithstanding this, ministry of fisheries, animal husbandry, and dairying saw a significant 37% increase in Budget allocation, from Rs 5,505.7 crore in FY25 to Rs 7,544 crore in FY26. This shift indicates govt’s intention to promote growth in dairy and fishery sectors, where India is already a major global player. India is the second-largest producer of fish and aquaculture, with seafood exports worth Rs 60,000 crore. The increased Budget allocation will be used to support sustainable fishing practices, especially in the Indian Exclusive Economic Zone and High Seas, with a particular focus on the Andaman & Nicobar and Lakshadweep Islands. This is a commendable and forward looking step.
However, upon examining the broader agri-food budget for FY26, it becomes clear that govt’s approach still heavily revolves around welfare measures and subsidies. For instance, food and fertiliser subsidies continue to consume a significant portion of the Budget. The food subsidy for FY26 has been pegged at a budgeted estimate (BE) of Rs 2.03 lakh crore, up by 3% from Rs 1.97 lakh crore in FY25 (RE). This focus on consumer subsidies overlooks the fundamental issues that farmers face.
While the FM announced reopening of three dormant urea plants in the eastern region and setting up of a new plant with annual capacity of 12.7 lakh tonnes at Namrup, Assam, these are positive steps toward improving self-sufficiency. However, more pressing question remains whether the current fertiliser subsidy policy is effectively promoting the right usage of fertilisers.
The fertiliser subsidy, meanwhile, has been reduced from Rs 1.83 lakh crore in FY25 (RE) to Rs 1.56 lakh crore for FY26 (BE). While this reduction may seem like a positive step towards fiscal prudence, the reality of this policy’s impact on farmers remains uncertain. Given that India imports around 80% of its natural gas for urea production, fluctuations in global gas prices will continue to heavily influence the cost of fertilisers. Furthermore, the heavy subsidisation of urea – often at the expense of other nutrients like phosphorus (P) and potassium (K) – has led to an unbalanced fertiliser usage pattern across the country. Recommended N,P,K dose (in kg/hectare) in Punjab is 118, 51 and 33, but actual is 190, 47.1 and 3.7. Similar distortion is there is other states, impacting soil health and productivity.
The real challenge lies in whether govt can pivot from its current fertiliser subsidy regime to a more efficient and sustainable approach. One potential solution could involve direct cash transfers to farmers. This model would empower farmers to purchase fertilisers at market prices, thereby reducing leakage (currently at 20-30%) and ensuring that the subsidy is used more efficiently.
Moreover, govt should encourage the use of technological innovations, such as nano-urea and nano-diammonium phosphate, which can help balance nutrient usage and reduce the environmental damage caused by excess nitrogen use. By allowing fertiliser prices to be determined by market forces, would not only promote better nutrient use but also help restore the right balance of nitrogen, phosphorus, and potassium in soils. However, such a shift would require strong communication efforts to build trust among farmers and ensure their understanding of the long-term benefits.
Overall, while the Budget offers several positive steps for agriculture, it does not seize the opportunity to bring about a comprehensive transformation in the sector. The focus on welfare measures and subsidies, though important, may not be enough to drive lasting change. Now is the time to shift the focus from short-term relief to long-term sustainability.
(Gulati and Juneja are distinguished professor and fellow, ICRIER, respectively. Views are personal)