Union budget's ultimate success will depend on its effective implementation, adequate financial allocation

By Dr. Vikas Singh 

The growing significance of agriculture in India’s economy is becoming increasingly evident, with its share in employment rising from 42% in 2018 to 46% in 2024. This shift underscores the economy's increasing reliance on agriculture, even as it continues to evolve. A NABARD study further confirms this trend, revealing that the proportion of rural agricultural households increased from 48% in 2016–17 to 56.7% in 2021–22. However, despite an average annual growth rate of 4.2% over the past five years, the sector has experienced a concerning slowdown, with growth dropping to a seven-year low of 1.4% in the financial year 2023–24. Simultaneously, food inflation surged to 8.4%, placing additional pressure on rural households, while rural real wage growth has stagnated or even turned negative in some cases, raising serious economic concerns.  

Given the rising role of agriculture in employment and the persistent issue of stagnant rural wages, a stronger policy push was anticipated to stimulate rural demand and control inflation. The Union Budget 2025–26 addresses these concerns through a combination of targeted agricultural reforms and broader investments in infrastructure, industries, MSMEs, health, and education. The budget also focuses on simplifying business regulations, revising personal income tax slabs to enhance domestic consumption, increasing institutional finance for farmers and MSMEs, supporting exports, and ensuring fiscal discipline.  

A key initiative in the budget is the Prime Minister Dhan-Dhaanya Krishi Yojana – Developing Agri Districts Programme, which aims to uplift agricultural productivity in 100 districts currently suffering from low output, moderate crop intensity, and below-average access to credit. The program, designed to benefit 1.7 crore farmers, seeks to boost productivity, encourage crop diversification, improve post-harvest storage facilities, expand irrigation, and increase access to credit. Additionally, the budget introduces several sectoral initiatives, including a dedicated program for self-sufficiency in pulses, a national mission on high-yielding seeds, and specific efforts to improve the productivity and market reach of fruits, vegetables, and cotton. The fisheries sector has also received a boost, with targeted investments aimed at increasing yields and improving income security for fishing communities.  

Recognizing the financial challenges faced by farmers, the budget raises the loan limit under the Modified Interest Subvention Scheme from ₹3 lakh to ₹5 lakh for loans taken through the Kisan Credit Card (KCC), providing much-needed liquidity to small and marginal farmers. Furthermore, to strengthen agricultural processing and market linkages, the government has announced the establishment of a Makhana Board in Bihar, which will streamline production, processing, and marketing for Makhana farmers.  

Beyond direct agricultural interventions, the budget prioritizes rural financial inclusion through India Post and India Post Payments Bank, which will provide essential banking and financial services such as Direct Benefit Transfers (DBT), cash withdrawals, EMI collections, micro-credit, insurance, and assisted digital transactions for rural communities. A major push has also been made for cooperative sector financing, with the National Cooperative Development Corporation (NCDC) receiving additional support to expand lending operations for cooperative institutions. These measures are expected to improve access to formal credit and strengthen the financial backbone of rural enterprises and Self-Help Groups (SHGs).  

To further address the rural economy, the budget proposes the creation of a Grameen Credit Score Framework, to be developed by Public Sector Banks, to better assess the creditworthiness of self-help group members and rural borrowers. This initiative is expected to enhance financial accessibility and reduce dependence on informal lenders. Additionally, a significant budgetary allocation of ₹74,226 crore has been made to the **Department of Drinking Water and Sanitation (DDWS)**, with a major share going to the **Jal Jeevan Mission**, which aims to expand tap water connections in rural households, thereby improving health and sanitation outcomes.  

To counter inflationary pressures and boost consumer spending, the budget raises the income tax exemption limit from ₹7 lakh to ₹12 lakh, significantly increasing disposable income for middle-class households. This move is expected to drive demand for consumer goods, particularly in rural and semi-urban markets, stimulating broader economic growth.  

While the measures announced in the budget represent a step in the right direction, their ultimate success will depend on effective implementation, adequate financial allocation, and robust monitoring mechanisms. The government’s proactive stance on strengthening rural economic opportunities aligns with its long-term vision of making migration a choice rather than a compulsion. However, for these efforts to have a lasting impact, a stronger push for sustainable agricultural practices, including organic and regenerative farming, is essential. The role of **Farmer Producer Organizations (FPOs)** and cooperative societies will be crucial in ensuring that small and marginal farmers benefit from these policies, making it imperative for central and state governments to work closely together for seamless execution.  

The Union Budget 2025–26 lays out a clear strategy for revitalizing agriculture and rural development. If implemented effectively, these measures will not only uplift millions of farmers but also contribute significantly toward India’s long-term economic vision of becoming a developed and self-reliant nation by 2047 (Viksit Bharat by 2047).  

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Dr. Vikas Singh is an economist with a Ph.D. in Economics. He has published numerous research papers on microfinance, rural development, financial inclusion, and policy-driven growth in reputed journals