Budget 2025: A roadmap to empower farmers and reignite rural India

The Budget must go beyond promises—it must deliver feasible solutions to secure livelihoods, strengthen rural demand and bridge the rural-urban divide

Finance Minister Nirmala Sitharaman gears up to present the Union Budget 2025-26 on February 1, the nation stands at a pivotal crossroads. With GDP growth projected to dip to a four-year low of 6.4 per cent in FY 2024-25, the spotlight turns to revitalising the rural economy, a cornerstone of the country’s consumption-driven progress.

The urgent call for agricultural reforms has grown louder, fueled by ongoing farmer protests, including the fast-unto-death by 70-year-old farmer leader Jagjit Singh Dallewal at Punjab’s Khanauri border, which has captured national attention, demanding a legal guarantee for Minimum Support Price (MSP). Agriculture, which employs nearly 45 per cent of the country’s workforce and sustains over 60 per cent of its rural population, is at a breaking point. Stagnant productivity, declining incomes, and policy neglect have left farmers in crisis. This Budget cannot be limited to lofty promises—it must deliver practical solutions to secure livelihoods, strengthen rural demand, and narrow the rural-urban divide. Revitalising agriculture is not just an economic necessity but a moral obligation to foster inclusive growth.

Here’s how Budget 2025 can introduce transformative measures to bolster the agricultural sector and ensure rural spending—currently contributing 60 per cent of total consumption —fuels India’s economic resurgence.

1. Boost Agriculture Budget and Research

The allocation for agriculture and allied sectors constitutes only 3 per cent of the Union Budget, which needs to be raised to at least 7.5%. Unspent funds in this category should be carried forward to address critical gaps in research, education, and infrastructure for crop storage and processing. Investing in agricultural research institutions to develop climate-resilient crop varieties and sustainable farming techniques can enhance productivity. Encouraging public-private partnerships in agrarian innovation can further drive the sector’s growth.

2. Provide Legal Backing to MSP 

The persistent demand for Minimum Support Price (MSP) with legal guarantees highlights the sector’s vulnerabilities. Implementing the MS Swaminathan Commission’s recommendation of setting MSP at C2 (comprehensive cost of production) +50 per cent and granting it legal status can ensure private buyers do not exploit farmers. This reform would not put a significant financial strain on the government but could protect farmers from distress sales. Furthermore, creating a robust monitoring mechanism to enforce MSP and extending its coverage to more crops can improve farmers’ incomes. Enhancing the transparency of procurement processes through digital platforms and integrating MSP enforcement with local market committees can also make the system more reliable.

3.  Enhance PM-KISAN Support

The Rs 6,000 annual support to around 10 crore small and marginal farmers under PM-KISAN to help meet their working capital needs, unchanged since its launch in 2018, has not kept pace with inflation. However, with inflation averaging 6 per cent over the past six years. The government should consider doubling this support to Rs 12,000 annually to address farmers’ growing financial needs.

This increase could significantly impact small-marginal farmers, who struggle to meet their expenses amid rising input costs for seeds, fertilisers, and irrigation.

4. Transform the Kisan Credit Card (KCC)

The KCC scheme provides short-term loans with an interest subsidy for up to Rs 3 lakh. However, the rigid repayment schedule often forces farmers to rely on private moneylenders to meet short-term cash requirements.

A more farmer-friendly approach would be to convert KCCs into running overdraft accounts, increase the credit limit to Rs 10 lakh, and cap interest rates at 4 per cent. Removing usage restrictions on loans would further empower farmers to make long-term agricultural investments. Additionally, simplifying the KCC application process and enhancing awareness through rural outreach programs can improve access to credit. Expanding the scheme to include sharecroppers, tenant farmers, and farm labourers can promote financial inclusion in agriculture.

5. Introduce a Pension Scheme for Small Farmers

India’s farmers lack a robust social security net. A non-contributory pension of Rs3,000 per month for small and marginal farmers aged 60 and above, owning up to 2 hectares of land, could provide much-needed financial security. Contributions from state governments could further augment this scheme. Implementing such a pension system can alleviate poverty among elderly farmers and reduce their dependence on family support.

6. Strengthen Animal Husbandry and Dairy Sectors:

Livestock contributes over 25 per cent to agricultural GDP but suffers from fluctuating milk prices and restrictive cattle rearing and trade policies.

A simple yet impactful step would be legally mandating private dairies to match or exceed the milk procurement prices set by cooperatives like Amul. Additionally, incorporating milk and eggs into the mid-day meal scheme can improve farm incomes while tackling malnutrition among children.

Promoting cattle insurance schemes and increasing budgetary allocation for veterinary services can enhance livestock productivity. Encouraging the adoption of modern technologies like artificial insemination and genetic improvement can further boost the sector’s contribution to rural livelihoods.

7. Reform Fertiliser Subsidy Policies

The current system treats fertiliser subsidies as farmer benefits but deducts the subsidised amount while calculating MSP. This practice lowers farmers’ actual remuneration. MSP calculations should instead consider the market price of inputs, ensuring fairer returns for farmers.The government could also promote balanced fertiliser use by incentivising organic farming practices and providing subsidies for bio-fertilisers. A shift towards a direct benefit transfer system for fertiliser subsidies can reduce leakages and ensure benefits reach the intended beneficiaries.

8. Simplify Crop Insurance

The PM Fasal Bima Yojana requires farmers to navigate complex procedures to claim compensation. The government should shoulder the entire premium initially, including the state’s share, and simplify the claim process. This would reduce the administrative burden on farmers while ensuring timely compensation for crop losses.

Leveraging technology like satellite imagery and AI-driven risk assessment models can streamline the verification process and minimise disputes. Expanding insurance coverage to include post-harvest losses and natural calamities can make the scheme more comprehensive and farmer-friendly.

9. Reassess Inflation Control Policies

Policies like export bans, stock limits on agricultural produce, and the Food Corporation of India (FCI) dumping grains at below-market prices undermine farmers’ profitability. These interventions should be re-evaluated to balance inflation control with fair returns for farmers. Encouraging exports of surplus produce and ensuring better storage infrastructure can reduce post-harvest losses. Developing a decentralised agricultural pricing system driven by real-time market data can align domestic policies with global demand trends. A Vision for Fairness and Growth India’s agricultural sector has long been the backbone of its economy, yet farmers have faced systemic neglect and economic disparity.

Over the last decade, the government has written off Rs12.30 lakh crore in big corporate loans, while farmers continue to struggle under mounting debt (Rs 18 lakh crore) and policies that fail to guarantee fair prices for their produce.The 2025 Budget presents an opportunity to correct these imbalances. By addressing these critical issues, the government can improve farmers’ lives, spur rural demand, catalyse GDP growth and lay the foundation for a more equitable and sustainable agricultural future. It’s time to honour the farmers who feed the nation by delivering the support they deserve.

(The Author is Vice-Chairman of Sonalika ITL Group, Vice-Chairman (of the Punjab Economic Policy and Planning Board, Chairman of ASSOCHAM Northern Region Development Council. Views expressed are personal)