Fertile Yet Fragmented

Despite ambitious reforms and record spending, India's farmers remain shackled by skewed incentives, outdated infrastructure and political inertia.

India’s green revolution once symbolised its triumph over hunger and foreign dependence. Today, while industrialisation powers cities and services dominate exports, agriculture still anchors the country’s economic resilience. Yet, the sector remains undermined by structural inefficiencies, over-politicisation, and an inability to modernise at pace with ambition.

Nowhere is this clearer than in fertilizer use, a fundamental input for boosting agricultural productivity. Every crop season, the ministries of agriculture and fertilizers jointly forecast requirements and allocate subsidies, ranging from 30 to 70 percentage. In 2025-26, Rs.1.67 trillion is earmarked to subsidise Urea and other nutrients. Despite the government’s best efforts, nearly a third of all fertilizers are still imported, as of 2023-24. The 2013 National Investment Policy aimed to reverse this dependence, spurring six new Urea plants by the end of 2024. Another is planned in Assam. But even as capacity expands, technology remains outdated—a point flagged by Parliament’s Standing Committee over a decade ago. Their recommendation to switch to a Direct Benefit Transfer (DBT) model for subsidies remains stuck in bureaucratic limbo.

Fertilizer misuse, driven by distorted incentives, presents another challenge. Urea, heavily subsidised, is cheaper than other vital nutrients. The result: excessive usage, declining soil quality and diminishing long-term returns. The government responded by launching the PM-PRANAM scheme in June 2023, nudging states towards balanced fertilizer consumption. The Soil Health Card initiative, introduced a decade ago, furthers this mission by helping farmers match application to soil conditions. As of December 2024, over 2.36 million farmers had benefited from such initiatives.

Agricultural credit has grown by 14 percentage annually over the past decade, reaching Rs.23 trillion in 2023-24. Yet small landholdings and low productivity limit borrowing power. Nearly two-thirds of indebted households own under one hectare, with many still reliant on informal lenders. A 2020 survey found 31 percentage of small farmers used non-institutional credit, and 43 percentage of loans were spent on non-farm needs.

The Kisan Credit Card (KCC) scheme, launched in 1998, now covers the full cycle of farm and household needs. By late 2024, 73 million accounts held Rs.8.9 trillion in credit. Loans up to Rs.3 lakh attract 7 percentage annual interest, with a 3 percentage rebate for timely repayment. Meanwhile, the flagship crop insurance scheme, PMFBY, launched in 2016, covers 480.3 million hectares with Rs.19.5 trillion insured. But delayed state subsidies have hampered claim payouts, prompting a 2021 parliamentary call for fixed timelines. Awareness remains dismal as 39 percentage of farmers do not know the scheme exists, and a further 24 percentage do not see the need for it.

Woes deepen after harvest. A 2020-21 NABARD study pegged annual losses from post-harvest wastage at Rs.1.5 trillion, largely due to insufficient storage. India needs 61 million tonnes of cold storage capacity, but has just 39.4 million tonnes. Its 7,085 APMC markets fall far short of the 48,000 needed to ensure one every 5 km, as recommended by the Swaminathan Commission. Worse, most markets lack modern infrastructure. Middlemen thrive in this chaos, often paying farmers a fraction of the final price. The government’s three farm laws aimed to liberalise the sector but were rolled back after widespread protests. While the e-NAM platform, launched in 2016, offers a digital marketplace and marginally better returns, adoption remains uneven.

The Minimum Support Price (MSP) regime, meant to act as a safety net, has also come under scrutiny. Covering 22 crops, MSPs were set at 1.5 times production costs in 2018-19. Agencies like FCI and NAFED handle procurement. But generous MSPs for select crops have hurt crop diversity and soil health, especially in Punjab and Haryana. A 2023 Niti Aayog survey found that crops with higher MSP support showed lower output growth than unsupported crops, raising questions about effectiveness and long-term sustainability.

Digitisation has yielded modest gains. Jan Dhan Yojana expanded banking access for farmers, enhancing creditworthiness. Since 2019, PM-Kisan has transferred Rs.6,000 annually via DBT to landholding families, disbursing Rs.3.24 trillion to 120 million beneficiaries by August 2024. The scheme’s 2025-26 outlay is Rs.63,500 crore.

Political meddling has long thwarted attempts to empower India’s farmers, entrenching corruption and inefficiency. Yet the past decade has witnessed a push towards formalization, with digital tools and improved credit flows gradually empowering smallholders. To sustain this momentum, the government must back collaborative farming via FPOs and cooperatives, while inviting corporate investment to modernize agriculture. Replicating successes like Amul will be vital to realising the ambitions of Viksit Bharat.

(The author is a Chartered Accountant with a leading company in Mumbai. Views personal.)