The Economic Survey 2025-26 has pointed to a noticeable decrease in agricultural growth, raising fresh concerns about the performance of India’s farm sector. According to the Survey, the average annual growth rate of agriculture over the last five years stood at 4.4%, but the second quarter (Q2) of the current financial year recorded only 3.5% growth, which is significantly lower than the recent average.

While agriculture continues to remain a backbone of the Indian economy, especially for rural employment and food security, the moderation in growth signals emerging structural and climatic challenges. The findings of the Survey come at a time when policymakers are focusing on inclusive growth, rural prosperity, and inflation control.

This slowdown may not appear alarming at first glance, but experts believe that even a small drop in agricultural growth can have wide-ranging effects on rural income, consumption demand, food prices, and overall GDP performance.

Understanding the Growth Numbers

The 4.4% average annual agricultural growth over the past five years reflects relatively stable performance driven by:

• Good monsoon seasons

• Government support schemes

• Increased minimum support prices (MSP)

• Expansion of irrigation facilities

• Growth in allied sectors like dairy and fisheries

However, the 3.5% growth recorded in Q2 of 2025-26 indicates that the sector may be losing momentum.

Agriculture growth is measured through Gross Value Added (GVA) in the farm sector, which includes crop production, livestock, forestry, and fisheries. When growth slows in this sector, it affects not only farmers but also industries linked to agriculture, such as fertilisers, tractors, rural banking, and food processing.

Possible Reasons Behind the Slowdown

1. Monsoon Variability

India’s agriculture remains heavily dependent on the monsoon. Even though irrigation coverage has improved, a large portion of farmland still relies on rainfall.

In 2025, uneven monsoon distribution affected certain regions. While some states received adequate rainfall, others experienced delayed or deficient rainfall, which impacted kharif crop production.

Inconsistent rainfall patterns can reduce yields of key crops such as:

• Paddy

• Pulses

• Oilseeds

• Cotton

Such fluctuations directly affect agricultural output growth.

2. Lower Crop Yields in Key States

Agricultural growth is also influenced by productivity. In some major producing states, crop yields were reported to be slightly lower compared to the previous year.

Factors affecting yields include:

• Soil health deterioration

• Rising input costs

• Pest attacks

• Extreme weather conditions

If productivity growth slows, overall agricultural GVA also declines.

3. Global Commodity Price Pressures

Global agricultural markets have experienced volatility due to geopolitical tensions and trade disruptions. While India is largely self-sufficient in food grains, it participates in global markets for commodities such as rice, wheat, sugar, and spices.

Changes in global prices influence domestic production decisions. If export demand weakens or prices fall, farmers may reduce cultivation of certain crops.

Lower realisations can discourage expansion, affecting overall growth.

4. Rising Input Costs

Farmers have been facing increased costs for:

• Fertilisers

• Diesel

• Electricity

• Seeds

• Labour

When input costs rise faster than output prices, farm profitability reduces. This discourages investment in productivity-enhancing measures.

High input costs also affect small and marginal farmers more severely.

5. Structural Issues in Agriculture

Despite several reforms, Indian agriculture continues to face structural challenges:

• Fragmented landholdings

• Limited mechanisation in small farms

• Post-harvest losses

• Inadequate storage facilities

• Market access constraints

These long-standing issues limit the sector’s ability to sustain high growth rates.

Impact on Rural Income

Agriculture provides direct employment to nearly half of India’s workforce. Even if its share in GDP has reduced over time, it remains critical for rural livelihoods.

When agricultural growth slows:

• Farm incomes grow at a slower pace

• Rural consumption demand declines

• Purchasing power in villages weakens

Rural demand is crucial for sectors like:

• Fast-moving consumer goods (FMCG)

• Two-wheelers

• Affordable housing

• Consumer durables

A slowdown in farm growth can therefore indirectly impact manufacturing and services sectors.

Link Between Agriculture and Inflation

Agriculture plays a major role in determining food inflation, which directly affects retail inflation.

If agricultural output grows slower than demand:

• Supply constraints may arise

• Prices of vegetables, pulses, and cereals may increase

• Inflationary pressures may build up

On the other hand, if production is weak and demand also remains subdued, rural distress can increase.

Maintaining stable agricultural growth is therefore critical for price stability and macroeconomic balance.

Government Support Measures

Over the years, the government has introduced several initiatives to strengthen the farm sector:

• PM-KISAN income support scheme

• Increased Minimum Support Prices (MSP)

• Crop insurance schemes

• Irrigation projects under PMKSY

• Promotion of natural farming and organic agriculture

• Expansion of e-NAM digital marketplaces

The Economic Survey acknowledges these efforts but suggests that sustained structural reforms are needed to maintain higher growth levels.

Role of Allied Sectors

Agriculture is not limited to crop production. Allied activities such as:

• Dairy

• Poultry

• Fisheries

• Horticulture

have become major contributors to farm income.

In recent years, livestock and fisheries growth has helped stabilise agricultural performance even when crop output fluctuated.

If crop growth slows but allied sectors perform strongly, overall agricultural GVA can still remain resilient.

The Survey indicates that diversified income sources are essential for future stability.

Five-Year Trend vs Current Performance

The 4.4% average growth over five years suggests that Indian agriculture has shown resilience despite multiple challenges, including:

• Pandemic disruptions

• Supply chain breakdowns

• Climate-related risks

However, the drop to 3.5% in Q2 2025-26 indicates a cyclical slowdown rather than a structural collapse.

Experts note that quarterly data can fluctuate due to seasonal factors. A clearer picture will emerge when full-year data is available.

Climate Change Concerns

One of the biggest long-term challenges facing Indian agriculture is climate change.

Rising temperatures, erratic rainfall patterns, and extreme weather events are becoming more frequent.

Climate risks include:

• Heatwaves affecting wheat output

• Floods damaging paddy crops

• Droughts impacting rain-fed areas

Adapting to climate change will require:

• Climate-resilient crop varieties

• Improved irrigation systems

• Better weather forecasting

• Crop diversification

Without these measures, maintaining high agricultural growth may become increasingly difficult.

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