The Economic Survey has proposed a calibrated increase in the retail price of urea, along with an equivalent per-acre direct cash transfer to farmers’ bank accounts, to discourage the excessive use of the fertilizer and to correct the growing imbalance in soil nutrients.
The strategy would protect farmers’ overall purchasing power while ensuring that fertilizer prices better reflect actual agronomic needs. Farmers who use nutrients efficiently would gain, while excessive application would be discouraged.
The survey recommends a phased rollout across various agro-climatic regions to finetune benchmarks and transfer mechanisms before nationwide implementation.
The survey also outlined a comprehensive roadmap to strengthen India’s agriculture sector, focusing on deepening reforms, promoting climate-resilient technologies and improving risk management. The strategy emphasizes empowering Farmer Producer Organizations, revitalizing cooperatives and improving markets and logistics to enhance efficiency and farmer returns.
The survey flagged urea overuse, driven by its status as the cheapest fertilizer. India’s fertilizer subsidy has ballooned as retail urea prices have not been increased for more than a decade. For the current financial year, the government initially allocated ₹1.64 trillion and topped it up with another ₹6,594 crore in December, taking the total to ₹1.7 trillion.
Mint reported on 11 June 2025 that the government plans to cap subsidized fertilizer distribution and instead link allocation of soil nutrients to crop requirements and sowing patterns specific to different regions.
“The survey provides suggestions on voluntary-based and incentive-based nudging to farmers to induce them away from high usage of fertilizers as well as encourage them to diversify their production,” said Ranen Banerjee, partner and leader economic advisory at PwC India. “There are suggestions made on a part of the fertilizer subsidy going to farmers as DBT (direct benefit transfer) and an acreage-based monetary incentive to paddy farmers as a pilot. These are good suggestions that could possibly be less sensitive and implementable with dialogue and persuasion.”
Indexed transfers
The survey suggested that such transfers should be indexed to agro-climatic zones and cropping patterns, recognizing that fertilizer requirements vary widely across crops and regions. This would ensure fairness while promoting efficiency within each category.
Highlighting India’s digital readiness, the survey said Aadhaar-linked fertilizer sales and real-time nutrient tracking can provide a detailed map of nutrient use across districts and seasons. PM-Kisan offers a platform for calibrated, timely per-acre transfers.
To strengthen the agriculture sector, the survey laid thrust on attracting greater private sector participation in food processing, cold-chain infrastructure and high-value agricultural products to boost competitiveness in the domestic and export markets. Expanding high-growth segments such as horticulture, agroforestry, dairy, poultry and fisheries is expected to support inclusive economic development and generate jobs, particularly in rural areas.
The priorities include improving access to assured irrigation through rejuvenation of water bodies and adoption of drip irrigation, strengthening agricultural research via public-private collaboration, reforming the fertilizer sector to restore soil health, and promoting crop diversification aligned with water availability and sustainability goals.
Agriculture and allied activities are likely to contribute 15.6% of India’s national income at current prices in FY26. The sector accounts for 46.1% of the country’s workforce. Given the relatively large share of employment in agriculture and allied activities, the sector remains central to India’s overall growth trajectory. Strengthening agricultural performance is important for inclusive growth and ensuring food security.
Over the past five years, the agriculture and allied sector expanded at an average annual rate of about 4.4% at constant prices. In Q2 of FY26, the agriculture sector grew 3.5%. The decadal growth of 4.45% (FY16-FY25), the highest in comparison to previous decades, has resulted primarily from the strong performance in livestock (7.1%) and fishing and aquaculture (8.8%), followed by the crop sector at 3.5%.
Foodgrain output
According to the survey, India’s foodgrain production has increased steadily despite certain challenges. Foodgrain production is estimated to have reached 357.7 million tonnes (LMT) in agriculture year (AY) 2024-25, an increase of 25.4 million tonnes over the previous year. The growth was driven by higher output of rice, wheat, maize and coarse cereals.
“Agriculture will be central to achieving Viksit Bharat, driving inclusive growth and improving the livelihoods of millions. India has made notable progress in increasing agricultural production, particularly in key sectors such as dairy, poultry, fisheries, and horticulture, which collectively contribute significantly to the country’s GDP,” the survey noted.
The survey pointed out that price and income-support policies are essential because farm incomes remain unstable due to weather shocks, market volatility and rising input costs. Small and marginal farmers have limited resilience and weak bargaining power. Assured income and fair prices provide basic stability, encourage productive investment and help sustain viable agricultural livelihoods.
While investment in research and development has been a hallmark of Indian agriculture through a strong and robust research ecosystem, continuity with focus on innovation in agricultural practices, improved seed varieties that are resistant to pests, diseases and climate stress as well as modern farming techniques that maximize resource efficiency will be key to enhancing long-term productivity.
Furthermore, the widespread adoption of digital technologies, including precision agriculture tools and data analytics, can significantly optimize farming operations and yield predictions, it noted.
Critical challenges
The survey states that agriculture is entering a phase of new opportunity, supported by advances in irrigation, digital extension, improved storage and the strengthening of cooperatives and value chains. Yet structural issues such as small landholdings, climate risks, productivity gaps and weak market integration continue to weigh on farm incomes.
The survey pointed out that the agricultural sector faces substantial challenges that threaten its sustainability and productivity. Among them, climate change, with erratic weather patterns, rising temperatures and extreme events affecting crop yields. Water scarcity is a pressing and critical factor in regions that are predominantly dependent on monsoon rainfall.
The survey suggested that addressing these challenges necessitates region-specific interventions tailored to local agro-climatic conditions and natural resource availability. Promoting climate-resilient agricultural practices such as drip irrigation and sprinkler systems, as well as diversifying to an appropriate mix of high-yielding climate-resilient and drought-resistant crops is critical for sustainability.