Economic Survey Calls for Agri Reforms, Urea Price Hike to Fix Fertilizer Imbalance

The Economic Survey 2025–26, tabled in Parliament, strongly advocates wide-ranging reforms in the agriculture sector. It emphasizes that raising urea prices and promoting balanced fertilizer use through financial incentives for farmers are essential to reduce fertilizer imbalance and improve soil health.

Highlighting the crucial role of agriculture in the Indian economy, the Survey notes that while the sector has provided stability, its growth rate remains relatively modest. Much of the recorded growth in agriculture and allied sectors has come from non-farm activities. India’s rural economy is becoming more diversified, with non-farm sectors contributing significantly to incomes, though challenges such as skill gaps and low productivity persist.

The Survey also points out that capital investment in agriculture remains inadequate and must be increased. It recommends introducing food vouchers under the Public Distribution System (PDS) as part of the National Food Security Act.

Fertilizer Imbalance a Major Concern

The Survey identifies the imbalanced use of fertilizers as a serious concern and calls for an increase in urea prices. It further suggests shifting from input subsidies to per-acre income support for farmers. Special emphasis has been placed on soil health and balanced nutrient management.

The ideal Nitrogen-Phosphorus-Potassium (NPK) ratio is considered to be 4:2:1. However, this ratio deteriorated to 10.9:4.1:1 in 2023–24, compared to 4:3.2:1 in 2009–10. Correcting this imbalance is critical for restoring soil health. The Survey stresses the need to reform the way farmer support is delivered.

With Aadhaar-based authentication now implemented on POS machines, the Integrated Fertilizer Management System (IFMS) provides the government with detailed data. The Survey recommends using this data to design and implement reforms.

Productivity Key to Rural Growth

Crop productivity is not increasing at the pace required to raise farmers’ incomes. The Survey therefore calls for comprehensive reforms in the sector. It emphasizes that boosting agricultural productivity, rather than relying primarily on price support, is essential for increasing rural incomes. It also cautions against excessive dependence on the Minimum Support Price (MSP).

The Survey notes that export growth driven by manufacturing is necessary for long-term rural prosperity, as agriculture alone cannot absorb India’s expanding workforce.

Export Opportunities

The Survey acknowledges that farming alone cannot generate sufficient employment for the country’s growing labor force and that manufacturing-led export growth is vital for rural prosperity.

Recent free trade agreements could increase demand for labor-intensive agro and food processing exports, provided India produces globally competitive goods.

Climate Challenges

Climate change is identified as a major challenge for the agriculture sector. Consecutive good monsoons have helped raise agricultural output, strengthen food security, and contain inflation. However, to safeguard long-term food security, the Survey stresses the development of climate-resilient crop varieties, precision farming, and improved water-use efficiency.

Agricultural Growth and Investment

The Survey refers to nearly two dozen government schemes aimed at supporting agricultural development and farmer incomes. It reports that the average annual growth rate (AAGR) of agriculture and allied sectors in India has exceeded the global average of 2.9 percent, reaching 4.4 percent over the past five years. For the current financial year, growth in agriculture and allied sectors is projected at 3.1 percent.

However, growth this year has largely been driven by non-crop sectors. Regional disparities in crop productivity remain, and the government aims to address them through the Prime Minister’s Dhan-Dhaanya Krishi Yojana.

Data also highlight weak capital investment in agriculture. Currently, only 55.8 percent of the country’s gross cropped area is irrigated. Oilseeds and pulses have particularly low irrigation coverage, while crops such as rice, wheat, and sugarcane enjoy relatively better irrigation facilities.

Agricultural Credit

According to the Survey, against a government target of Rs 27.5 lakh crore in agricultural credit for the current financial year, ground-level credit disbursement has reached Rs 28.69 lakh crore. This includes Rs 15.39 lakh crore in short-term (crop) loans and Rs 12.77 lakh crore in term loans.

In 1950, about 90 percent of agricultural credit came from non-institutional sources such as moneylenders. By 2021–22, this share had declined to 23.4 percent. Despite this improvement, the proportion remains a concern given the size of today’s agricultural economy. A large number of farmers still depend on moneylenders and often pay interest rates ranging from 30 to 50 percent.

Agriculture in Uncertain Global Environment

Amid global economic uncertainty, agriculture will remain central to maintaining economic stability. However, ensuring food security, rural incomes, and protection from global shocks and climate risks will be increasingly challenging.

For sustainable rural growth, the Survey argues that the focus must shift away from government support and procurement toward higher productivity, diversification, and building a more resilient and sustainable food system. This will require coordinated efforts by the central and state governments as well as the private sector.

Overall, despite persistent challenges, the Economic Survey underscores that agriculture will play a central role in achieving the goal of a “Developed India.” While the sector has made notable progress, large-scale structural reforms are necessary to address future challenges and ensure sustainable growth in farmers’ incomes.