Union Budget 2026–27: What It Signals For India’s Agricultural Trade

The Union Budget 2026–27 has generated discussion around allocations for agriculture. Beyond headline provisions lie deeper policy signals that shape export competitiveness, logistics efficiency, regulatory facilitation and trade readiness.

In an environment marked by geopolitical tensions, supply chain disruptions and tightening sanitary and phytosanitary (SPS) standards, competitiveness depends not only on production but also on compliance capacity, infrastructure and institutional coordination. Viewed through this lens, the Budget reflects a gradual shift toward a more market- and trade-oriented agricultural strategy.

High-Value Agriculture and Export Orientation

The enhanced outlay for RKVY and Krishionnati Yojana — up by 22.14 per cent and 64.71 per cent over the revised estimates of 2025–26 — signals continued emphasis on productivity, diversification and structural transformation. The allocation of Rs. 350 crore for high-value crops such as coconut, cashew, cocoa and sandalwood alongwith region-specific support for agarwood in the North-East and nut crops in hill states, reflects a calibrated move toward differentiated, value-chain oriented production rather than bulk commodity expansion.

Coconut, concentrated in Kerala, Karnataka, Tamil Nadu and Andhra Pradesh, remains a key livelihood crop. In 2023–24, exports of coconut products reached Rs. 3,469.44 crore, including Rs. 187.48 crore from dry coconut and Rs. 334.23 crore from fresh coconut.  Declining productivity in traditional regions, however, threatens sustained competitiveness, making plantation rejuvenation strategically important.

The cashew value chain presents a structural paradox. India ranked fourth globally in cashew production in 2024, yet twelfth among major importers, reflecting raw material constraints and processing competitiveness issues. With demand projected to grow at around 8 per cent annually, processors remain dependent on imported raw cashew. Similarly, cocoa cultivation is expanding, particularly as an intercrop with arecanut and coconut, but imports remain significant. The Budgetary allocation for cashew and cocoa is therefore strategically significant. It aims not only to enhance domestic production and reduce import dependence but also to strengthen export positioning in high -value plantation crops.

Infrastructure and Logistics as Trade Enablers

For perishable agricultural commodities, logistics efficiency often determines market success. The Budget’s continued emphasis on Dedicated Freight Corridors, inland waterways, and coastal cargo transport is a step towards easing logistic constraints.

At present, a substantial share of agricultural produce in India moves by road primarily through trucks even over long distances. While road transport offers flexibility, it is often time-consuming, fuel-intensive, and vulnerable to congestion-related delays. For export-oriented perishables such as fruits, vegetables, marine products and floriculture, such delays translate into higher wastage, quality deterioration, and increased logistics costs.

India’s inland waterway network spans over 20,000 km but remains underutilised for agri-movement. Diversifying freight beyond road transport can reduce costs, improve reliability and stabilise supply chains. Better connectivity between production clusters, processing hubs and export gateways strengthens price competitiveness and supports deeper integration into global markets.

Value Addition and Processing: Beyond Raw Exports

Fisheries has been among the strongest growth drivers within allied sectors. As per the Economic Survey 2025–26, between FY16 and FY25, agriculture and allied activities grew at 4.45 per cent annually, with fisheries and aquaculture expanding at 8.8 per cent.   The increase in the duty-free import limit for specific inputs used in seafood processing, from 1 per cent to 3 per cent, encourages greater processing depth. This matters because India’s position in marine trade increasingly depends on processed and ready-to-cook products rather than unprocessed shipments.

Another significant thrust is in the processing of AYUSH and traditional medicinal crops. India exported about 129 thousand tonnes of AYUSH and herbal plant products in 2024–25, valued at US$ 689 million. Sustaining growth in this segment requires robust quality assurance, testing infrastructure and regulatory credibility. The proposed upgrading of pharmacies and drug-testing laboratories, along with strengthened certification systems, directly strengthens this compliance framework. In markets with stringent quality and safety standards, processing gains translate into sustained market access only when backed by credible standards enforcement.

The proposed establishment of Self-Help Entrepreneur (SHE) Marts at the cluster level introduces a localised platform for branding, aggregation and retailing of processed products. While aimed at strengthening rural entrepreneurship, such platforms can also enhance product differentiation and market readiness, which is important for linking small-scale producers to premium domestic and export markets.

Together, these measures highlight a shift toward value capture rather than volume expansion.

Digital Trade Facilitation and Systems Integration

The rollout of the Customs Integrated System (CIS) represents a significant reform in trade facilitation. As a unified digital platform, CIS aims to streamline clearance for food, plant and animal products—categories accounting for nearly 70 per cent of interdicted consignments. Expanded use of non-intrusive scanning and AI-based risk assessment could reduce inspection delays and minimise disruption of perishable shipments.  For agri-exports, where delays directly affect quality and shelf life, faster and more predictable clearance processes strengthen reliability in global markets.

Upstream digital initiatives such as Bharat-VISTAAR, integrating AgriStack portals with ICAR’s packages of practices, aim to improve dissemination of production information. While primarily production-oriented, better access to standardised information can indirectly strengthen quality compliance at the source.

Taken together, these initiatives indicate progress toward strengthening both production-side information systems and border-side clearance processes. Although these operate at different points in the value chain, greater coherence between them over time could enhance overall export readiness.

Changes in the Regulatory Environment

Production and processing gains translate into export advantage only within an enabling regulatory framework. The exemption of customs duty on fish catch by Indian vessels operating within the Exclusive Economic Zone (EEZ) and on the high seas reduces operational costs and improves viability of deep-sea fishing. Given the importance of marine exports, such rationalisation strengthens competitiveness at the source.

Strengthening the Trade Architecture: Strategic Priorities

To translate these policy signals into sustained export gains, institutional strengthening will be essential. First, agricultural market intelligence must become more systematic. Exporters require timely information on tariff changes, non-tariff measures, sustainability standards and competitor movements to anticipate market shifts rather than respond belatedly. Second, quality and standards infrastructure must keep pace with production expansion. Accredited laboratories, residue monitoring systems and harmonised standards are central to maintaining credibility in high-value export markets. Third, export preparedness needs stronger coordination across states. Aligning state- level export strategies with central trade initiatives and commodity-specific value chains would improve coherence and responsiveness. Fourth, digital systems should be leveraged to reduce transaction costs and strengthen documentation and traceability processes in trade.

Conclusion

The Union Budget 2026–27 reflects a gradual but clear shift in agricultural policy from output expansion toward value addition, logistics efficiency and institutional modernisation. If supported by stronger market intelligence, credible standards governance and coordinated export strategies, these measures can help India move beyond bulk commodity trade towards diversified, value-added and globally competitive agricultural exports. In an increasingly complex trade environment, competitiveness will depend not only on how much India produces, but on how effectively its systems support market access.

(Smita Sirohi is ICAR National Professor, MS Swaminathan Chair and Pavithra Srinivasamurthy is Senior Scientist, ICAR-National Institute of Agricultural Economics and Policy Research (NIAP), New Delhi)