Key Support Measures for Enhancing Agricultural Growth in India

India’s agriculture sector supports the livelihoods of nearly 46.1% of its total workforce and contributes around 18% to GDP – yet farmers continue to face challenges ranging from volatile market prices and inadequate credit access to poor post-harvest infrastructure. Recognizing these structural gaps, the government has put in place a multi-layered system of support measures designed to strengthen every link in the agricultural value chain. From institutional finance and capital investment to price protection and digital marketing reforms, these interventions collectively aim to make Indian agriculture more productive, stable, and farmer-friendly.

Institutional finance: building the credit backbone 🔗

Access to affordable credit is one of the most fundamental requirements for a farmer, especially when input costs are rising steadily. The Indian government, through a network of commercial banks, regional rural banks (RRBs), and cooperative institutions, has worked to channel institutional credit to the agriculture sector at scale. Institutional credit to agriculture has nearly tripled, rising from ₹8.5 lakh crore in 2014-15 to ₹25.48 lakh crore in 2023-24. This sharp increase reflects sustained policy push to reduce farmers’ dependence on informal moneylenders, who historically charged exploitative interest rates.

Kisan Credit Card (KCC) scheme 🔗

The Kisan Credit Card (KCC) scheme, introduced in 1998, is the cornerstone of agricultural credit delivery in India. The scheme provides farmers with timely credit support under a single window for cultivation, post-harvest activities, marketing loans, and allied activities such as dairy and fisheries. As of March 2024, there were 7.75 crore operational KCC accounts with a loan outstanding of ₹9.81 lakh crore. In Budget 2025-26, the government further raised the loan limit under the Modified Interest Subvention Scheme (MISS) from ₹3 lakh to ₹5 lakh, making affordable credit available to a wider pool of farmers.

Interest subvention scheme 🔗

To keep borrowing costs low, the government operates an Interest Subvention Scheme that enables farmers to access short-term crop loans at a concessional interest rate of 7% per annum. An additional 3% subvention is available to farmers who repay their loans promptly, effectively bringing the interest rate down to 4%. Lending institutions – including public sector banks, RRBs, and cooperative banks – receive interest subvention from the government to compensate for the difference. The recently launched Kisan Rin Portal (KRP) has digitized the entire claims process, replacing slow manual submissions and ensuring faster disbursement of both the subvention and the Prompt Repayment Incentive (PRI). By December 2024, the portal had processed claims worth ₹1,08,336.78 crore, benefiting approximately 5.9 crore farmers.

Capital formation in agriculture 🔗

Gross Capital Formation (GCF) in agriculture – which includes investments in irrigation, farm machinery, storage, and rural infrastructure – is a critical indicator of how productively the sector is growing. Higher capital formation creates assets that improve long-term farm productivity, reduce post-harvest losses, and support income stability.

The Agriculture Infrastructure Fund (AIF) is a key initiative in this direction. It provides medium- to long-term debt financing with interest subvention and credit guarantee support for post-harvest management infrastructure and community farming assets. As of July 2024, the AIF had mobilized investment of ₹73,194 crore, supporting over 17,000 custom hiring centres, nearly 15,000 primary processing units, 13,165 warehouses, and 1,792 cold storage projects. These facilities directly address the storage and logistics bottlenecks that have long caused post-harvest losses for farmers.

The Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) further complements capital formation by building efficient supply chains from farm to retail outlet, extending the shelf life of perishable produce and reducing wastage. Under PMKSY, 1,044 projects were completed by end March 2024.

Agricultural subsidies: making inputs accessible 🔗

Subsidies remain the largest single component of India’s agricultural support. According to a report by ICRIER, approximately 73% of India’s agriculture budget is allocated towards welfare schemes and subsidies, with food and fertilizer subsidies alone comprising over 50% of the Union Budget’s rural and agrarian spending in FY25.

Fertilizer subsidies 🔗

Fertilizer is one of the most critical and cost-sensitive inputs in Indian agriculture. The government provides subsidies to fertilizer manufacturers and importers so that farmers can buy these inputs at below-market prices. India’s input subsidies on fertilizer, irrigation, and electricity climbed from USD 25 billion in 2011 to USD 48 billion in 2022-23. The subsidy is transferred to fertilizer companies via Direct Benefit Transfer (DBT), with Aadhaar-based verification used to confirm eligible farmers at the point of sale – a design intended to reduce leakages and target benefits more effectively.

PM Kisan Samman Nidhi (PM-KISAN) 🔗

As a direct income support measure, the PM Kisan Samman Nidhi (PM-KISAN) scheme provides all landholder farmer families with a fixed income support of ₹6,000 per year, disbursed in three equal installments of ₹2,000 directly into their bank accounts. This is a direct subsidy – cash goes to the farmer without passing through intermediaries – and is designed to help small and marginal farmers meet their cultivation expenses and reduce their dependence on informal credit for basic input purchases.

Crop insurance: PMFBY 🔗

Weather-related risks are a constant threat to farm income. The Pradhan Mantri Fasal Bima Yojana (PMFBY), launched in 2016, provides affordable crop insurance against natural calamities from the pre-sowing to post-harvest stage. Under PMFBY, farmer premium contributions are capped at 2% for Kharif crops, 1.5% for Rabi crops, and 5% for horticultural crops, with the government bearing the remaining premium cost. As of the 2024-25 interim budget, the scheme had extended crop insurance coverage to around 4 crore farmers. However, the reach among small and marginal farmers – who make up 68% of all farm landholdings – remains an area of ongoing improvement, with awareness being a key challenge in many rural areas.

Price support: the Minimum Support Price (MSP) mechanism 🔗

One of India’s most enduring agricultural policy tools is the Minimum Support Price (MSP) – a pre-announced price at which the government commits to procure specific crops from farmers when market prices fall below a certain level. The government currently fixes MSPs for 22 mandated crops based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), after factoring in production costs, demand-supply dynamics, and interstate price parity.

Since 2018-19, the government has maintained a policy of setting MSP at a minimum of 50% above the all-India weighted average cost of production (A2+FL). The results in terms of procurement scale have been significant: the number of farmers benefitting from MSP procurement rose from 1.63 crore in 2021-22 to 1.84 crore in 2024-25, with the total MSP value disbursed increasing from ₹2.25 lakh crore to ₹3.33 lakh crore over the same period.

Despite its scale, MSP coverage has its limitations. Procurement remains concentrated in states like Punjab and Haryana, particularly for wheat and rice. Awareness levels among farmers in other states are low, and the mechanism primarily benefits farmers with a marketable surplus large enough to interact with government procurement agencies. The PM-AASHA (Pradhan Mantri Annadata Aay Sanrakshan Abhiyan) umbrella scheme, which includes a Price Deficiency Payment (PDP) component, was introduced in 2018 to compensate farmers for price gaps without requiring physical government procurement – an approach that is especially relevant for oilseeds and pulses.

Agricultural marketing reforms: the eNAM revolution 🔗

Even when production is strong and credit is available, farmers have historically struggled to get fair prices due to fragmented, opaque, and geographically restricted agricultural markets. The traditional APMC (Agricultural Produce Market Committee) system, while functional for decades, confined farmers to selling only in their designated local mandis – limiting competition among buyers and keeping prices low.

The National Agriculture Market (eNAM), launched in April 2016, was designed to dismantle this geographic restriction. eNAM is a pan-India electronic trading portal that networks existing APMC mandis into a unified national marketplace, enabling transparent price discovery through competitive online bidding and direct payment to farmers’ bank accounts. The platform provides a single window for commodity arrivals, quality data, buy-sell offers, and e-payment settlement.

Scale and reach 🔗

As of October 2024, 1,389 mandis across 23 states and 4 Union Territories had been integrated with eNAM, with 1.78 crore farmers, 2.62 lakh traders, and more than 4,250 Farmer Producer Organizations (FPOs) registered on the platform. The cumulative value of agricultural produce traded on eNAM has crossed ₹3.79 lakh crore. The platform now facilitates trade in 247 agricultural commodities following the recent addition of 9 new products, with standardized quality parameters developed by the Directorate of Marketing and Inspection (DMI).

How eNAM benefits farmers 🔗

The platform addresses the core inefficiencies of traditional agricultural trading. Farmers can upload commodity details – including photographs and quality parameters – enabling buyers from across India to place competitive bids regardless of location. This widens the buyer pool significantly and reduces the influence of local middlemen. The introduction of tradable parameters links prices directly to produce quality, helping farmers realize better value for higher-grade output. The Platform of Platforms (PoP) feature within eNAM further allows inter-state trade, enabling a farmer in one state to sell to a buyer in another without physically transporting produce to a distant mandi first.

The road ahead: challenges and the need for deeper reform 🔗

India’s agricultural support architecture is broad in scope, but several structural gaps remain. Critics note issues including failure to reach small farmers adequately, bias in favor of larger landholders and input suppliers, and regional inequities between irrigated and non-irrigated areas. Agriculture economists have argued that investments in research and development, irrigation, and skill development yield better long-term returns than traditional welfare schemes. Rationalizing subsidies, expanding the reach of eNAM to more mandis, improving MSP awareness in underserved states, and channeling greater investment toward climate-resilient infrastructure are widely seen as the next frontier for meaningful agricultural growth.

India’s challenge is not just spending more on agriculture – it is spending smarter, ensuring that support reaches the farmer who actually tills the land, not just those who are already well-connected to markets and institutions.

What do you think? With 73% of India’s agriculture budget going toward subsidies and welfare schemes, should the government shift more resources toward agricultural research, digital infrastructure, and market development to create long-term growth? And given that eNAM has registered over 1.78 crore farmers but awareness and adoption remain uneven, what practical steps could bridge the digital and informational gap for small and marginal farmers in remote areas?

References

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