Future Growth Prospects for Indian Agriculture

India feeds over a billion people, contributes roughly 16-18% to GDP, and employs nearly half the national workforce – yet its agricultural growth has rarely kept pace with ambition. For decades, policymakers have set a 4% annual growth target for the sector, recognising that this is the minimum needed to support food security, rural incomes, and broader economic development. In reality, growth has swung sharply between good and bad years, shaped by monsoon patterns, policy gaps, and structural limitations. Understanding what has held Indian agriculture back – and what must change – is essential to charting a realistic path forward.

The 4% growth target: promise vs. performance 🔗

India’s national agricultural plans have consistently aimed for 4% annual growth, treating it as a benchmark for sustainability and rural development. The actual record, however, has been uneven. According to the Economic Survey 2023-24, the five-year average annual agricultural growth rate stood at 4.18% – marginally meeting the target – but this figure masks dramatic year-to-year fluctuations. Growth reached 4.7% in 2022-23, only to collapse to just 1.4% in 2023-24, largely due to erratic monsoons driven by the El Niño effect and a consequent dip in food grain production.

This volatility is not new. The World Bank has noted that agricultural growth slowed to an average of around 3.5% per year through the 1990s and 2000s, with cereal yields growing at barely 1.4% annually in that period. The problem is not a lack of potential – it is the failure to convert that potential into consistent, broad-based growth across all subsectors and regions.

Why growth has been inconsistent 🔗

Overdependence on rain and monsoons 🔗

A fundamental vulnerability is that Indian agriculture remains heavily dependent on the monsoon. About 49% of the agricultural area under food grains still relies on rainfall rather than assured irrigation. This means that a deficient or delayed monsoon directly undermines national crop output – a single weather year can push growth below 2% or even into contraction. The 2023-24 experience, where rainfall was 9% below normal in October-December 2023 and 33% below normal in January-February 2024, translated directly into a deceleration in agricultural GVA.

Cereal dominance and a growing demand mismatch 🔗

India’s agricultural policy has historically prioritised rice and wheat – a legacy of the Green Revolution’s success in achieving food self-sufficiency. But this focus has created a structural mismatch. Cereal production has been growing at roughly 2.5% per year over the past decade, while household consumption of cereals is declining as incomes rise and diets diversify. Food grains occupied 73% of India’s gross cropped area in the early 1980s, but this share has dropped steadily to around 63% as farmers begin responding to changing demand – a shift that needs to accelerate.

Meanwhile, demand for protein-rich food – pulses, dairy, eggs, and meat – is growing rapidly. India already faces a shortage of pulses, which is being covered by imports. Continuing to anchor national agricultural strategy around cereal surpluses while protein and horticultural deficits widen is a misalignment that costs both farmers and consumers.

Low and uneven crop yields 🔗

Despite being among the top producers globally in several crops, India’s yields per hectare remain well below world leaders. India’s rice yields are about one-third of China’s and roughly half those of Vietnam and Indonesia. Yield gaps exist across most major crops. This reflects inadequate investment in agricultural research, limited access to technology for small farmers, and the persistence of fragmented landholdings that constrain mechanisation. Labour productivity in Indian agriculture is low compared to other sectors and in cross-country context, and inadequate investment has prevented crop yields from converging with higher levels achieved in comparable countries.

The irrigation gap: a critical, under-exploited lever 🔗

One of the most important – and most underused – tools for stabilising and growing Indian agriculture is irrigation. India’s ultimate irrigation potential has been estimated at 139.5 million hectares (mha), comprising major and medium irrigation schemes, minor schemes, and groundwater sources. However, actual utilisation has consistently lagged this potential. India’s irrigation cover stands at roughly 48-52% of cultivated area, meaning close to half of all farmland still depends entirely on rainfall.

Micro-irrigation – including drip and sprinkler systems – currently covers only about 10 million hectares against a potential of 70 million hectares. Expanding micro-irrigation would simultaneously conserve water and extend reliable water access to millions of currently rainfed farms. The connection between irrigation and productivity is well established: expansion of irrigated area accounted for roughly one-third of crop output growth in India, with the remainder coming from yield improvements and shifts to higher-value commodities.

There is also a compelling link between irrigation and diversification. Research has shown that the presence of irrigation draws farmers toward horticulture, whereas output shifts to high-value crops in rainfed areas tend to function as a risk-management tool rather than a reliable income driver. Expanding irrigation is therefore not just about water supply – it directly enables the crop and livelihood diversification that agriculture needs.

Diversification: the strongest pathway for sustained growth 🔗

The single most important strategic shift for Indian agriculture is diversification – away from cereal monoculture toward a broader mix of horticulture, livestock, fisheries, oilseeds, and pulses. This is where growth opportunities are concentrated, and where consumer demand is expanding fastest.

Horticulture 🔗

India is already the world’s second-largest producer of fruits and vegetables, and this subsector is expanding rapidly. Horticulture output has climbed from 280.70 million tonnes in 2013-14 to 367.72 million tonnes in 2024-25. Fruits and vegetables are projected to grow at a CAGR of 7.80% through 2030, driven by urban dietary shifts and growing export demand. Yet there are significant constraints: most horticultural exports still consist of fresh, low-processed produce, limiting value addition and export earnings. Scaling up cold storage, food processing, and rural road connectivity is essential to capture this growth fully.

Livestock and dairy 🔗

Livestock is already the fastest-growing component of Indian agricultural GVA. The livestock sector contributes 30% to total agricultural GVA and has grown at a CAGR of nearly 13% between FY15 and FY23, with milk production alone valued higher than paddy and wheat combined. The livestock sector provides income to approximately 70% of India’s rural families, with particular significance for the rural poor and women-headed households. Growth in milk production has run at about 4% annually, but future domestic demand is expected to grow by at least 5% per year, creating a structural opportunity that requires investment in animal health, genetics, and veterinary infrastructure.

Fisheries 🔗

The share of fisheries in agricultural GVA has risen from 4.44% in 2014-15 and continues to grow. India is the world’s second-largest farmed fish producer, and the sector’s contribution to both rural livelihoods and export earnings makes it a high-priority area for diversification investment.

Allied sectors outperforming traditional crops 🔗

One of the clearest signals in recent agricultural data is the consistent outperformance of allied activities – livestock and fisheries – compared to traditional cereal crops. The share of livestock in agricultural GVA at current prices increased from 24.38% in 2014-15 to 30.23% in recent years, even as cereal yields have stagnated in several regions. This shift reflects not a failure of crop agriculture, but a structural realignment toward what consumers actually want. Policy attention and investment need to follow this signal rather than lag behind it.

Policy and structural enablers for future growth 🔗

Realising India’s agricultural growth potential requires more than better weather. Several structural interventions are necessary. India’s 2024-25 Union Budget targets increasing grain production by 50 million tonnes by 2030 while also diversifying production toward horticulture, pulses, and oilseeds – a positive signal. The newly approved PM Dhan-Dhaanya Krishi Yojana worth ₹24,000 crore aims to boost farm productivity, expand irrigation, improve credit access, and strengthen post-harvest infrastructure for 1.7 crore farmers across 100 districts.

On the marketing side, considerable potential exists for expanding agro-processing and building competitive value chains from producers to urban centres and export markets. Currently, government subsidies on power, fertilisers, and irrigation are four times larger than investment expenditures, crowding out critical spending on agricultural research and extension. Rebalancing this ratio – reducing input subsidies and redirecting funds toward research, infrastructure, and technology – is one of the more difficult but necessary fiscal shifts.

Technology is also increasingly central. The emergence of Agriculture 4.0 – incorporating drones, AI, remote sensing, and precision farming – offers tools to raise yields, reduce input waste, and monitor crop conditions in real time. Agri-start-ups are driving technology-led change across the value chain from planting to retail marketing, but wider dissemination to small and marginal farmers remains a challenge.

The road ahead 🔗

India’s agricultural growth story is not one of failure – it is one of unrealised potential. India recorded its highest-ever foodgrain production of 357.73 million tonnes in 2024-25, reflecting an 8% jump over the previous year. Agricultural and processed food exports rose 7.1% year-on-year in Q1 FY26. These are real achievements. But sustaining this momentum requires moving beyond cereal-centric thinking, closing the irrigation gap, and systematically investing in the subsectors – horticulture, livestock, fisheries – where demand is growing and growth potential is highest. The 4% target is achievable; reaching it consistently is the challenge that remains.

What do you think? Given that allied sectors like livestock and horticulture are already outpacing traditional cereal crops in growth, should India’s agricultural policy formally shift its investment priorities away from food grain support toward these high-growth subsectors? And with nearly half of India’s farmland still rainfed, is closing the irrigation gap the single most impactful intervention available to policymakers today?

References

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