Economic Survey FY25: Agriculture is the “sector of the future”
Virendra Pandit
New Delhi: The Economic Survey (2024-25) has projected agriculture as the “sector of the future,” highlighting its key role in India’s overall economic development, stating that the country’s economy is expected to grow between 6.3 percent and 6.8 percent in FY26.
Dr. V Anantha Nageswaran, Chief Economic Adviser (CEA) to the government, believes India is on a steady growth path while globalization is slowing down.
On Friday, the opening day of the Budget Session for FY26, Finance Minister Nirmala Sitharaman tabled the Economic Survey (2024-25), the most important document that reviews the country’s economic progress and challenges. It was prepared by Dr.Nageswaran and his team.
Highlighting the record Kharif production in FY25, it said rural demand has recovered, and the agricultural sector, the backbone of the economy, continues to play a pivotal role in the economy, contributing around 16 percent to the gross national product (GDP) and supporting 46.1 percent of the South Asian nation’s population. It predicted that rural demand would increase, supported by a recovery in agriculture, lower food prices, and a stable economy. However, global issues like trade tensions and rising commodity prices could still impact growth.
In the context of global turmoil, India displayed steady economic growth. The Economic Survey credited the projection of India’s real GDP growth at 6.4 percent in FY25 to agriculture (and also services), with increased rural demand. The agriculture sector is expected to rebound and grow by 3.8 percent in FY25 against 5.4 percent in FY24.
However, the Survey also said that even though the volatility in agricultural growth has diminished over time due to targeted interventions, the sector remains highly vulnerable to weather variability, with only about 55 percent of the net sown area receiving irrigation.
Underlining that climate change and water scarcity are some of the significant obstacles that require focused and targeted interventions, the Survey said that promoting agricultural production patterns and practices that align with the specific agro-climatic conditions and natural resource availabilities of different regions across the country is vital.
“Investment in research and development, especially on climate-resistant varieties, improved agriculture practices, diversification to high yield and climate-resilient crops, and micro-irrigation, can yield sustainable long-term benefits. The widespread adoption of digital technologies in agriculture will unlock further possibilities for enhancing productivity,” it said.
The Survey said that farmers must be allowed to receive price signals from the market unimpeded, with “separate mechanisms designed to take care of the cost-of-living impact on deserving households” for specified durations. It also suggested that farmers should have market mechanisms to hedge their price risks, and they need the right policies that nudge them away from impairing their soil fertility with an unbalanced application of fertilizers and from producing already overproduced crops, which deplete India’s water resources and use up electricity excessively.
“These policy shifts will help lift agricultural productivity in the economy by boosting land and labor productivity in the sector. Consistent and stable growth of agriculture at around 5 percent, with a 20 percent share of overall GVA in the economy, will contribute 1 percent growth to GVA,” the Survey said and added that agriculture will then absorb surplus labor even as output per worker and output per hectare rise.
Despite global economic uncertainties, India’s economy remains strong. The survey highlights that India’s financial and corporate sectors are in good shape. Strong government policies, steady private spending, and fiscal discipline are helping the economy stay resilient. However, a decline in globalization could pose risks in the future.
During the first half (H1) of FY25, India’s economy grew by 6.2 percent. In Q1 FY25, growth was 8.3 percent, but it slowed down in Q2 FY25 due to challenges in the industrial sector—lower exports due to trade restrictions and weak global markets, heavy rains disrupted mining, construction, and some manufacturing sectors, and some major festivals were celebrated later than usual, affecting economic activity in Q2.
India’s GDP grew by 6.7 percent in Q1 FY25 but slowed to 5.4 percent in Q2 FY25. Overall, the first half of FY25 recorded 6 percent growth, showing a mixed performance despite a strong start.
It said India’s share in global IPO listings jumped to 30 percent in 2024 from 17 percent in 2023, showing the country’s growing importance in international finance. The Nifty 50 index has given an 8.8 percent annual return over the last decade, making India’s stock market one of the best performers worldwide.
To achieve India’s aim to become a developed nation (Viksit Bharat) by 2047, it needs to grow at 8 percent per year for the next 20 years. However, global factors like trade policies and economic uncertainty could impact this goal.
India’s economy is benefiting from digital infrastructure, economic reforms, and strong business growth. By December 2024, India’s weight in the MSCI Emerging Markets Index reached 19.4 percent, showing its increasing role in global markets. While India has outperformed China’s Shanghai Composite Index, it still lags behind the US NASDAQ and Dow Jones in returns.
Although the economic outlook is positive, India must prepare for global challenges that could affect its growth in the coming years.
India’s economy benefits from money remitted home by Indians working abroad. Remittances grew from USD 28.1 billion in Q2FY24 to USD 31.9 billion in Q2 FY25.
The CEA pointed out that high electricity prices in India hurt businesses compared to countries like Vietnam and Bangladesh, where industrial electricity costs are lower.
