Will Union Budget 2025 Promote Another Green Revolution?

Finance Minister Nirmala Sitharaman is set to present the full budget on February 1, 2025, with widespread anticipation for measures aimed at providing relief to the middle class and addressing the concerns of a critical segment often in the spotlight – farmers. Following the post-monsoon period, a prime time to assess the agriculture sector for investment opportunities, Mandar Wagh delves into the sector’s performance, examines the key challenges it faces, evaluates government efforts to address these issues, and highlights budget expectations that could drive future growth in the sector 

All eyes are on the upcoming Union Budget 2025, with opinions sharply divided. While some argue that the middle class is grappling with challenges, others are optimistic that the budget will bring much-needed relief for the common man. When discussing budget announcements, farmers consistently take centre-stage due to their crucial role in the nation’s economy and food security. The importance of the agricultural sector cannot be overstated, as it provides livelihoods for a significant portion of the population and forms the backbone of rural economies. 

This year’s budget will be presented amidst a backdrop of heightened tensions, with farmers staging a year-long protest at the Punjab-Haryana border. Expectations are particularly high for impactful measures aimed at fostering growth in the agriculture sector and addressing the pressing concerns of farmers. This article delves into the anticipated budget announcements for the sector, identifies key challenges requiring attention, and examines the financial performance of leading industry players. By doing so, it offers valuable insights into the sector’s future direction and its potential for investment opportunities. 

India’s Agriculture Sector
India’s agriculture sector serves as the backbone of the nation’s economy, contributing approximately 18 per cent to the Gross Domestic Product (GDP) and is projected to reach around USD 600 billion by 2025. It also serves as the primary source of livelihood for around 55 per cent of the population. The sector spans various segments, including crops, livestock, fisheries and forestry, forming the foundation of rural livelihoods and food security. The sector also stands as a cornerstone of the global food supply chain, boasting several world-leading achievements. 

It has the world’s largest cattle herd, primarily buffaloes, and the largest area under cultivation for wheat, rice and cotton. The country is also the largest producer of milk, pulses, and spices, showcasing its dominance in diverse agricultural outputs. India ranks as the second-largest producer of fruits, vegetables, tea, farmed fish and sugarcane. The compound annual growth rate for agribusiness and related industries has been robust, hovering around 9-10 per cent over the last five years, driven by rising domestic consumption and increasing global demand for agricultural exports. 

India is a major exporter, with agricultural exports surpassing USD 50 billion each year. The government’s emphasis on food processing and infrastructure development, such as cold chains and rural storage facilities, has further strengthened export capabilities. Livestock and fisheries, in particular, have shown remarkable growth, contributing significantly to rural incomes and export earnings. 

Financial Health of Agriculture Companies 

To deliver a detailed analysis of the sector’s performance, we have evaluated the top 25 BSE-listed agriculture companies by market capitalisation. This review spans diverse segments such as tea and coffee, sugar, animal feed, fertilisers, pesticides and agricultural equipment, including compressors and pumps, providing comprehensive insights into the key players shaping India’s agriculture industry. While most sectors exhibited strong year-on-year (YoY) growth but less impressive quarteron-quarter (QoQ) performance, the agriculture sector presented a contrasting trend. 

In Q2FY25, the sector demonstrated notable sequential strength, though year-on-year growth remained subdued. This contrasting trend is attributed to a combination of seasonal and structural factors. Agriculture is highly seasonal, and Q2 often aligns with the monsoon season, which boosts agricultural activity and leads to stronger quarter-on-quarter performance. Favourable weather conditions, such as improved rainfall, contributed to increased output and higher revenues in the quarter. However, the subdued year-on-year growth is explained by the base effect, where the previous year’s performance was exceptionally strong, creating a higher benchmark for comparison. 

Additionally, factors like price fluctuations for agricultural commodities and rising input costs tempered overall profitability, limiting the year-on-year growth despite the positive sequential performance. Aggregate revenue for the sector surged by 16 per cent quarter-on-quarter, but year-onyear growth was limited to a modest 3 per cent. Similarly, aggregate net profit delivered an outstanding 70 per cent growth quarter-on-quarter but failed to show any year-on-year growth, instead recording a slight decline. 

A notable trend emerged as fertiliser and pesticide companies reported substantial growth in both revenue and net profit. In contrast, tea, coffee, and sugar companies delivered lacklustre results. This contrasting performance can be attributed to segment-specific dynamics. Fertiliser and pesticide companies benefited from increased agricultural activity, driven by favourable monsoons or improved irrigation, which boosted demand for their products. Additionally, government subsidies and supportive policies, along with strong export demand and stable raw material costs, further bolstered their revenue and profitability. 

Rising input costs, including raw materials, energy, and labour, weighed heavily on the margins, particularly for FMCG companies, where increased packaging and logistics expenses added to the strain. Additionally, urban demand, a key growth driver for the FMCG sector, remained muted due to inflationary pressures and weakened purchasing power, curbing sales growth. Export challenges, including subdued demand and price competition, further affected sugar and coffee companies, while intense competition in the FMCG space limited the ability to pass on higher costs to consumers. 


Financial Performance of the Leading Agriculture Companies
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Challenges Hindering Growth in Agriculture Sector 

India’s agriculture sector faces several challenges that hinder its growth and sustainability. One of the key issues is weather dependency. The sector is highly vulnerable to unpredictable weather patterns, including irregular rainfall and extreme events like droughts and floods. Despite improvements in irrigation infrastructure, many regions still rely heavily on monsoons, making crop yields unstable. Low productivity is another significant concern. Many Indian farmers still use outdated farming techniques, lack access to modern technology, and face poor soil health, leading to suboptimal yields. 

 

This issue is compounded by the fragmentation of land holdings, which limits economies of scale and the efficient use of resources. The lack of proper infrastructure is also a challenge. Poor storage, inadequate transportation networks, and the absence of effective cold chains contribute to significant post-harvest losses, especially in perishable commodities. Additionally, access to credit remains limited for many farmers, particularly small-scale ones, which restricts their ability to invest in modern farming equipment or inputs like high-quality seeds and fertilisers. 

Government policies and subsidies often fail to address the root causes of these issues, and market linkages remain weak. Farmers frequently face low prices for their produce due to middlemen and insufficient market access. Finally, rising input costs like fertilisers, labour, and fuel add pressure on farmers’ profitability, further limiting growth prospects in the sector. Addressing these challenges is essential for ensuring the longterm sustainability and competitiveness of India’s agricultural industry. 

Government’s Strategic Initiatives
To address the challenges outlined above, the Indian government has been actively implementing various initiatives. A comprehensive six-point strategy for agricultural development has been formulated, emphasising the enhancement of infrastructure, promotion of technology adoption, provision of financial support and accessibility, implementation of sustainable agricultural practices, capacitybuilding and training, and the introduction of policy reforms and incentives. Prime Minister Narendra Modi’s third term started with the release of the 17th instalment of the PM Kisan Nidhi, emphasising the government’s ongoing commitment to farmer welfare. 

The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) is a flagship programme providing direct income support to farmers, helping them meet various agricultural expenses. Under this initiative, eligible farmers receive financial assistance of ₹6,000 per year, paid in three equal instalments. Similarly, the PM Fasal Bima Yojana offers crop insurance to protect farmers against losses due to natural calamities, pests, or diseases, ensuring financial stability. The Micro Irrigation Fund (MIF) is aimed at promoting micro-irrigation systems like drip and sprinkler irrigation. 

It provides financial assistance to farmers to improve water use efficiency, reduce water wastage, and enhance agricultural productivity, especially in water-scarce regions. For promoting agricultural infrastructure, the government has focused on improving irrigation facilities through the Pradhan Mantri Krishi Sinchayee Yojana and enhancing cold storage and warehousing facilities to reduce post-harvest losses. The government has also pushed for technological advancements in farming practices through schemes like eNAM (National Agriculture Market), which enables farmers to sell their produce online, increasing market access and ensuring better price realisation. 

The National Mission on Agricultural Extension and Technology (NMAET) has been designed to enhance the reach of technology to farmers, improving their productivity and income. The government’s support for drone technology, along with initiatives like the Kisan Drone Yojana, is encouraging adoption, particularly in remote and underserved areas. The drone revolution in India is transforming agriculture by introducing advanced technologies for precision farming. Drones are being used for tasks like crop monitoring, pesticide spraying, and irrigation management, allowing farmers to increase efficiency and reduce manual labour. 

This innovation is not only improving agricultural productivity but also offering new business opportunities, especially for rural women, through drone-related services. Further, the Soil Health Card Scheme aims to promote sustainable farming by providing farmers with detailed information about soil health, leading to better input management. These initiatives, along with policy reforms represent the government’s ongoing commitment to modernising the agriculture sector, ensuring its growth, and improving the well-being of farmers across the country. 

Seeds of Change: Sector Expectations from Budget 2025 

As the government prepares for the FY25 budget, several key expectations have emerged for the agriculture sector. There is a strong push for enhanced financial support for farmers, including calls to reduce interest rates on agricultural loans to as low as 1 per cent, as well as doubling the PM-KISAN annual instalment from ₹6,000 to ₹12,000 to provide greater financial assistance. Additionally, stakeholders are urging the introduction of a zero-premium crop insurance scheme under the Pradhan Mantri Fasal Bima Yojana, aimed at alleviating risks for small farmers, and exempting GST on agricultural inputs like seeds, machinery, and fertilisers to reduce costs. 

Improved infrastructure is another priority, with expectations for the development of better storage facilities, such as cold storage and warehouses, to minimise post-harvest losses, alongside enhanced transportation networks to streamline the movement of agricultural produce. Furthermore, policy reforms are being sought to ensure fair pricing, reduce middlemen influence, and promote sustainable farming practices, including organic farming, through incentives and training. 

Lastly, to boost India’s agricultural exports, experts are calling for subsidies and support for exporters to increase the global competitiveness of Indian agricultural products. 

Conclusion
The agriculture sector offers significant growth potential, driven by factors such as a growing population, rising demand for food and agriproducts, technological advancements in farming practices, and increasing government support through subsidies and schemes. Despite facing challenges, long-term investments in the sector remain promising. The government is actively working to address these hurdles. Furthermore, favourable budgetary announcements aimed at supporting farmers, reducing input costs, and improving market access will contribute to the sector’s growth, paving the way for a prosperous and resilient future. 

Investors looking to invest in the agriculture sector should closely monitor sectoral developments and government announcements to make more informed investment decisions. Staying updated on policy changes, infrastructure improvements, and budgetary measures will be key to capitalising on opportunities in this promising sector. We will provide you with the important updates on the upcoming Budget Day, February 1, 2025. Stay tuned for real-time insights and expert analysis.