Will Union Budget 2025 bridge gaps, boost growth for India’s agriculture and MSMEs?

As we approach Budget 2025, it is imperative to address the pressing challenges faced by India’s agriculture and MSME sectors. Agriculture contributes nearly 18 per cent to India’s GDP and employs over 40 per cent of the workforce. Yet, the sector continues to lag in innovation and technological adoption. Similarly, MSMEs, accounting for more than 30 per cent of the nation’s industrial output, grapple with financial constraints and operational inefficiencies. To unlock the immense potential of these critical sectors, bold and targeted reforms are necessary.

Boosting agritech

A 10-year tax holiday for agritech startups could be transformative, encouraging entrepreneurs to invest in scalable, tech-driven solutions that benefit smallholder farmers. By alleviating the tax burden, startups can redirect their resources toward research, development and the implementation of groundbreaking technologies.

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Subsidies covering up to 50 per cent of capital costs, coupled with low-interest, long-term loans, are essential for enabling startups and farmers to acquire modern machinery and tools. These measures would drive the adoption of precision agriculture and other innovative practices, significantly enhancing productivity. At present, India’s agricultural productivity remains below global benchmarks, and such initiatives could bridge this gap.

Incentivizing MSME growth through PLI schemes

Production Linked Incentive (PLI) schemes tailored for agricultural equipment and tools could be a game-changer for MSMEs. These incentives would not only bolster domestic manufacturing but also align with the government’s “Make in India” objectives, fostering self-reliance in critical sectors.

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Additionally, increasing the corpus of the Agriculture Infrastructure Fund (AIF) from its current allocation of Rs1 lakh crore would strengthen supply chains and improve market access for both farmers and MSMEs. Enhanced funding would allow for the development of critical infrastructure, including storage facilities, transportation networks and processing units, thereby ensuring efficiency and reducing wastage.

Bridging the rural-urban divide

Expanding digital marketplaces and broadband connectivity in rural areas is crucial for integrating rural economies with urban markets. These initiatives can improve price transparency, streamline market access and empower farmers to secure fair prices for their produce. Strengthening rural connectivity would not only reduce geographical barriers but also foster inclusive growth.

Investing in R&D for future-ready agriculture

A dedicated R&D fund of Rs1,500-Rs2,000 crore is urgently needed to drive innovation in precision farming, climate-resilient crop varieties, and affordable tools for small-scale farmers. Such investments would equip India’s agricultural ecosystem to adapt to the challenges posed by climate change and resource constraints. By focussing on sustainable practices and resource optimisation, these advancements would ensure long-term food security and economic stability.

The way forward

The upcoming budget presents an opportunity to address structural inefficiencies and empower two of India’s most critical economic drivers: agriculture and MSMEs. By implementing tax incentives, boosting funding and prioritising innovation, we can pave the way for a sustainable and resilient future. The proposed measures will not only enhance productivity and profitability but also strengthen the foundation for a self-reliant and globally competitive India.

The author is co-founder Balwaan Krishi. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.