By Abbas Nazil
India’s agricultural sector is at a crossroads, facing the challenge of ensuring food security, supporting rural livelihoods, and mitigating climate change while dealing with financial constraints and limited resources.
A new report analyzing financial flows in the sector during FY 2020-21 and FY 2021-22 highlights a slight decline in overall funding, despite the increasing need for sustainable agriculture investments.
Total financial flows to the sector averaged INR 22,393 billion (USD 301 billion) annually during the period, marking a 1.1 percent drop from INR 22,474 billion (USD 303 billion) in FY 2020-21 to INR 22,312 billion (USD 299 billion) in FY 2021-22.
This decrease comes at a time when India’s food demand is expected to rise to 400 million tonnes by 2050, up from an estimated 330 million tonnes in FY 2022-23, requiring an average annual growth rate of 4 percent to meet future needs.
Private financing, led by commercial financial institutions, played the dominant role in agricultural funding, accounting for 99.5 percent of total disbursements.
This was driven primarily by the Reserve Bank of India’s priority-sector lending guidelines, which mandate that banks allocate 18% of their adjusted net bank credit to agriculture.
As a result, financial institutions disbursed INR 34,387 billion (USD 462 billion) in agriculture credit over the two-year period, averaging INR 17,194 billion (USD 231 billion) annually.
The report also highlights a significant reliance on domestic sources, which accounted for 99.5 percent (INR 22,289 billion) of financial flows, while international contributions remained minimal at 0.5 percent (INR 105 billion).
This imbalance reflects a global trend where agriculture receives limited Official Development Assistance (ODA), making it challenging to mobilize international support for India’s transition to sustainable farming.
Government funding remains a crucial pillar in driving sustainable agriculture. Union and state governments allocated an average of INR 7,294 billion (USD 98 billion) per year to agriculture, with INR 6,373 billion (USD 86 billion) specifically supporting sustainable activities.
These funds were primarily directed towards upstream and downstream activities aimed at promoting environmental resilience and productivity.
By mapping these financial flows and identifying key investment opportunities, the report serves as a guide for policymakers, regulators, and private investors to address the sector’s financial challenges.
It emphasizes the need for collaborative efforts, including public-private partnerships and enhanced international support, to mobilize funds and accelerate India’s shift toward a more sustainable agricultural landscape.
