The expected fall in the annual growth of gross value added (GVA) in “agriculture and allied activities” to 2.7% in the second half of the current fiscal year from 3.9% in the first half is being attributed to a host of factors including crop damage and the lower price realisation. An unfavourable base has also played a part.
“Prolonged artificial suppression of farmgate prices is triggering an economic contagion, with decelerating GDP growth serving as an early indicator of things to come,” Ajay Vir Jhakar, chairperson, Bharat Krishak Samaj, told FE. This could upset a fragile recovery in rural income and consumption.
The nominal growth rate of GVA of agriculture and allied activities is projected at a record low of 0.8%in FY26, down from 10.4% in 2024-25, majorly due to negative food inflation.
The Impact of Negative Food Inflation
Food inflation rose to 10.87% in October, 2024 on year and since then it has plunged to (-) 3.91% in November, 2025, largely driven by base effect and subdued prices of vegetables, cereals, pulses, meat, eggs and spices. Food inflation has remained in the negative zone for the sixth consecutive month in November, 2025.
“The Government interventions have remained agile, balancing demand and supply to largely contain food prices for consumers. Coupled with weak global price signals, agricultural prices in 2025 remained broadly subdued across most cereals, pulses, and oilseeds, limiting farm-gate price realization and value capture by farmers,” Shweta Saini, CEO, Arcus Policy Research, said.
Saini stated as a result, agricultural growth in FY26 appears to be driven more by volume expansion than by price-led gains, underscoring the need to strengthen income-growth pathways for farmers.
The sector is expected to have a GVA growth of 3.1% in FY26, according to the first advance estimates released by the National Statistics Office on Wednesday. The GVA grew 4.6% in FY25 and 2.7% in FY24.
Production Stability and Niti Aayog Projections
Overall crop production conditions have remained broadly stable, barring weather-related disruptions in select commodities such as onions, tomatoes, rice, and tur due to unseasonal rains.
Ramesh Chand, member, Niti Aayog recently stated that agri-sector growth is likely to be close to 4% in FY26. Crops account for roughly 55% of farm-sector GVA, and the livestock sector’s share is 30%.
In the first quarter of FY26, the agri and allied sector GVA growth in nominal terms was 3.2%, a sharp decline from 7.5% in the same quarter of 2024-25.
Ashok Gulati, agricultural-economist has identified factors such high base period growth, excessive and untimely rainfall in some areas damaged crops and food prices collapse, especially veggies for lower projection of agri-growth in the current fiscal. Support by above normal monsoon rains, foodgrain – rice, wheat, pulses and coarse cereal production rose to a record 357.73 million tonne (MT) in 2024-25 crop year (July-June), up from 332.30 million tonnes in 2023-24, according to the agriculture ministry.
Correspondingly, In 2024-25, the horticulture production which includes fruits and vegetables, increased by 4% to 369.05 MT, up from 354.74 MT in 2023-24.
The crop outlook for 2025-26 is also looking promising with robust sowing in both kharif and rabi seasons.
According to a Crisil analysis, the prices of key vegetables – tomato, onion and potato – during most of part of 2025 ruled way below the 2024 level because of the sharp rise in production induced by higher price realisation in 2024.
Pushan Sharma, Director-Crisil Intelligence had earlier stated that in the current rabi season 2025, the prices of key vegetables such as onion, potato and tomato declined ~38%, ~34% and ~24% on-year, respectively.