India's agricultural sector confronts a complex set of challenges, including ensuring food security for its expanding population, supporting rural livelihoods, and mitigating the effects of climate change. These issues are compounded by resource limitations, financial constraints, and the imperative to reduce greenhouse gas emissions. To address these multifaceted challenges, a comprehensive sustainable agriculture framework has been developed using a value-chain approach. This framework examines various sectors, activities, policies, and initiatives within the agricultural landscape. The analysis covers financial flows during fiscal years 2020-21 and 2021-22, revealing key insights into public and private finance sources, intermediaries, and end-use activities across the entire agriculture value chain. By mapping these financial flows and identifying investment opportunities, the report serves as a roadmap for stakeholders to transform challenges into opportunities.
The Indian agricultural sector is at a pivotal juncture where sustainability is not just an option but a necessity. With the country's food demand projected to reach around 400 million tonnes by 2050, the current production levels need to grow at an average rate of approximately 4% over the next five years. The financial support for sustainable agriculture has seen fluctuations, with an overall decline from INR 22,474 billion (USD 303 billion) in FY 2020-21 to INR 22,312 billion (USD 299 billion) in FY 2021-22. Despite this slight downturn, the role of commercial financial institutions (FIs) remains crucial. These institutions have led the way in disbursing loans, accounting for 99.5% of total disbursements. The Reserve Bank of India’s priority-sector lending guidelines mandate banks and FIs to allocate 18% of their adjusted net bank credit or credit equivalent of off-balance sheet exposures to agriculture and allied activities. Over the two-year period, the total agriculture credit disbursed amounted to INR 34,387 billion (USD 462 billion), averaging INR 17,194 billion (USD 231 billion) annually.
Furthermore, the financial landscape is dominated by domestic sources, which represent 99.5% of the flows, amounting to INR 22,289 billion. International contributions account for only 0.5%, or INR 105 billion, highlighting the challenge of mobilizing international support. Official Development Assistance (ODA) for agriculture is limited and fragmented, representing just 5.2% of total ODA globally as of 2018. This disparity underscores the need for capacity building and technical assistance to complement domestic resources and unlock further value in sustainable agriculture development.
Government budgets also play a significant role in supporting sustainability efforts. Union and state governments allocated an annual average of INR 7,294 billion (USD 98 billion) to agriculture during FY 2020-21 and FY 2021-22. Of this amount, INR 6,373 billion (USD 86 billion) was directed towards sustainable agriculture activities, primarily focusing on upstream and downstream operations. This substantial investment reflects the commitment to fostering sustainable practices in the agricultural sector.
In response to these challenges, stakeholders must collaborate to harness the potential of sustainable agriculture. Public-private partnerships, intergovernmental and intragovernmental initiatives can mobilize finance and advance sustainable practices. By leveraging these collaborative efforts, India can transform its agricultural landscape into one that ensures food security, supports rural livelihoods, and mitigates climate change impacts while promoting economic growth and environmental sustainability.