The Importance of Agriculture in India’s National Economy

Every time you eat a meal, wear a cotton shirt, or see a headline about India’s record exports, agriculture is quietly at work behind the scenes. Even as software exports and stock markets dominate the economic conversation, farming still shapes the daily reality of nearly half of India’s working population. Understanding why agriculture continues to matter so much is key to understanding the Indian economy itself.

The country’s largest source of employment 🔗

No other sector in India employs as many people as agriculture does. According to the Periodic Labour Force Survey for 2023-24, 46.1% of India’s workforce depends on farming and allied activities for a livelihood, even though the sector’s share of national output is much smaller. This is a distinctive feature of the Indian economy: a large share of the population earns its income from a sector that generates a comparatively modest share of GDP, which explains why average farm incomes remain lower than incomes in industry or services.

An interesting shift within this workforce is the rising presence of women. Data cited in the Economic Survey 2024-25 shows that the share of women workers engaged in agriculture rose from 57% in 2017-18 to 64.4% in 2023-24, even as male participation in the sector declined. This points to agriculture becoming an increasingly female-dominated occupation in rural India, often alongside male family members migrating to cities for non-farm work.

A shrinking share of GDP, but still the backbone 🔗

At independence, agriculture accounted for more than half of India’s national income. That share has fallen steadily as industry and services expanded, but the sector has not become irrelevant, it has simply changed role. Agriculture and allied activities still contribute roughly 16-18% of Gross Value Added (GVA), and in absolute terms this contribution keeps growing. The Second Advance Estimates for 2025-26 put the GVA of the agriculture and allied sector at ₹52.09 lakh crore, registering 2.4% growth over the previous year.

This gap between a 46% employment share and an 18% GDP share tells its own story. It is one of the clearest indicators of low productivity per worker in farming compared to other sectors, and it is precisely why raising farm incomes remains a central economic policy goal.

Feeding a nation of 1.4 billion people 🔗

Food security is perhaps agriculture’s most fundamental contribution. India’s foodgrain production has climbed steadily, from around 2,515 lakh metric tonnes in 2015-16 to 3,577 lakh metric tonnes in 2024-25, a compound annual growth of roughly 3.6%. Early estimates for 2025-26 point to a record kharif foodgrain output of over 1,733 lakh metric tonnes, driven by better seed varieties, expanded irrigation, and improved farming practices.

This growth matters because India’s population is not just large, it is still growing. Instruments like the Minimum Support Price (MSP) and the Public Distribution System exist precisely to translate farm output into stable, affordable food access for both rural and urban households, insulating consumers from the price swings that would otherwise follow a bad monsoon or a poor harvest.

Powering India’s industries with raw material 🔗

Cotton and the textile industry 🔗

Agriculture does far more than fill plates, it fuels factories. The textile industry, one of India’s largest employment and export generators, runs almost entirely on agricultural inputs like cotton and jute. India is the world’s second-largest cotton producer, with output of around 5.05 million tonnes in 2024-25, concentrated in Karnataka, Maharashtra, and Gujarat. Without a steady domestic cotton supply, India’s textile and garment exports, which depend heavily on cost-competitive raw material, would look very different.

Turning crops into packaged food 🔗

The food processing industry is agriculture’s other major industrial partner, converting sugarcane into sugar, oilseeds into edible oil, fruits into juices, and grains into packaged staples. This sector has expanded considerably, with its gross value added rising from ₹1.34 lakh crore in 2014-15 to ₹2.24 lakh crore in 2023-24. Government support through the Production Linked Incentive Scheme for Food Processing, backed by an outlay of ₹10,900 crore, has already generated close to 3.39 lakh direct and indirect jobs, while the share of processed food within India’s agricultural exports has climbed from 13.7% to 20.4% over the past decade. This shift towards value addition means farmers increasingly benefit not just from selling raw crops, but from the wider industrial ecosystem those crops feed into.

A pathway out of poverty for rural India 🔗

Agriculture’s link with poverty reduction runs deeper than income alone. World Bank analysis notes that agricultural intensification through the 1970s and 1980s raised rural wages and, combined with falling food prices, meaningfully reduced rural poverty. That basic logic still holds. When farm productivity rises, rural households earn more, spend more locally, and gradually build savings, which in turn supports demand for goods and services well beyond the farm gate.

Government welfare architecture reinforces this link. Direct income support under PM-Kisan Samman Nidhi has transferred close to ₹3.90 lakh crore to more than 11 crore farmers, while the Kisan Credit Card scheme has extended over ₹10 lakh crore in institutional credit to 7.71 crore farmers, reducing dependence on informal moneylenders. Crop insurance under the Pradhan Mantri Fasal Bima Yojana has paid out ₹1.83 lakh crore in claims since 2016, cushioning farmers against the shock of a failed harvest. For India’s smallest and most marginal farmers, these schemes often make the difference between staying above or slipping below the poverty line.

India’s expanding footprint in global agri-trade 🔗

Rice: the world’s largest exporter 🔗

India’s agricultural strength is increasingly visible on the world stage. The country is the largest rice exporter in the world by volume, and rice remains its single largest agricultural export earner, valued at approximately US$12.95 billion in FY25. Total agricultural and allied exports touched US$52.55 billion in FY26, up from US$51.1 billion the previous year, reflecting steady recovery and diversification across commodities such as marine products, spices, and fresh fruits and vegetables.

Cotton and beyond 🔗

Cotton adds another dimension to this trade story. Beyond meeting domestic textile demand, Indian cotton and cotton-based products find steady markets abroad, reinforcing the country’s position as one of the world’s leading cotton producers and exporters. Fruit and vegetable exports have also grown quickly, supported by rising global demand for horticultural produce, with output reaching 114.51 million tonnes of fruits and 219.67 million tonnes of vegetables in 2024-25. Together, these trends show a sector that has moved well beyond subsistence farming to become a genuine engine of foreign exchange earnings.

The challenges that remain 🔗

None of this progress means agriculture’s job is done. Yield gaps remain a real concern, India’s rice yields are roughly a third of China’s and about half of Vietnam’s, according to World Bank research. Landholdings continue to shrink and fragment across generations, climate variability threatens output stability, and the economy still struggles to create enough non-farm jobs to draw workers out of low-productivity agriculture. Economic Survey estimates suggest India needs to add close to 7.85 million non-farm jobs annually to meaningfully shift workers away from farming. Addressing these gaps through better irrigation, market access, and rural infrastructure will decide how well agriculture continues to serve the economy in the decades ahead.

What do you think? Should India’s policy focus shift towards moving more workers out of agriculture into industry and services, or towards raising productivity and incomes within farming itself? And as food processing and agri-exports grow, could this be the sector’s real path to becoming a high-income contributor rather than just a high-employment one?

References

1. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2158030&reg=3&lang=2
2. https://www.downtoearth.org.in/agriculture/economic-survey-2025-employment-increased-in-agriculture-sector-decreased-in-manufacturing-and-services
3. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2237739&reg=48&lang=2
4. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2245639&reg=3&lang=1
5. https://www.ibef.org/industry/food-processing
6. https://ddnews.gov.in/en/indias-food-processing-sector-witnessing-strong-transformation-with-production-linked-incentive-scheme/
7. https://www.worldbank.org/en/news/feature/2012/05/17/india-agriculture-issues-priorities
8. https://ddnews.gov.in/en/year-ender-2025-indias-agricultural-sector-growth-governance-and-ground-level-impact/
9. https://www.ibef.org/exports/agriculture-and-food-industry-india