R. Suryamurthy
In a significant boost to India’s agricultural sector, the Union Cabinet today unveiled a strategic package of farmer-centric policies, including the extension of a crucial interest subvention scheme and substantial hikes in Minimum Support Prices (MSPs) for Kharif crops. These proactive measures are poised to amplify the positive impact of an early and optimistic monsoon forecast, collectively fostering a resilient and prosperous agricultural landscape.
The Union Cabinet, chaired by Prime Minister Narendra Modi, gave its nod for the continuation of the Modified Interest Subvention Scheme (MISS) for the financial year 2025-26. This vital decision, carrying an estimated cost of Rs 15,640 crore to the exchequer, ensures that farmers will continue to benefit from affordable short-term credit through the Kisan Credit Card (KCC) scheme.
Under the MISS, farmers can avail of loans up to Rs 3 lakh at a subsidised interest rate of 7%. A 1.5% interest subvention is provided to eligible lending institutions, and an additional 3% Prompt Repayment Incentive effectively brings the interest rate down to a mere 4% for those who repay their loans on time. “This consistent support is critical for maintaining the flow of institutional credit to the agricultural sector,” stated a senior official, underscoring the scheme’s role in enhancing financial inclusion for over 7.75 crore KCC account holders. The scheme’s success is evident in the remarkable surge in institutional credit disbursed through KCC, which increased from Rs 4.26 lakh crore in 2014 to Rs 10.05 lakh crore by December 2024.
Remunerative Prices Assured: MSPs Hiked for Kharif Crops
Complementing the credit support, the Cabinet Committee on Economic Affairs (CCEA), also headed by the Prime Minister, approved significant increases in the Minimum Support Prices (MSPs) for 14 Kharif crops for the upcoming Marketing Season 2025-26. This move reinforces the government’s commitment to ensuring remunerative prices for agricultural produce, aligning with the Union Budget 2018-19’s pledge to fix MSP at a minimum of 1.5 times the All-India weighted average cost of production.
Notable absolute increases in MSP include nigerseed (Rs. 820 per quintal), Ragi (Rs. 596 per quintal), Cotton (Rs. 589 per quintal), and Sesamum (Rs. 579 per quintal). Farmers cultivating bajra are projected to achieve the highest margin over their cost of production at an estimated 63%, followed by maize (59%), tur (59%), and urad (53%). For all other approved Kharif crops, the margin over production cost is set at 50%. This measure is designed to incentivise higher production and encourage crop diversification, especially towards pulses, oilseeds, and Nutri-cereals.
The impact of these consistent MSP policies is underscored by impressive procurement figures. Paddy procurement from 2014-15 to 2024-25 reached 7608 LMT, a substantial increase from the 4590 LMT procured in the preceding decade. Across all 14 Kharif crops, the total MSP amount disbursed to farmers in the last decade surged to Rs. 16.35 Lakh Crores, a sharp rise from Rs. 4.75 Lakh Crore in the prior decade.
Monsoon’s Timely Arrival: A Foundation for Growth
The policy decisions come amidst a highly anticipated and favourable monsoon outlook. The Southwest Monsoon has arrived a week early, bringing welcome rains to southern India and parts of Maharashtra. As of May 27, 2025, it has covered Kerala, Tamil Nadu, Karnataka, Maharashtra, and Andhra Pradesh, with its advance into Chhattisgarh, Odisha, and Northeast India expected within the next 2-3 days. This early onset is crucial for facilitating the swift commencement of Kharif crop sowing.
The India Meteorological Department (IMD) forecasts an optimistic 106% of the long-period average (LPA) for monsoon rainfall, with above-normal precipitation expected in the Central and Southern regions. These regions, with approximately 50% irrigation penetration, are poised for a significant boost in Kharif crop acreages.
However, experts like Pushan Sharma, Director-Research at Crisil Intelligence, emphasise the importance of rainfall distribution. While the overall forecast is positive, localised heavy downpours, as recently witnessed with damage to the summer tomato crop in Maharashtra, highlight the need for careful monitoring.
Despite these nuances, the overarching sentiment is positive. India Ratings and Research (Ind-Ra) projects a robust 4.0% year-on-year agricultural gross value addition (GVA) growth for FY26 if the monsoon’s spread is near normal. Dr. Devendra Kumar Pant, Chief Economist and Head of Public Finance at Ind-Ra, noted, “This augurs well for consumption growth in the economy.” The increasing resilience of the agricultural sector, driven by a higher share of non-crop activities and the rising prominence of Rabi production, further strengthens its ability to withstand monsoon variations.
The synergistic combination of extended interest subvention, enhanced MSPs, and a promising monsoon outlook sets a strong foundation for sustained agricultural growth and increased prosperity for farmers across the nation.
