by Vivek Sen, Neha Khanna, Parag Puri, and Suryanshu Hooda
Introduction
India’s agriculture sector is confronted with a multifaceted “Grand Challenge”. It must ensure food security for a growing population, support rural livelihoods, and manage the adverse impacts of climate change. All this while dealing with limited natural resources, financial constraints, and the need to reduce greenhouse gas emissions. These challenges are not just theoretical; they are the daily reality for millions of farmers across the country.[1]. It is predicted that an increase in temperature, shifts in rainfall patterns, and increased intensity and frequency of extreme weather events will impact water availability, soil health, and pest populations, exacerbating food shortages and nutrient deficiencies[2]. Agriculture is also the second-highest GHG-emitting sector in India, producing 13.72% of the country’s gross GHG emissions, according to India’s 4th Biennial Update Report (BUR)[3].
Transitioning Indian agriculture to sustainable and climate-smart practices is critical and urgent. However, this transition is remarkably complex in India’s unique socio-economic context. The challenge is significant, with around 45.5% of India’s workforce engaged in agriculture and related activities, and 92.02% of the total agricultural sector employment concentrated in rural areas. Furthermore, 89.4% of India’s farmers hold less than two hectares of land and are focused on subsistence farming. Given these structural challenges, India’s climate action policy considers emissions from agriculture ‘survival emissions’ essential for food security and socio-economic development[4]. As such, the burden of emission reduction cannot be put on small and marginal farmers[5].
This blog explores the evolving policy paradigm and objectives of Indian agriculture, assesses the current landscape (needs and investment) of sustainable and climate-smart agriculture financial flows, and outlines opportunities for action for the agriculture finance ecosystem.
Sustainable and Climate-Resilient Agriculture Policy Paradigm
Since the early 2000s, India’s agriculture policy paradigm has drifted from subsistence to sustainable and climate-smart agriculture. Historically, the national agricultural policy has progressed through 5 distinct phases (check Figure 1: 5 distinct phases of India’s Agriculture Policy) from the 1950s to the present day[6],[7].
While the first four phases were pivotal in achieving high productivity and food security, the challenges of small land holdings, low productivity, impacts of climate change, pressure on natural resources such as water, and an underdeveloped food processing and retail sector, persisted still[8]. The agriculture policy has shifted to a sustainable and climate-smart paradigm to address these concerns.
This shift is evident in policy, official climate communications, and government schemes. India’s National Agriculture Policy (2000) and National Agroforestry Policy (2014) laid early sustainability groundwork[9], while key climate communications—such as the First National Communication and successive Biennial Update Reports (BURs)—formalized climate adaptation objectives[10], [11], [12], [13], [14]. The National Innovations on Climate Resilient Agriculture (NICRA), National Food Security Mission, Pradhan Mantri Krishi Sinchayee Yojana, and National Mission for Sustainable Agriculture (NMSA) further reinforced the government’s commitment to sustainable and climate-smart agriculture.
The analysis of the policy literature indicates that the three objectives for sustainable and climate-smart agriculture under the 5th paradigm phase are (check Figure 2: 3 Objectives of Sustainable and Climate-smart Agriculture in India)-
India’s draft climate finance taxonomy has cemented the sustainable and climate-smart policy phase by recognizing the role of agriculture, food, and water security in climate adaptation and resilience building. The taxonomy aims to facilitate financial flows toward research and development in climate-resilient crop varieties, precision irrigation systems, and sustainable technologies, which are key to reducing climate risks while boosting productivity and safeguarding food security[15].
Sustainable and Climate Finance Needs of the Indian Agriculture Sector
Despite the growing emphasis on sustainable and climate-smart agriculture, comprehensive estimates of India’s financing needs remain fragmented. However, the following available estimates provide partial insights:
| Financial Needs | Estimates |
| Climate Adaptation Finance | India needs around USD 206 billion (at FY 2014-15 prices) for adaptation action in agriculture, forestry, fisheries, infrastructure, water resources, and ecosystems between 2015 and 2030[16].The cumulative expenditure needed for adaptation in a Business as Usual (BAU) scenario is estimated to be ₹56.68 trillion (approx. USD 648.5 billion) till 2030 at 2023-24 prices18. |
| Climate Mitigation Finance | To achieve India’s Intended Nationally Determined Contribution (INDC) under the Paris Agreement by 2030, approximately USD 133 billion (16% of USD 834 billion) will need to be allocated to the agricultural sector for climate mitigation[17]. |
| Sustainable Finance | India requires USD 2.64 trillion in investment to achieve the Sustainable Development Goals by 2030[18]. However, the specific share needed for the agriculture sector is unknown. |
This lack of clarity on the total financial investment required for an overall sustainable and climate-smart agriculture transformation poses a challenge for coordinated investment planning.
India’s sustainable and climate-smart agriculture finance flow (500 Words)
In 2025, Climate Policy Initiative (CPI) India published the report on “Sustainable finance flows to India’s agriculture sector”, detailing the roles of public and private finance stakeholders, the quantum of current financial flows, the efficiency of different financial mechanisms, and beneficiary sectors/ activities of the agriculture value chain that are critical for achieving sustainable and climate-smart agriculture. This blog provides an insight into assessing these sustainable finance flows and a snapshot of the sustainable agriculture investments through private equity and venture capital sources.
Report Insights
Annual financial flows to sustainable agriculture averaged INR 22,393 billion (USD 301 billion) for FY 2020-22, declining marginally by 1.1% year-on-year. Despite this, the urgency for agricultural investment remains critical, with India’s food demand projected to rise to 400 million tonnes by 2050. In comparison, production in FY 2022–23 was around 330 million tonnes, necessitating an annual growth rate of approximately 4%.
Private financing dominates sustainable agriculture, contributing 67% of total tracked flows, averaging INR 15.05 trillion (USD 202 billion). This figure marks an 11.4% increase over the period, underlining the vital role of commercial financial institutions (FIs). Backed by the Reserve Bank of India’s priority sector lending mandates, commercial FIs accounted for 99.4% of private financing, largely in agricultural credit.
Public finance, representing 33% of the tracked flows, saw a 21.6% contraction from INR 8,232 billion (USD 111 billion) in FY 2020–21 to INR 6,447 billion (USD 87 billion) in FY 2021–22, primarily due to phasing out of the Union government’s COVID-19 pandemic-related food support schemes. Still, the combined average allocation from union and state government budgets and public sector undertakings (PSUs) in agriculture remained substantial, averaging at INR 7,294 billion (USD 98 billion). Bilateral and Multilateral Development Finance Institutes supported sustainable agriculture with additional average flows of INR 46 billion (USD 0.6 billion) in FY2020- 22. 99.5% of all tracked finance originated domestically, highlighting India’s reliance on internal resources. International sources contributed just INR 105 billion (USD 1.4 billion) annually, mirroring global trends where agriculture receives a small share of Official Development Assistance.
Funding the future of farming through private equity and venture capital funds
Venture capital and private equity funding pathways represent entry points for private sector financing for innovation. In agriculture, innovation through agri-tech, storage solutions, and direct-to-consumer marketplaces has also worked towards improvements along the agri-value chain. From providing on-farm advisory services, inputs, and soil health analysis to delivering farm products to consumers through farm-to-fork business models, agriculture startups in India are piloting and scaling their ventures.
Analyzing India’s sustainable agriculture finance flows, private equity and venture capital funds provided an average of $892 million annually over FY2020- 22. Storage solutions, research & development, agrochemical inputs, and financial services sub-sectors supporting sustainable agriculture received 93% of these flows. The funding flows came in seed and angel investments, venture debt, grants, and series-A & B rounds, reflecting both exploratory pilots and scale-ready models. With India’s agritech market projected to reach USD 34 billion by2027[19], this signals a vast untapped opportunity for PE/VC funds to align impact with returns.
As global investors increasingly look to climate-aligned assets, sustainable agriculture, with its cross-cutting impact on food security, rural livelihoods, and emissions, offers a compelling value proposition. A more supportive ecosystem involving blended finance, policy incentives, and de-risking mechanisms could further accelerate private capital inflows.
Opportunity for Action
India’s sustainable and climate-smart agriculture finance ecosystem remains constrained by skewed funding patterns, limited international flows, and underrepresentation of key financial actors, including DFIs, philanthropies, and private equity/venture capital (PE/VC) investors. To unlock greater investment and accelerate transformation, there are 4 pillars to guide this action:
- Comprehensive, sustainable, and climate-smart agriculture activity tagging within India’s climate taxonomy: Such an action will establish standards for FIs and regulators for promoting investment in sustainable practices, support evaluation and innovation.
- Monitoring and reporting systems for comprehensive and granular data: Initiatives will reduce data gaps, enhance financial oversight, improve decision-making, and support agricultural stack development within the sustainable finance ecosystem.
- Boosting and diversifying financial flows in lagging sectors: Actions to promote integrated value-chain financing and innovative blended finance to support underfunded agricultural areas, reduce debt reliance, and enhance risk mitigation through public-private collaboration and targeted government support.
- Capacity building for sustainable and climate-smart agriculture: Bridge knowledge gaps and promote sustainable practices through localized, digital, and capacity-building initiatives tailored to regional needs, engaging all stakeholders in the agricultural finance ecosystem.
Given the highly localized nature of climate adaptation, states and local-level actors bear significant responsibility for implementing adaptation-related interventions[20]. So, overall, effective climate action and sustainable agriculture transformation needs to focus on adapting to each state’s unique challenges[21]– soil conditions, prevalent crops, and climate vulnerabilities, and encourage complementary sub-national governments’ efforts[22].
India’s agriculture sector needs coordinated action from national policy to sub-national implementation to farmer-level action. The governments have already taken significant steps at both national and state levels, but given the importance of agriculture from a food security, livelihoods, and climate perspective, the focus and impetus must continue. By aligning fiscal, policy, and institutional tiers at every level, India can develop a robust, sustainable agricultural economy that ensures food security, enhances climate resilience, and contributes to emissions reduction.
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