A detailed policy analysis reveals that for Indian farmers, the Budget has increasingly transformed into a ritual rather than an effective remedy, highlighting systemic issues in agricultural governance and policy implementation.

Unfulfilled Budget Promises

The gap between budget announcements and actual implementation remains a critical concern. The promised increase in Kisan Credit Card limit from ₹3 lakh to ₹5 lakh, announced in the previous year's budget, is yet to be officially notified. This delay exemplifies how budget announcements often remain statements of intent rather than actionable policies.

Agricultural Economics and Subsidy Structure

The analysis reveals significant changes in agricultural arithmetic that challenge existing subsidy frameworks. Agriculture currently grows at approximately 3.00% while population growth has declined to 0.50%, fundamentally altering the economic landscape. Despite this shift, fertilizer subsidy policies continue without corresponding adjustments.

The food security framework shows stark contradictions in targeting:

Crop Insurance and Compensation Challenges

The Pradhan Mantri Fasal Bima Yojana (PMFBY) demonstrates structural issues despite significant government investment. Under the current framework, the Centre and states together contribute 90.00% of the premium costs. However, widespread dissatisfaction persists among both farmers and states regarding claim settlement processes and transparency mechanisms.

Multiple crops have traded below Minimum Support Price (MSP), including:

• Bajra, cotton, gram, groundnut, maize
• Masur, moong, ragi, soybean, urad
• Common vegetables showing price declines of approximately 33.00% despite 4.00% increase in fruit and vegetable output

Currency Impact and Trade Policy

Currency depreciation has provided unintended relief to the agricultural sector. The rupee's movement from ₹60.00 per dollar in 2014 to near ₹90.00 has created natural import barriers and enhanced export competitiveness.

Economic Position and Per Capita Analysis

India's economic standing presents a paradox in global rankings. While the country has achieved the position of world's fourth-largest economy by GDP, its per capita performance tells a different story.

The analysis suggests that farmers will receive higher farm-gate prices only when purchasing power increases, consumption expands, and economic growth becomes more evenly distributed across sectors and regions. The current policy framework requires fundamental restructuring to address these systemic challenges and move beyond the ritual approach toward genuine remedial measures.

Basant Bafna, head of fixed income at Mirae Asset Investment Managers (India), expects the government to maintain its focus on fiscal consolidation while preserving growth momentum in the upcoming Budget 2026. Speaking in an interview, Bafna outlined his expectations for government borrowings, bond market dynamics, and monetary policy trajectory.

Fiscal Consolidation and Borrowing Outlook

Bafna believes India's fiscal consolidation story remains intact, though the pace may moderate. The government appears committed to balancing growth-oriented spending with fiscal discipline, prioritizing consolidation over populist measures. The debt-to-GDP ratio is expected to ease from nearly 56% to close to 50% over the next five years, supported by strong economic growth.

While central government borrowings are expected to remain stable, state borrowings are likely to rise compared to FY26. This growth trajectory is anticipated to be driven by steady government capital expenditure with support from GST rationalization. However, near-term revenue pressures persist, potentially requiring greater reliance on disinvestment and asset monetization.

Bond Market Dynamics and Investment Strategy

The bond market outlook reflects mixed conditions across different segments. Central government securities yields are expected to remain supported due to the government's commitment to fiscal consolidation and higher prevailing spreads compared to historical averages. However, elevated supply of State Development Loans (SDLs), coupled with muted demand, suggests limited scope for yield compression.

Bafna recommends a balanced barbell strategy combining accrual with selective duration exposure to navigate potential rate movements while managing supply-side pressures. This approach aims to capitalize on elevated spreads while maintaining flexibility amid ongoing market dynamics.

Monetary Policy and Rate Trajectory

Regarding RBI policy, Bafna notes that the central bank has already implemented 125 basis points of rate cuts in 2025, leaving limited room for further easing in the near term. Additional rate cuts would likely depend on growth slipping below 6% or inflation undershooting expectations. The policy focus is expected to remain on ensuring transmission of rate cuts already undertaken.

A potential catalyst for additional policy space could emerge from the new CPI series expected to be published in February, particularly if it significantly undershoots expectations. For corporate debt, demand-supply dynamics are expected to drive yields, with elevated levels in the near term due to supply pressures from high credit-deposit ratios for banks.

Geopolitical Considerations and Investment Approach

Amid ongoing geopolitical uncertainties, bond spreads remain elevated compared to three-year averages across various segments. As global volatility gradually stabilizes and the RBI continues measures to ensure smooth liquidity transmission, there is potential for spread compression as policy transmission takes effect.

Bafna suggests that investors need not make significant changes to their debt holdings ahead of the Union Budget, as the broader trajectory of consolidation and growth remains intact. The decision to increase bond exposure should be guided by individual risk appetite and investment horizon, considering the opportunity's sensitivity to broader market dynamics.