Policy Update
Mannat Ghumman

Introduction

The dawn of Prime Minister Narendra Modi’s third term commenced with the release of the 17th installment of the PM Kisan Samman Nidhi, leading to the disbursement of ₹20,000 crore to benefit 9.3 crore farmers across the Indian subcontinent.

The path to the country’s prosperity passes through the fields and barns of the villages.”  

Chaudhary Charan Singh, 5th Prime Minister of India

Agriculture is the backbone of the Indian economic and cultural experience, more than 45% of the country’s labor force, yet average monthly income of a farmer household in India as reported by Business Line as only ₹10,218. The sector is overrun with debt, price unrest and underproductivity. Dr  Rijul Siha (2024) outlines to mitigate the economic and social difficulties of the agricultural sector several financial aid policies have been introduced such as Pradhan Mantri Fasal Bima Yojana (PMFBY), Pradhan Mantri Krishi Sinchayee Yojna (PMKSY), Soil Health Card (SHC), National Agricultural Market (eNAM) etc.

The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme is one of the pioneering examples of using direct transfer payments to farmers in India. The scheme was initially implemented as the Rythu Bandhu scheme by the Telangana Government in 2017 – The central government adopted the scheme on February 1, 2019, and launched it nationwide. Under the PM-KISAN scheme, all small and marginal farmers receive an annual income assistance of ₹6,000, which is transferred directly into their bank accounts in three equal installments. The scheme aims to supplement the financial needs of farmers for expenses on agricultural inputs such as seeds, fertilizers, and field preparation.

The prime aim of PM KISAN is to ensure that farmers receive a minimum income, it’s main objective can be outlines as –

  1. To Boost Small and Marginal Farmers’ Income: In the current fiscal year, the government has launched a new Central Sector Scheme aimed at increasing the income of Small and Marginal Farmers (SMFs).
  2. To Address Financial Inclusion: The PM KISAN scheme focuses on meeting the financial needs of SMFs, enabling them to purchase necessary inputs for optimal crop health and yields.
  3. Ensuring Sustainable Farming Income: The main goal of PM KISAN is to protect SMFs from relying on moneylenders for agricultural expenses, thus ensuring their continued participation in farming activities.

Price Support to Farmers

Agricultural incomes in the country are highly varied, as demonstrated by the large range of average agricultural monthly incomes, – States with the highest average monthly incomes are Punjab (₹26,701), Haryana (₹22,841), and Kerala (₹17,915), while States with the lowest average incomes include Jharkhand (₹4,895), Odisha (₹5,112), and West Bengal (₹6,762). Most of this deviation in intra regional developments has been due to the nature of agricultural schemes introduced in the country in the 20th century which focussed on increasing agricultural productivity and reducing the cost of production, the primary policy in question being the Green revolution.

The focus in recent years has been to alleviate the performance of the sector, such as E-NAM which focussed on generating higher prices to farmers by providing large market access. PM-KISAN Samman Nidhi as a direct benefit transfer payment aims to support the structural weakness of the sector. DBT schemes have several advantages over traditional subsidy schemes, such as being more transparent and efficient. They provide regular and predictable income to the beneficiary.

C.S.C Shekar (2021) outlines an academic argument to demonstrate the need for price support for farmers in India, due to the economic sustainability challenges faced by farm households, which impact both farmers’ welfare and national food security. Market failures, especially in developing and underdeveloped countries, necessitate such support. These failures include labor market dualism, where small farms rely more on family labor leading to higher land productivity, but lower per capita output compared to large farms. Land market rigidity, exacerbated by restrictive leasing regulations and limited access to credit, prevents small farmers from expanding their holdings and improving incomes.

Furthermore, credit market failures hinder small farmers from making necessary investments, cultivating high-return crops, and managing risks, trapping them in low-return subsistence farming. Public support is thus critical to address these market failures and ensure the viability and productivity of the agricultural sector.

Moreover, C.S.C Shekar (2021) demonstrates that Farming is uniquely risky because producers have little control over output quantities (q) due to weather and abiotic stresses, and over prices (p), which are determined long after production decisions. This lack of control creates significant income uncertainty for farmers, justifying the need for public support.

Insurance markets, typically modeled to manage risks independently across clients, struggle with agriculture due to the synchronized and widespread nature of weather-related risks, leading to correlated claims and increased vulnerability for insurers. This systemic risk makes private insurance inadequate, further necessitating public support. Additionally, public support is vital due to the positive externalities of agriculture, its role in employment, its critical inter-sectoral linkages, and the strategic importance of food security.

Impact of PM-KISAN SAMMAN NIDDHI

PM Kisan presents a natural experiment to assess the effects of cash transfers. For any intervention to have long-term impacts, there must be investments in productive activities. Conceptually, cash transfers can encourage farmers to invest in productive activities for several reasons.

  1. Easing Credit and Liquidity Constraints: Cash transfers can help alleviate credit and liquidity constraints, making it easier for farmers to purchase agricultural inputs. This is particularly relevant in India, where over 50% of farmers rely on informal credit, and one-fifth purchase inputs on credit.
  2. Increasing Net Income and Risk-Taking Capacity: Cash transfers increase farmers’ net income, which may enhance their capacity to take risks and undertake riskier but potentially more productive investments.

Several field experiments have been conducted to study the impact of PM KISAN Samman Nidhi.

  1. Pavan Kumar and Dr. B.R. Kishore Babu (2018): Pavan and Babu conducted a study in Guntur district to assess farmers’ awareness of the PM-Kisan scheme. They found that 30% of farmers benefited from the scheme. Among those who received the first installment, 52% spent the funds on agriculture, 26% on consumption, 7% on education and health, and 16% on other ancillary expenses. Second-grade beneficiaries allocated 39% of the funds to consumption, 23% to agriculture, and 19% to education and healthcare, indicating varied spending patterns based on beneficiary grade.
  2. Naik, Vasudev, et al. (2022): Naik et al. analyzed the PM-KISAN scheme’s performance in Karnataka, focusing on fund utilization patterns. The study covered six districts in Kalyan Karnataka from 2020 to 2021, surveying 60 beneficiaries. Findings showed that funds disbursed were primarily used for purchasing seeds (38.33%), fertilizers (15%), and pesticides (11.67%). This underscores the scheme’s role in facilitating agricultural investments at the grassroots level.
  3. Bordoloi, Prantik, et al. (2023): Bordoloi et al. examined the impact of PM-KISAN in the North Eastern states, highlighting significant increases in agricultural productivity under the scheme. They reported record growth in food grains, oilseeds, horticulture, and milk production, indicating positive outcomes in enhancing agricultural output and rural livelihoods in the region.
  4. Deepak Varshney, et al. (2024): Varshney et al. explored the adoption of modern agricultural technologies facilitated by PM-KISAN. Evidence suggests that more than 50% farmers who received the benefits in agricultural peak season have spent their money in the agriculture sector, and more than 60% farmers who received the money in the off season spent the money on consumption, education and medical purposes. Their findings suggest that the scheme incentivizes farmers to invest in modern techniques through Krishi Vigyan Kendras (KVKs), potentially leading to sustainable improvements in agricultural productivity and income levels over time.
  5. Sihag Rijul and Malik Dp. (2024): Sihag and Malik’s analysis evaluates the current status and effectiveness of the PM-KISAN scheme’s outreach to farmers. They find that the central and south zones exhibit the highest registration rates among farmers, indicating strong program presence in these regions. States like Rajasthan, Maharashtra, Andhra Pradesh, and Uttar Pradesh stand out with the highest number of registered farmers in their respective zones, highlighting regional disparities in adoption. The study also assesses farmers’ awareness levels, noting that approximately half of the respondents are fully aware of the eligibility criteria, but there are gaps regarding knowledge of application deadlines and approval procedures. Socio-economic factors such as age, education, and income significantly influence awareness, suggesting a need for targeted communication strategies to ensure equitable access to the scheme.
  1. Kumari, Priya, and Suman Dahiya (2022): Kumari and Dahiya’s study, conducted in Jhajjar district, Haryana, investigates the determinants of farmer adoption of the PM-KISAN scheme and examines spending patterns of beneficiaries. Using a probit regression model, they identify that older farmers and those with larger registered landholdings are more likely to adopt the scheme, whereas farmers dependent on non-farm income show lower adoption rates. The majority of funds received are allocated towards fertilizers, insecticides, and household consumption, indicating immediate economic impacts on farmers’ standards of living and productivity enhancements attributed to the scheme.
  2. Bal Krishna Mishra and Dr. Neekee Chaturvedi (2024): This study explores farmers’ awareness and perception of the Kisan Samman Nidhi Scheme in Gorakhpur district, Uttar Pradesh, focusing on the role of print media in shaping public perception. Conducted among 80 beneficiaries from specific villages, the study finds a high level of awareness among respondents, with 85% having basic knowledge of the scheme. The majority perceive the scheme positively, with 92.5% rating it very good. This underscores the significant influence of print media in disseminating information and fostering positive perceptions among beneficiaries towards government agricultural support initiatives.

The Way Forward

PM-KISAN is the largest scheme under the MoAFW, accounting for 49 per cent of the Ministry’s allocations inFY 2021-22 BEs. Since its launch, allocations have increased over threefold. In FY 2018-19 REs, `20,000 crore was allocated to the scheme. This increased to `75,000 crore in FY 2019-20 BEs, the first full year of implementation. 

However, as reported by the wire, Farmers face significant challenges accessing PM-KISAN benefits due to frequent changes in the verification process, shifting from Aadhaar-based to registration number-based systems, causing confusion and accessibility issues. Many farmers, particularly in remote areas, struggle with inconsistent internet access and lack of functioning mobile phones, hindering their ability to receive OTPs or navigate digital platforms. Transparency measures like displaying beneficiary lists and sending SMS notifications are often not effectively implemented, leaving farmers uninformed about their payment status. Compliance requirements, such as mandatory Aadhaar authentication and E-KYC, have caused halted payments and significant hurdles, especially for those without access to E-KYC facilities.

The shift to the Aadhaar-Based Payment System (ABPS) has further complicated matters, leading to confusion and payment delays. Complex login procedures for officials, involving OTPs and specialized apps, discourage timely problem resolution. The digital divide, marked by limited digital literacy and poor network coverage, exacerbates these issues. Additionally, inconsistent execution of scheme guidelines and lack of clear communication about non-payment reasons frustrate farmers and undermine trust in the system.

References

  1. Bordoloi, Prantik, Et Al. “A Study On Pradhan Mantri Kisan Samman Nidhi (Pmkisan) With Reference To The North Eastern States, India.” Journal Of Social Science, Vol. 4, 2 Oct. 2023, Pp. 2224–2230, https://Doi.Org/10.46799/Jss.V4i5.706.
  2. C.S.C. Sekhar, 2021. “Price Or Income Support To Farmers? Policy Options And Implications,” Ieg Working Papers 420, Institute Of Economic Growth.
  3. Deepak Varshney, Et Al. “Pm-Kisan And The Adoption Of Modern Agricultural Technologies.” Economic And Political Weekly, Vol. 55, No. 23, 13 Jan. 2024, Www.Epw.In/Journal/2020/23/Special-Articles/Pm-Kisan-And-Adoption-Modern-Agricultural.Html.
  4. Jayant Pankaj. “A Farmer Makes ₹10k A Month In India; Earnings As Low As ₹4.8k In Some States.” Businessline, 21 Feb. 2024, Www.Thehindubusinessline.Com/Data-Stories/Data-Focus/A-Farmer-Makes-10k-A-Month-In-India-Earnings-As-Low-As-48k-In-Some-States/Article67870070.Ece.
  5. Kulkarni, Sneha. “Pm Kisan 17th Installment Amount To Be Released To Eligible Beneficiaries; How To Check Beneficiary Status.” The Economic Times, Economic Times, 10 June 2024, Economictimes.Indiatimes.Com/Wealth/Save/Pm-Kisan-17th-Installment-Amount-To-Be-Released-Eligible-Beneficiaries-How-To-Check-Beneficiary-Status-Online/Articleshow/110865465.Cms?From=Mdr.
  6. Kumari, Priya, And Suman Dahiya. “Determinants Of Adoption Of Pm-Kisan Scheme: Empirical Evidence From Jhajjar District In Haryana.” Journal Of Rural Development (Online)/Journal Of Rural Development, 30 Dec. 2022, Pp. 510–522, Nirdprojms.In/Index.Php/Jrd/Article/View/166259, Https://Doi.Org/10.25175/Jrd/2022/V41/I4/166259.
  7. “Navigating Pm-Kisan: A Deep Dive Into Digital Challenges Faced By Farmers.” The Wire, 2024, Thewire.In/Government/Navigating-Pm-Kisan-A-Deep-Dive-Into-Digital-Challenges-Faced-By-Farmers.
  8. “Pm Kisan Samman Nidhi Yojana.” Pib.Gov.In, 2022, Pib.Gov.In/Pressreleasepage.Aspx?Prid=1800851
  9. Pavan Kumar And Dr. B.R. Kishore Babu, “A Study Of Farmer’s Awareness Towards Pradhan Mantri Kisan Samman Nidhi Yojana In The Guntur District”, International Journal Of Research In Regional Studies, Science Journalism In Management And Management Practices Vol. -3, Issue 2018 March
  10. Sihag, Rijul, And Malik Dp. Pradhan Mantri Kisan Samman Nidhi (Pmkisan Scheme): Assessing The Effectiveness Of Direct Benefit Transfer To Farmers. 1 Mar. 2024.
  11. “View Of Mediating Role Of Print Media In Shaping Awareness And Perception About Kisan Samman Nidhi Scheme: A Study On Farmers Of Gorakhpur District Uttar Pradesh Shodhkosh: Journal Of Visual And Performing Arts.” Granthaalayahpublication.Org, 2024, www.Granthaalayahpublication.Org/Arts-Journal/Shodhkosh/Article/View/201/277

About the contributor: Mannat Ghumman is a research intern at IMPRI pursuing her Bachelor’s of Science in Economics.

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