Home >Politics >Policy >This entire idea of direct cash transfer to farmers is stupid: Abhijit Sen
Economist and former member of the erstwhile Planning Commission Abhijit Sen (Photo: Priyanka Parashar/Mint)
Economist and former member of the erstwhile Planning Commission Abhijit Sen (Photo: Priyanka Parashar/Mint)

This entire idea of direct cash transfer to farmers is stupid: Abhijit Sen

  • If you want to give a cash benefit, do it without distinguishing between farmers and non-farmers
  • A toothless NITI Aayog is trying to flex its muscles on India’s statistical system. And in doing so, it is destroying its credibility 

NEW DELHI : The income support scheme announced in the interim budget for small and marginal farmers is both regressive and inefficient, because it neither includes the poorest landless farmers, nor does it seek to improve farm productivity, said economist and former member of the erstwhile Planning Commission Abhijit Sen. Sen also said that there were better alternatives such as a quasi-Universal Basic Income (UBI) scheme, suggested by Congress president Rahul Gandhi. Edited excerpts:

What are the hits and misses of the budget?

I don’t know about the hits and misses, it is certainly not pretending to be what it is supposed to be. What it is supposed to be is a vote on account for two months, what it is trying to be is a budget for not just one whole year, but possibly for five years. It is basically a manifesto rather than a budget and, in that, it succeeds to address all the fronts, in some cases by violating all conventions.

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(Photo: Ramesh Pathania/Mint)

The first front is the middle class. No interim budget before this has tinkered with direct taxes. But the middle class is quite happy about it. The second big front is the farmers. That’s a lot of money and it is packaged in a way that addresses rural distress. What is odd about the agriculture hand-outs is that 20,000 crore is put for this year. So you are actually going back and saying I want to make a payment before the budget time, which is breaking conventions of all kinds. It’s like writing a post-dated cheque.

But obviously, the optics is all correct with a lot of shovelling down there. But I am not very sure when it gets down to the ground how farmers will take it—a big amount of money, or is it only a 500 per month? But more importantly, for politics, it is not very clear how it is going to play out. If it were to start in May with the regular budget, there is enough time to plan this. Here nothing has been planned. And, obviously, you plan to give this 2,000 for four months before the elections. We don’t even know who the farmer is.

That’s the big question. The centre has to rely heavily on the states to implement the scheme, right?

Yes, and there will be delays because this exercise has not been done. Then the centre will say “we provided the money, but the states could not implement it". That’s how the politics is going to be played. May be that’s also calculated. In any case, it’s a bit bizarre. But, more importantly, this entire idea of a cash transfer to farmers is stupid.

Why is that?

For two quite separate reasons. Of course, to some extent, both Telangana and Odisha have done similar things. Stupid for the following reasons: It is trying to be a benefit transfer to the farmers. In Telangana, unlike the case of the central government scheme, the cash transfer is per hectare. So, at least it is trying to say the farmer will invest in that hectare. In the central government one, it is per household, but for farmers with less than two hectares of land. What it is actually doing is a direct transfer. It has nothing to do with agriculture. All it has to do with agriculture is that if you are a farmer, and you will get it. Quite apart from the problems of defining who is a farmer, it obviously leaves out all the tenants and landless—anyone who does not own land will not be included in the scheme just like the Telangana scheme. Therefore, you have a regressive aspect to it, which is that the poorest people, who are part of agriculture, are not included in it. It also has an efficiency aspect, which is the signal that you are giving, that try and prove that you are an agriculturist. It is a disincentive against migrating out of agriculture.

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(Photo: Pradeep Gaur/Mint)

The point I am trying to make here is if you want to give a cash benefit, do it without distinguishing between farmers and non-farmers. You could have simply done it for all the people in rural areas, or you could have said that all people in rural areas, other than who have more than two hectares of land.

But that would have bloated the expenditure significantly?

It wouldn’t have bloated it much because the total number of households in rural areas is 180 million. The total number of households with operational land holdings is 140 million, out of which 120 million are below two hectares and will be the current beneficiaries. So, that would add only 4 crore, or so, to the total number.

How else could it have been done?

If you want to do something for agriculture, then it should be really something that helps agriculture and improves its productivity. It could have been done. For example, the following could have been done to support, not so much the households, but to support collective enterprises of various things in which households are participating. If the government had said that those households would be eligible who are part of a cooperative or part of some Panchayat-led movement to do certain things, or part of the farmer producers’ organizations, then at least you would be incentivizing productivity.

Is the income transfer scheme for farmers a step towards UBI?

No. You have done nothing of that sort. The neo-classical guys, be it Pranab Bardhan or Ashok Gulati, who are batting for UBI, would say that income transfers will be the first step to cutting back on subsidies, so that we get a better and more efficient system. But subsidies are not going. You are simply adding more money. 75,000 crore is not peanuts. Suppose you even cut back fertilizer subsidies of 60,000 crore to zero. At present, you are giving farmers 500 per month without any condition. Then, you will add another 400 per month and tell the farmer you will not get any subsidized fertiliser. The farmers will hit the streets (again).

Some argue that UBI is a necessity to infuse cash into rural India as demonetization has ruined the cash economy. Do you agree?

We need to inject cash, all right. But you could do it in many ways. For example, take Rahul Gandhi’s suggestion of guaranteed minimum income to the poor. If I were to design the scheme, (I would consider) guaranteeing something to two types of people—the poor who can work and those who cannot work. Those who can work, you have something along the lines of MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme). For the old and disabled, you give a higher pension. The great beauty of MGNREGS is that they don’t need to be identified—this is the type of work that only the poor will do. You can make a higher transfer to them. Among the old for whom the employer has already provided for a pension, they can be excluded. Whereas in a quasi-UBI, you need to identify the 20-40% of the poor. The moment you try to do that, you are getting into that BPL (below poverty line) mess. The amount of money you would need by not identifying the poor is going to be pretty small compared to what you would need by trying to identify the poor.

How do you see the current turmoil in India’s statistical system with members of the National Statistical Commission resigning and questions being raised about the credibility of the data?

It’s a mess. The point is there are certain institutions such as the judiciary and the statistical system whose credibility is their most important asset. I was part of the Planning Commission. Statistics was taken out of the ministry of planning because we wanted it to be out. Of course, statistics people met planning. But nobody in the Planning Commission would have thought that we are going to tell them how to produce data. How can the bigger user of the data try and tell the producer of the data that how to produce data? How that data is credible to anyone then? A toothless NITI Aayog is trying to flex its muscles on statistics. And in doing so, it is destroying the credibility of the institution which at least in India we could have been proud of. You have actually created a situation where we are now in a situation where China used to be. Nobody including the international agencies will now believe your data.

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