Since the scheme has been implemented retrospectively from December 1, 2018, all beneficiaries would get Rs 2,000 for the financial year (FY) ending 2018-19. Assuming that the Modi government transfers another Rs 2,000 for the remaining months of its tenure in FY 2019-20 starting April 1, farmers would get Rs 4,000 just before the elections, with a promise of another Rs 4000 coming their way after the polls.
While this money is meant only for households owning land, the Modi government’s scheme has no provision to cater to landless farmers who take risks and are actual tillers of the land. The National Sample Survey Organisation (NSSO) estimates that there are almost 12 million landless households in rural India – seven per cent of all rural households in the country. The scheme also puts the onus of identifying beneficiaries on the state and relies on Agriculture Census 20115-16 to ascertain land holdings. Experts have pointed out that using the Agriculture Census might be fraught with inaccuracies as the report identified land parcels through random sampling in villages. The census is not a definitive record that can identify the real and legal owners of land in rural India.
What does this Rs 4,000 pre-election cash dole mean for the 125 million marginal and small land-owning agricultural beneficiary households? For marginal agricultural households (defined as those owning up to a hectare of land), this translates into almost half a month’s income. Various estimates like the Agriculture Census 2015-16 and Nabard reports peg the average income of marginal agricultural households at almost Rs 7,650. The monthly income of agricultural households owning between 0.1 and 0.4 hectares of land and constituting the bulk of marginal landowners is estimated to be even less at Rs 6,650.
The Agriculture Census 2015-16 estimates that almost 70 per cent of all operational holdings up to two hectares are owned by marginal farmers. For such households, an income support of Rs 4,000 through a one-time cash transfer before the elections
would mean a cash dole that equals almost two-thirds of their monthly income. For small agricultural households owning one to two hectares, the monthly income was almost Rs 10,000. The money paid under the PM-KISAN scheme would constitute almost half of the monthly income of such households.
The economic and political implications of the scheme become more evident when looked at from the point of view of poorer, bigger and electorally crucial states. In Uttar Pradesh, India’s most populous and electorally crucial state with 80 Lok Sabha seats, the average monthly agricultural household income is pegged at about Rs 6,700. Studies that estimate farm incomes have highlighted the positive correlation between the size of landholdings and monthly income. In fact, Nabard’s 2016-17 study goes on to say that agricultural households owning less than two hectares earn less than half of those owning more than two hectares of land. A fifth of all rural households earned less than Rs 2,500 a month which was “insufficient to meet the bare necessities of life”.
In Bihar, which sends 38 members to the Lok Sabha, the monthly income of agricultural households is pegged at Rs 7,175. Farm households in West Bengal, which sends 42 members to India’s lower house, were estimated to earn only a little more than their western neighbours, at Rs 7756. Those in Madhya Pradesh and Andhra Pradesh, which together send 47 members to the Lok Sabha, earned almost Rs 7,900 and Rs 6,900, respectively, every month.
The average monthly income of agricultural households of all these states was lower than the national average, estimated at Rs 8,900. Among bigger states, only Maharashtra, which is represented by 48 members in the Lok Sabha, has farmers earning more than the national monthly average.
Quite evidently, a significant proportion of these earners would be low-earning marginal and small farming households. Therefore, a cash transfer of Rs 4,000 under PM-KISAN would translate into a significant component of a month’s income in these states.
Interestingly, almost half of all beneficiaries of the pre-election cash dole under PM-KISAN scheme would be in just seven states that together account for 305 Lok Sabha seats – more than half the seats in India’s lower House. A fourth of all beneficiaries of the scheme will be in the states of Uttar Pradesh and Bihar, which together account for 120 Lok Sabha seats – almost a fifth of all seats in the House.
These crucial states also have negligible landless households – the group which has been left out of the ambit of the scheme. NSSO estimates show that just about three and five per cent of households are considered landless in Uttar Pradesh and Bihar, respectively. In West Bengal too, just about seven per cent of rural households are said to be without any landholding.
In addition to monthly incomes, the cash transfers also add to the income surplus of agricultural households. Nabard estimates the monthly consumption expenditure of marginal agricultural households at almost Rs 6,500 which leaves them with a monthly cash surplus of Rs 1,175.
Modi’s cash dole to farmers, which accounts for almost Rs 500 a month, increases the surplus of these households by almost half. Among marginal households, those owning 0.1 to 0.4 hectares of land manage a surplus only of Rs 465 a month after spending their meagre incomes on food and other essentials.
The PM-KISAN scheme, effectively, more than doubles the monthly surplus of this category of households. Small farming households with holdings of up to two hectares would see their monthly surplus increasing by almost 25 per cent. The cash transfer to farmers has deeper implications for electorally crucial states like Uttar Pradesh and Bihar, where the monthly surplus of households is estimated to be just around Rs 300 on average. In these states, where more than 25 per cent of the beneficiaries of PM-KISAN scheme reside, the cash dole increases their monthly surplus by two-and-a-half times.
A look at the saving patterns of these households also shows that the PM-KISAN scheme could make a smaller but significant contribution. Many households primarily rely on these savings to cope with distress arising from crop failures, declining crop productivity and a fall in market prices of their produce before turning to money lenders for loans.
The average monthly savings of marginal agricultural households was just about Rs 650 on average according to Nabard. Among marginal farmers, those owning 0.1 to 0.4 hectares of land saved the least. Small farmers owning up to two hectares saved almost twice as much. But for both categories of farmers, a cash transfer of Rs 4,000 (or Rs 500 a month) adds significantly to their monthly savings. In fact, marginal farmers could see their monthly savings almost doubling, assuming that they do not use the money for meeting their consumption expenditure.
Like the impact on household surplus, the impact of the scheme on boosting household savings is also more pronounced in poorer, bigger and electorally crucial states. In Uttar Pradesh, an agricultural household’s average monthly saving is estimated to be almost Rs 1,000. In states like Bihar and West Bengal, agricultural households save Rs 555 and Rs 435, respectively, every month. Clearly, another Rs 500 a month would mean a lot more to these households than to urban dwellers.
A more silent and immeasurable impact of the pre-election cash dole on land-owning farmers could be its psychological impact on voters and its consequences on the BJP’s chances in the 2019 Parliamentary elections. A much-talked-about measurement of such cash doles on public perception was captured in Finland, where people were given a basic income of 560 euros every month for no work. A year later, they were psychoanalysed. The report containing the results published by Finland’s ministry of social affairs and health in February this year had two startling revelations.
Firstly, the people who were given a basic income reported higher levels of well-being and satisfaction than the rest of the population. A secondly, those who got this money were also more satisfied with politicians than others.
The report noted, “previous research on institutional trust has shown that people’s level of trust varies from one institution to another. Political institutions – which people can influence directly – are least trusted. Such institutions are, for instance, Parliament, political parties and the government. In the test group, the level of trust in the legal system and in politicians is slightly higher than in the control group. While there was only a small difference between the groups as regards trust in different institutions, such as the court system and the police, the basic income recipients trusted politicians considerably more.”
With the NDA government putting money in farm landowners bank accounts, without they having to do any work, with the promise of more cash after the elections, the trust of at least 125 million farmer voters and their families may just tilt in Modi’s favour in the days to come.