Why Modi’s farm income support scheme could be a game changer in the elections

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The prime minister launched the farm income support scheme on Sunday, transferring Rs 2,000 per household to over a crore farmers. The plan is to transfer Rs 6,000 a year to every farming household having cultivable land up to 2 hectares.

The scheme has been criticised by the opposition, who say Rs 6,000 a year is peanuts. Let’s take a look at the data to see whether it will really make a difference to small and marginal farmers.

The NABARD (National Bank for Agricultural and Rural Development) All India Rural Financial Inclusion Survey 2016-17 has details about agricultural households. It says 87 per cent of households have land holdings of up to 2 hectares. That means 87 per cent of farming households will ultimately benefit from the farm support scheme.

How much of a difference will the extra Rs 6000 per annum make? The NABARD survey says that, for those owning less than 0.01 hectares of land, income per month was Rs 8,136 while consumption expenditure was Rs 6,594, giving a surplus of Rs 1,542 per month. An additional Rs 6,000 will, therefore, amount to 3.9 months of the surplus. Even if we assume that the surplus has increased, say by 10 per cent over 2016-17, the additional Rs 6,000 will still be three and a half months of the surplus.

The NABARD survey said the monthly surplus for those owning between 0.01 and 0.4 hectares of land was less, at Rs 465, presumably because these households had to spend more on the land and couldn’t supplement their income through wage labour by much. For this category, Rs 6,000 income support per year would be equivalent to more than a year of the existing surplus.

For those owning 0.4-1 hectare, the NABARD survey put their monthly surplus at Rs 1,518 per month. For these people, the additional Rs 6,000 will work out to around four months of surplus.

And finally, for those owning 1-2 hectares, the surplus according to NABARD was Rs 2,188 per month. For this category, Rs 6,000 would be 2.7 months of surplus.

In short, for all the households with landholdings below 2 hectares, Rs 6000 per year will be a significant addition to their surplus.

NABARD also classified households according to their levels of monthly consumption expenditure. The survey found that the poorest 20 cent of agricultural households have consumption higher than income, which means they can’t make ends meet. For them, the Rs 6,000 per annum will be a godsend, though it won’t be sufficient to wipe out their deficit.

For those in the third decile, or the poorest 20-30 per cent, the average surplus of income over consumption was a mere Rs 167 per month; for those in the poorest 30-40 per cent, it was just Rs 259 per month; and for those in the fifth decile, the surplus was Rs 879 per month. That means, for the poorer half of agricultural households Rs 6000 per month will be a substantial amount, even if we assume a modest rise in their surplus in the two years since the NABARD survey was conducted.

Indeed, even for agricultural households in the seventh decile, the monthly surplus was just Rs 2,197 and an additional Rs 6,000 will make a sizable difference. Those who say that the PM-KISAN scheme won’t make much of a difference simply do not have any idea of how poor the vast majority of our people are.

To be sure, there are many problems with the scheme. Odisha’s income support scheme provides Rs 10,000 per year to small and marginal farmers and also provides income for landless labourers. Telangana’s Rythu Bandhu scheme provides Rs 8,000 per acre in income support. It is entirely possible that other states will also try and provide higher income support.

The problems with identification of beneficiaries in the absence of proper land records are well-known. Also, there’s no particular reason why landless labourers or the urban poor should be denied an income support scheme. The scheme is no long-term solution — all it does is make life a little less difficult for many.

Nevertheless, the NABARD survey said that average savings in a year for agricultural households was Rs 9,657 in 2016-17. Rs 6,000 a year will, therefore, make a big difference to millions of small and marginal farmers. And with Rs 2,000 already in farmers’ pockets, it could well tip the scales in the coming elections.