The unprecedented Covid-19 crisis has forced almost all countries to adopt partial or complete lockdown strategies to reduce the speed of infections. While lockdowns have been found to be effective in reducing the speed of infections, it has implications for the welfare of national economies with higher poverty rates, lesser savings, and higher dependency on agriculture and informal sectors. In India, majority of the workforce depend on the agriculture sector and low-paid informal jobs. Therefore, a key question is how the government should provide emergency relief to the most vulnerable sections.
On March 27, the Central government announced its first relief package, namely, the Pradhan Mantri Garib Kalyan Yojana (PM-GKY) of ₹1.7 lakh crore to tackle the economic distress precipitated by the Covid-19 crisis. This package provided for direct benefit transfer (DBT) and in-kind support (IKS) through existing schemes.
The DBT component includes four sub-parts. First, the release of the first instalment of ₹2,000 under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme in April. Second, three instalments of ₹500 each for the 200 million women account-holders through the Pradhan Mantri-Jan Dhan Yojana (PM-JDY). Third, three instalments of ₹1,000 for 30 million senior citizens, widows and disabled persons. Four, three instalments of DBTs under the Pradhan Mantri Ujjwala Yojana (PMUY) to 80 million beneficiaries to buy LPG cylinders for three months.
IKS schemes such as the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) were facilitated to provide free ration for 750 million people for the next three months. Other important announcements were insurance schemes for more than two million health workers and an increase in wages for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) beneficiaries, among others.
The International Food Policy Research Institute (IFPRI) conducted a study in the rural districts of Rajasthan, Madhya Pradesh and Uttar Pradesh to assess the efficacy of the PM-GKY focussing on the effectiveness of DBTs in reaching the vulnerable sections of society such as small and marginal farmers, women, senior citizens, widowed and persons with disabilities. These three States together account for roughly one-third of the total population of the country.
Our sample covers 2,000 households from 343 villages of 53 districts, representing all agro-ecological zones (AEZs) from Rajasthan, Madhya Pradesh and Uttar Pradesh. Sample comprises small and marginal farmers with average land size of less than one hectare.
PM-KISAN
The Centre’s flagship income support scheme for farmers, planned to provide an assistance of ₹2,000 each in three instalments for purchasing agricultural inputs to nearly 140 million eligible beneficiaries. Our study found that 89 per cent of the eligible farmers received the benefits of the scheme in April.
In the present situation where liquidity is already low, this emergency relief is likely to be helpful, especially to small and marginal farmers for continuing their agricultural activities. A previous study on PM-KISAN conducted by the IFPRI in late 2019 suggests that farmers spend this monetary assistance mainly on purchasing agricultural inputs, which have implications for improvements in agricultural productivity and income.
In the context of the upcoming kharif season, another instalment of the PM-KISAN scheme is a win-win situation for both farmers and the agriculture sector as a whole. The impressive performance of this scheme at a time of crisis makes a strong case for exploring the expansion of DBTs for other agricultural subsidy-based programmes.
Augmenting income through PM-JDY
The PM-JDY was launched in August 2014 for ensuring access to financial services such as banking, savings and deposit accounts, insurance, and pension, especially for women. Under the PM-GKY, the government aims to provide an assistance of ₹500 per month for three months to more than 200 million eligible beneficiaries.
Our study found that 92 per cent of the eligible beneficiaries received benefits in April. It is significant that most of the beneficiaries are women and have access to funds in their accounts. Previous studies on women’s participation in social safety nets highlight the implications for the household’s income and children’s welfare.
Since the launch of the scheme, it is important to recognise that the government has shown tremendous progress in encouraging a significant part of the economy to facilitate women’s access to financial institutions through the PM-JDY. Without this infrastructure, it would be difficult to provide emergency relief directly to 200 million beneficiaries.
Therefore, there is a need for the further expansion of rural financial infrastructure with the goal of providing universal access to financial services.
Other DBTs
Under PM-GKY, the government aims to provide clean cooking fuel in the form of LPG cylinders free of cost to 80 million poor families through the PMUY. Our study found that 94 per cent of the eligible households received DBTs to obtain their allotted free of cost LPG cylinders.
Moreover, the government also aims to provide DBTs to senior citizens, widows and disabled persons. Our survey found that 90 per cent of the eligible beneficiaries received benefits under the scheme. Being the most vulnerable to Covid-19 infections, senior citizens in particular have been advised to stay at home. Therefore, emergency relief through DBTs to this section of the population is quite salient.
To conclude, our analysis of the disbursement of DBTs in the three biggest states of India shows that the government has managed to provide emergency relief to vulnerable sections of society such as small and marginal farmers, women, senior citizens, widows and disabled persons.
Lower transaction costs, minimal leakages, and its immediate delivery make a strong case for DBTs. It is really difficult to reach a high volume of the vulnerable sections of society, especially in the rural areas in a short span of time. Therefore, DBTs can serve as important pathways to reach the large masses by expanding its scope.
Kumar is Research Fellow, IFPRI, Varshney is Research Collaborator, IFPRI, and Joshi is Honorary Director, Agricultural Economics Research Centre