COVID-19, Government Transfer Payments, and Investment Decisions in Farming Business: Evidence from Northern India

Deepak Varshney, Anjani Kumar, Ashok K. Mishra, Shahidur Rashid, Pramod K. Joshi

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Although the COVID-19 pandemic resulted in about a 24% decline in India's GDP during the April–June 2020 quarter, the nation's agricultural sector, somewhat surprisingly, seems to have done remarkably well. This paper examines whether the public transfer program Pradhan Mantri Garib Kalyan Yojana (PMGKY), announced immediately after the lockdown, benefited farmers in dealing with the COVID shock. Overall, 95% of the smallholders received support from at least one of PMGKY's four components. Direct cash transfers had significantly more impact than in-kind transfer schemes. The result shows that farmers receiving cash transfers under PM-KISAN, one component of PMGKY, were more likely to invest in buying seeds. In contrast, farmers receiving cash transfers under PM-UY, another piece of PMGKY, were more likely to invest in fertilizer and pesticides. Finally, smallholders who received benefits from all four components of PMGKY were more likely to invest in purchasing seeds, fertilizer, and pesticides. Findings suggest the fungibility of public cash transfers from the recent PMGKY scheme is significant in alleviating credit constraints and increasing future investments in modern inputs.

Original languageEnglish (US)
Pages (from-to)248-269
Number of pages22
JournalApplied Economic Perspectives and Policy
Volume43
Issue number1
DOIs
StatePublished - Mar 2021

Keywords

  • COVID-19
  • agricultural policy
  • input usage
  • liquidity constraint
  • smallholders

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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