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COVID ‐19, Government Transfer Payments, and Investment Decisions in Farming Business: Evidence from Northern India
Author(s) -
Varshney Deepak,
Kumar Anjani,
Mishra Ashok K.,
Rashid Shahidur,
Joshi Pramod K.
Publication year - 2021
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1002/aepp.13144
Subject(s) - cash , agriculture , investment (military) , agricultural economics , purchasing , shock (circulatory) , economics , government (linguistics) , business , fungibility , payment , cash crop , transfer payment , agricultural science , public economics , finance , welfare , market economy , geography , production (economics) , marketing , macroeconomics , linguistics , philosophy , archaeology , law , environmental science , medicine , political science , politics
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.