Governments worldwide implement farm support policies to assist farmers, yet universalising such measures may lead to inefficient resource allocation. We use a difference-in-differences framework on National Sample Survey data to examine the impact of India’s first unconditional cash transfer scheme to support landowning farmers in their initial farming investments. We find a strong land productivity response to transfers with a 25% increase for medium and large farmers and an 11% rise for small and marginal farmers. This heterogeneous outcome of transfer is also evident across the conditional quantiles. We conjecture that more fund allocation towards agricultural machinery and equipment upgrades by medium and large farmers from higher transfer has served as a potential mechanism for this heterogeneous effect. We validate our results through triple difference estimation based on rural bank branch penetration and various robustness checks.
Keywords: Unconditional Cash Transfers; Targeting; Inequality; Rural Economy
(with Neeraj Katewa)