Interview: Income support schemes for farmers are a cop-out, says economist Abhijit Sen

On January 1, when Indian news agency ANI asked Prime Minister Narendra Modi about the government’s plans to reduce agrarian distress, he said loan waivers do not work as a very small segment of farmers take loans from banks. “A majority of them take loans from money lenders,” said Modi. “When governments make such announcements, those farmers do not become beneficiaries of the waivers.”

Calling loan waivers a political stunt, the prime minister told ANI the government would empower farmers in other ways. In that context, an idea from the South Indian state of Telangana has been getting some attention. The state government gives its farmers Rs 4,000 per acre per year as income support. States like Jharkhand and Odisha have followed suit. The first has announced a Rs 5,000 per acre payment from next year. The second plans to transfer Rs 10,000. There is speculation that the Union government might follow suit.

It is easy to understand why politicians find these ideas attractive. As capital becomes global even as labour stays local, governments are increasingly unable to provide jobs for all their people. One outcome, according to economist Abhijit Sen, a former member of the erstwhile Planning Commission, is that politicians, increasingly unable to find answers, turn to interventions like regular cash payments to the citizenry.

The country needs to tread carefully on this idea. Income transfer schemes come with large questions. Where does the money come from? Given competitive politics, can these burgeon out of control? If so, what happens to developmental expenditure? What happens to a society where states collect revenues from a small handful of businesses and keep a large chunk of the population on the dole? Whom are they more answerable to?

Excerpts from an interview.