Do Direct Cash Transfers to Farming Households Alleviate Financial Distress and Improve Farm Productivity? Evidence from Eastern India

This paper studies the impact of direct income transfers, using a natural experiment arising from the “Krushak Assistance for Livelihood and Income Augmentation” program, a public program designed to deliver unconditional cash transfers for income support to small and marginal farmers in the Indian state of Odisha. We study the effect of these transfers at the household level by making use of a nationally representative household survey. This paper finds that while the transfer does not have a significant impact on overall indebtedness or postprogram borrowing levels, it does have a substantial impact on the sources through which credit is procured. The transfers are also shown to cause a decline in the area cultivated by households in the crop season, following the commencement of the program but no significant impacts are found on investment into farm inputs or on crop yield.