The impact of direct benefit transfers for micro-irrigation on farm performance: Evidence from India

Using data from a survey of farm households in the Indian state of Uttar Pradesh and employing a sequential logit model, this paper has investigated the impact of farmers’ participation in the Direct Benefit Transfer (DBT) subsidy scheme for micro-irrigation on crop performance. The findings show that over 91% of the farmers were aware of the scheme, 61% of them registered as potential beneficiaries and two-thirds of them actually benefitted from it. Registration is the critical transition stage for participation in the DBT scheme. Our findings show that conditional upon the ownership of tube-wells and water pumping devices, several personal and household-level factors such as age, education, access to information and membership of village-level organizations distinguish the beneficiaries of DBT from the non-beneficiaries. There appears no selection bias in the scheme as neither the farm size nor the social status of potential beneficiaries appeared significant in the sequential selection process. Further, the findings show that controlling for the farm and farmer characteristics, the DBT scheme has a positive and statistically significant impact on crop yield as well as net returns, but more on the latter implying its role in reduction in the cost of production. These findings imply the need to expand DBT scheme for its greater impact on farm income and inclusiveness.