Pros
- Market Neutral: Does not distort the market as support is not linked to production of any particular crop.
- Efficiency: Reduces leakages as money is directly transferred to beneficiaries’ bank accounts.
- Empowerment: Farmers have freedom to decide how to use the money.
- Poverty Alleviation: Best strategy to alleviate farm distress until markets are freed.
- Simplicity: Easier to implement compared to complex price support mechanisms.
Cons
- Inflationary Impact: May have some impact on inflation as cash leads to spending on consumer staples.
- Fiscal Burden: Can be a significant financial burden on the government.
- Work Incentive: Critics argue it may reduce incentive to work (moral hazard).
- Targeting: Ensuring only eligible beneficiaries receive the support.