Beyond Terms of Trade: Challenges in Implementing the Farmers’ Welfare Index (IKP) as a Multidimensional Metric in Indonesia
DOI:
https://doi.org/10.59890/mjst.v3i2.161Keywords:
Farmers’ Welfare Index (IKP), Nilai Tukar Petani (NTP), Multidimensional Poverty, Agricultural Policy, Indonesia, Qualitative Literature ReviewAbstract
For over three decades, the Farmers' Terms of Trade (Nilai Tukar Petani or NTP) has served as the hegemonic indicator for measuring agricultural performance and farmer welfare in Indonesia. However, the limitation of NTP as a mere price ratio index has often obscured the structural poverty faced by smallholders, creating a policy blind spot in which market prices decouple from household well-being. The inclusion of the Farmers' Welfare Index (Indeks Kesejahteraan Petani or IKP) in the 2026 State Budget (APBN), as agreed upon by the government and the House of Representatives in late 2025, marks a paradigm shift from a price-centric to a multidimensional people-centric approach. This study employs a qualitative literature review to critically analyze the challenges of transitioning from NTP to IKP. By synthesizing academic literature from 2020–2025 and analyzing policy documents, this paper identifies three thematic challenges: (1) the methodological resistance in shifting from monthly high-frequency price data to annual multidimensional asset data; (2) the "prosperity illusion" where high NTP in sectors like palm oil does not correlate with improved human development outcomes; and (3) the political economy of data, where more accurate poverty metrics may face bureaucratic inertia. The study concludes that while IKP offers a superior conceptual framework based on the capability approach, its implementation requires a "hybrid" transition period in which NTP serves as a market signal while IKP drives long-term development policy
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