Indonesia Shifts from Price-Based NTP to Multidimensional Farmers’ Welfare Index in 2026 Budget
Indonesia is preparing a historic shift in how it measures farmer welfare. In an article published in 2026 in the Multitech Journal of Science and Technology (MJST), Loso Judijanto of IPOSS Jakarta analyzes the transition from the long-standing Farmers’ Terms of Trade (Nilai Tukar Petani/NTP) to the newly adopted Farmers’ Welfare Index (Indeks Kesejahteraan Petani/IKP). The study comes as the Indonesian government and the House of Representatives formally integrated IKP into the 2026 State Budget (APBN), signaling a major policy transformation.
For more than three decades, NTP has been treated as the primary barometer of agricultural success. Yet Judijanto argues that NTP—essentially a price ratio between what farmers earn and what they spend—has failed to capture the deeper realities of rural poverty. The new IKP, developed by Statistics Indonesia (BPS), measures welfare across six dimensions and 21 indicators, including food security, education, health, housing quality, and agricultural resilience.
The shift matters because Indonesia’s farmers remain central to national food security and rural livelihoods. As the country seeks to strengthen social protection and align with Sustainable Development Goals (SDGs), policymakers are acknowledging that price signals alone cannot define prosperity.
Why NTP Is No Longer Enough
NTP calculates the ratio between prices received by farmers and prices they pay for goods and services. If the ratio is above 100, farmers are considered better off. The indicator is released monthly and often cited in political speeches and budget debates.
However, Judijanto highlights several weaknesses:
- Price does not equal welfare. High commodity prices can boost NTP even when farmers lack access to sanitation, education, or healthcare.
- Volume and productivity are ignored. A farmer facing crop failure due to climate change may still appear “prosperous” if market prices rise.
- Inequality is masked. Large landowners and landless laborers are grouped under one aggregate figure.
- Short-term focus. NTP reacts to monthly market fluctuations but does not measure long-term resilience.
In regions dominated by palm oil, for example, NTP often exceeds 105 or even 110 during commodity booms. Yet child stunting rates and school participation can remain stagnant. This phenomenon creates what Judijanto describes as a “prosperity illusion.”
The IKP: A Multidimensional Approach
The Farmers’ Welfare Index (IKP) represents a conceptual break. Instead of focusing solely on income flows, IKP measures assets and capabilities—what development economists call “stocks” rather than “flows.”
IKP includes six dimensions:
- Food security
- Education
- Health
- Decent living standards
- Agricultural resilience
- Vulnerability to shocks
This framework aligns with the Capability Approach pioneered by economist Amartya Sen, which defines well-being as the freedom to live a healthy, educated, and secure life.
Judijanto notes that IKP reflects global shifts in poverty measurement. “Income is only a means,” he writes, paraphrasing development literature. True welfare depends on whether farmers have access to essential services and long-term security.
By including health and education indicators, IKP also expands accountability beyond the Ministry of Agriculture. Ministries responsible for social services now share responsibility for farmer welfare outcomes.
Research Method in Brief
The study uses a qualitative literature review covering academic publications and policy documents from 2015 to 2025. Rather than statistical modeling, Judijanto synthesizes scholarly critiques of NTP, analyzes government policy discourse surrounding APBN 2026, and identifies recurring themes.
The analysis reveals three central challenges in implementing IKP:
- Methodological transition – Moving from monthly price data to annual multidimensional surveys.
- Narrative resistance – Overcoming the entrenched belief that NTP above 100 equals success.
- Political economy constraints – Addressing bureaucratic inertia and potential data manipulation.
Key Findings
1. Divergence Between Price and Prosperity
The review confirms that NTP is highly sensitive to global commodity shocks but largely blind to structural deprivation. Farmers may withdraw children from school or reduce protein intake during crises—actions invisible in price indices.
2. Welfare as Assets, Not Just Income
IKP measures long-term assets such as land ownership, savings, housing quality, and educational attainment. A farmer with savings and secure land tenure is considered more resilient than one with temporary high cash income.
3. Implementation Challenges
Several structural barriers could undermine IKP:
- Data frequency gap: IKP may be updated annually, unlike monthly NTP releases.
- High fiscal cost: Collecting detailed survey data across 514 districts requires substantial funding.
- Political resistance: If IKP reveals lower welfare levels than NTP suggests, it could expose policy failures.
Judijanto warns that without strong political commitment, IKP risks becoming a symbolic metric rather than a transformative tool.
Real-World Implications
The adoption of IKP could reshape agricultural governance in several ways:
- Budget allocation: Welfare-based targeting could guide subsidies and development funds.
- Palm oil revenue use: Profit-sharing funds (DBH Sawit) could be redirected toward education and healthcare in producing regions.
- Village fund incentives: Local governments improving IKP scores may receive fiscal performance rewards.
- SDG alignment: Indonesia can better report progress toward poverty reduction and food security targets.
If implemented effectively, IKP could transform agricultural policy from focusing on “yield per hectare” to “quality of life per household.”
Judijanto emphasizes that the transition should not eliminate NTP entirely. Instead, he recommends a hybrid model:
- NTP as a tactical market indicator
- IKP as a strategic welfare indicator
This dual system would preserve price monitoring while ensuring long-term human development remains the ultimate policy goal.
Author Profile
Loso Judijanto, M.Sc. is a researcher affiliated with IPOSS Jakarta. His work focuses on agricultural policy, welfare measurement, and development economics in Indonesia. Judijanto specializes in analyzing institutional reform and multidimensional poverty frameworks in rural contexts.
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