Beyond Terms of Trade: Challenges in Implementing the Farmers’ Welfare Index (IKP) as a Multidimensional Metric in Indonesia

For more than three decades, the welfare of farmers in Indonesia has been measured through the Farmer's Exchange Rate (NTP), which is based on price ratios. However, this indicator is considered unable to capture structural poverty and the non-monetary dimensions of farming households. This study aims to examine the challenges of implementing the Farmer Welfare Index (IKP), which began to be adopted in the 2026 State Budget as a multidimensional approach based on the capability approach. Using qualitative methods through literature review and policy document analysis from 2015–2025, the research identifies three main challenges: methodological resistance to data changes, the illusion of welfare in high-NTP sectors such as palm oil, and political-bureaucratic obstacles in data governance. The study concludes that the IKP is more comprehensive conceptually, but requires a hybrid transition model—NTP as a short-term market indicator and IKP as a basis for long-term development policy—to ensure that welfare measurement reform is effective and sustainable.