Climate Change, Risk, Uncertainty and Mitigation: Crop Insurance in India

Abstract

Climate Change has impacted production risk in agriculture in many ways especially by increasing the volatility in production. Agriculture, which still in India is weather dependent, faces more frequent losses than before and variability in losses is also rising. As about 80% of the farmers are small and marginal in India, they need certain protection from such uncertainties for their sustenance. Undoubtedly crop insurance can provide the required safety net and enable farmers to take other measures that help to reduce impact of climate change. In this backdrop, this paper examines the state of crop insurance in India using both secondary data from NSSO and conducting a field survey in the state of Karnataka. The analysis of data shows that only a meager 4% of households are covered under crop insurance. While the lack of information is the major reason for not opting for insurance, another large percentage of the households are not interested due to the unattractive design of the schemes. Our regression analysis further highlights that both economically and socially advanced classes have better adoption record. These findings send strong signals to the policy makers to re-think about the mitigation strategies planned by them for the poor farmer households to handle the challenges of uncertainty in the face of climate change in India.

Keywords: risks, uncertainty, mitigation strategies, crop insurance

JEL Classification: G2, Q14