Crop-insurance adoption and impact on farm households’ well-being in India: evidence from a panel study

Abstract

Despite several benefits, the crop insurance adoption rate is observed as low in India. Numerous studies have, therefore, enquired about the reason behind low adoption, and further, a few cross-section studies have estimated its impact on farmers’ well-being, and the findings are mixed in nature. Using data from both rounds of the India Human Development Survey (IHDS), i.e. 2004–2005 and 2011–2012, this study aims to identify the major determinants of adoption and to evaluate its impact on farm households’ well-being. In the case of the former, we find the major determinants, namely, education of the household head, livestock ownership, outstanding debt, landholding, membership in credit groups, access to several government benefits, and previously experienced disasters. Employing a difference-in-difference (DID) model for the latter, we observe that crop insurance improves farmers’ well-being, i.e. per-capita consumption expenditure was 12–28% more for the insured farmers between 2004–2005 and 2011–2012. Hence, this study advocates for further scaling up crop insurance adoption in India as it supports the farmers to diversify risks and smoothening consumption.