Agriculture Risk, Insurance and Income: A Study of the Impact and Design of India's Comprehensive Crop Insurance Scheme

Agricultural risk can have implications for both efficiency and welfare. Risk management interventions are quite often undertaken by governments because agriculture plays a critical role in the economies of many developing countries. This study is about one such risk-related intervention - crop insurance - in the context of a developing country. A view which has been gaining ground in recent times, especially since the 1980s - and has become a part of conventional wisdom - is that crop insurance, as a policy instrument for risk management, is not workable, and that it may not even be justified theoretically. This study reconsiders this question. India introduced an area-yield crop insurance scheme, known as the Comprehensive Crop Insurance Scheme (CCIS), in 1985. In an area-yield insurance scheme both premium and indemnity are based on the average crop yield of a specified geographical area rather than on farm-level yield. This study analyzes, from a global perspective, the above question focusing on the financial and economic performance of the CCIS.