Does crop insurance ensure food security for Indian farmers? Evidence from a nationally representative survey

Abstract

AbstractThis study examines the impact of farm households' decision to adopt crop insurance and its effect on food security. Using the National Sample Survey Office's 77th round of data (2019–2020) from Indian farming households, the endogenous switching regression results confirm that insuring crops against production risks increases food security (as measured by higher consumption expenditures and net farm income). Specifically, findings show that farming households would decrease consumption expenditures by 15% and net farm income by 26% if they had not adopted crop insurance. Similarly, the noninsured families would have 23% higher consumption expenditures and 31% higher net farm income if they had insured crops. However, we find heterogeneity in welfare impacts because large farmers reap more benefits than smallholders. Policy implications from this study call for increased awareness of insurance programs, educating farmers about crop insurance schemes, and an effective institutional framework to reduce heterogeneity in insurance benefits. [EconLit Citations: Q13, Q18, O53].