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Addressing Agricultural Income Risks in India: Efficacy of Risk Management Options in Hazard-Prone Regions


Affiliations
1 Punjab Agricultural University, Ludhiana 141 00, India, India
2 Embassy of India to the European Union, Belgium, and Luxembourg, 217 Chaussee de Vleurgat, 1050 Brussels, Belgium
 

The present study discusses how formal risk management options (RMOs) have evolved in reducing agricultural income loss. It also considers the dependency of farm households on informal RMOs. Based on our analysis of a representative sample of 180 rural households, we conclude that the formal RMOs such as insurance and commercial credit markets need to improve. Addressing the complexity of claim assessment and the problem of information lop-sidedness in the insurance market should be a top priority for reducing inefficiency. Ascertaining the adequacy of claim amount in comparison to the loss is also important. The absence or underdevelopment of the formal market leads to efficient utilization of informal RMOs to reduce income risk. In this regard, informal ex-ante RMOs may be advantageous to the stable rise of farmers’ income and development of the rural financial system in the long run.

Keywords

Addressing Risk, Finance Markets, Finance Service, Income Risk.
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  • Addressing Agricultural Income Risks in India: Efficacy of Risk Management Options in Hazard-Prone Regions

Abstract Views: 339  |  PDF Views: 149

Authors

Vinita Kanwal
Punjab Agricultural University, Ludhiana 141 00, India, India
Smita Sirohi
Embassy of India to the European Union, Belgium, and Luxembourg, 217 Chaussee de Vleurgat, 1050 Brussels, Belgium

Abstract


The present study discusses how formal risk management options (RMOs) have evolved in reducing agricultural income loss. It also considers the dependency of farm households on informal RMOs. Based on our analysis of a representative sample of 180 rural households, we conclude that the formal RMOs such as insurance and commercial credit markets need to improve. Addressing the complexity of claim assessment and the problem of information lop-sidedness in the insurance market should be a top priority for reducing inefficiency. Ascertaining the adequacy of claim amount in comparison to the loss is also important. The absence or underdevelopment of the formal market leads to efficient utilization of informal RMOs to reduce income risk. In this regard, informal ex-ante RMOs may be advantageous to the stable rise of farmers’ income and development of the rural financial system in the long run.

Keywords


Addressing Risk, Finance Markets, Finance Service, Income Risk.

References





DOI: https://doi.org/10.18520/cs%2Fv122%2Fi2%2F178-186