Income risk and management strategies of rural households: evidence from distressed regions of Maharashtra

Vulnerability to production and market risks is a dominant feature of agriculture in the developing countries. This happens due to household's limited capacity for ex post risk coping. Ex ante risk reduction and mitigation strategies may enhance their ability to build-up asset base to enable them to escape poverty. This paper delineates the extent of incidence of events that lead to occurrence of environmental, health and economic risks in two high risk prone regions viz. Vidarbha and Marathwada in Maharashtra. An analysis of various strategies that rural households adopt to avoid consumption shortfalls due to income shocks has been carried out empirically using the logit model. The results based on a primary survey of 200 rural households in the region indicate that irregular rainfall along with pest and disease outbreaks before crop harvest are the main sources of environmental risks. The landless, marginal and small farmers are more susceptible to the sources of economic risks compared to the farmers having larger size landholdings. The use of risk management strategies was conditioned by the socio-economic status of households with poorer households resorting to sell their assets and borrowing to informal sources. The study concludes that in the distressed regions, effective social risk management strategies are imperative to improve the socio-economic status of rural households.