Insuring the non-insured rural poor: cross-country review and empirical evidence

Insuring the crops and livestock plays a huge role in reducing poverty in India as it provides assured income in times of crop failure and catalyzes the production after a bad agricultural year. The mechanism to provide these insurance has failed miserably in India adding to the woes of farmers. Hence, reviewing the crop insurance policies would do a lot well in the process of reducing the poverty in rural areas. Successful crop insurance policies around the world is reviewed and compared to that of Indian crop insurance policy. In this piece of research work the performance of present crop insurance scheme of India PMFBY is analyzed in terms of its ability to compensate economic loss of farmers. The results indicate that crop insurance policies of USA are better accepted by the farmers as their revenue or income is insured unlike in other countries. The USA had the highest area insured (124.4 mha) in the world followed by China. Performance of crop insurance has increased during recent years in India due to the launch of PMFBY but the results reveal that only around 40–50 per cent of the economic loss was covered under PMFBY. Case study of a farmer revealed that loss due to reduction in prices was not covered under crop insurance in India. Thus, it is suggested to take clue from the Federal crop insurance programme of USA, where the revenue shortfall is insured arising because of either shortfall in yield or fluctuation in prices, could be a game changer for modern crop insurance products in India.