Author: Hardeep Singh, Digvijay S Negi, and Pratap S Birthal
Title: Uncertain Monsoon, Irrigation and Crop Yields: Implications for Pricing of Insurance Products
Abstract: A significant body of literature interested in studying the impacts of weather risks on agricultural performance has modeled crop yields as a function of either levels or deviations in seasonal rainfall. However, an aspect that has received little attention in the literature relates to the impact of timing of arrival of monsoon on agricultural performance. In this paper, using a pan India district-level panel dataset for a period of 50 years, we investigate three interrelated issues that are critical for managing the weather-induced agricultural risks. One, we examine the impact of timing of arrival of monsoon on crop yields. Two, we assess the mitigation benefits of irrigation against delayed monsoon. And three, by simulating premium rates for an area yield insurance product at varying levels of irrigation coverage, we argue for differential pricing of insurance products for irrigated and rainfed crops or regions.
Keywords: Monsoon onset, Crop yields, Irrigation, Crop insurance, Premiums
JEL Code: Q10, Q18, Q50, G22