Does agro-climatic vulnerability affect the crop insurance adoption in India?

Purpose To examine the effect of agricultural vulnerability to climate change on the adoption of crop insurance in India. Design/methodology/approach The seasonal-agricultural vulnerability index (AVI) from climate change has been constructed at the district level for the entire country using satellite data, agricultural statistics and census parameters. Further household-level farmer data are obtained from the 77th Round of the Situation Assessment Survey of Agricultural Households by NSSO to assess the effect of AVI on crop insurance adoption among the farmers cultivating paddy and wheat as one of their major crops. To address the issues of separation in the data, the firth logit model is employed for the empirical analysis. Findings The results show that agricultural vulnerability positively influences the adoption of crop insurance among the agricultural households in India. The heterogeneity analysis reveals that households with large landholdings, higher education and awareness of the Minimum Support Price are more likely to have crop insurance. Adoption of insurance is lower among socially marginalized communities. Further, it notes that India has a significant area under agricultural climate vulnerability, and crop insurance adoption is very low at around 7%. Practical implications This article presents insightful policy suggestions that policymakers should focus on promoting crop insurance in highly vulnerable regions and helping to enhance the risk mitigation capacity of farmers in India. Originality/value The novelty of this article lies in its examination of how vulnerability to climate change affects the uptake of crop insurance as a means of alleviating the risks associated with climate change.