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Assessing the risk to the agricultural system is important for agricultural sustainability. The present study analyses agricultural drought risk with respect to different drought severities. Different drought indices – namely, Standardized Precipitation Evapotranspiration Index (SPEI), Standardized Soil moisture Index (SSI), Vegetation Condition Index (VCI), and Temperature Condition Index (TCI) – are used to evaluate the conditional probability. Non-stationary analysis is carried out for SPEI and SSI to incorporate the impact of large-scale oscillations and regional hydrological variability. Copula analysis is performed between drought conditions and various crop yield anomalies over Maharashtra, India, during 1998–2015. The outcomes suggest that SPEI is a significant drought indicator over the maximum number of districts in all the crops. Sea Surface Temperature (SST) and Indian Summer Monsoon Index (ISMI) are selected as suitable covariates to model the non-stationarity in the SPEI time series. The drought risk is estimated to increase with drought severity for all of the selected crops. It is observed that the exclusion of non-stationarity will underestimate the agricultural risk. [ABSTRACT FROM AUTHOR]

With an accelerated pace of globalisation and trade liberalisation, both production and price risks in agriculture seem to have increased substantially. Governments are now exploring the ways of managing these joint risks by introducing innovative farm income/revenue insurance products. To take care of the variability in both the yield and the market price, Government of India implemented a pilot project, viz. Farm Income Insurance Scheme (FIIS) during Rabi 2003-04 season and Kharif 2004 season. The major objective of the scheme was to protect farm income and ensure sustainable production. However, in the area under FIIS, procurement of food grains with Minimum Support Prices (MSP) was withdrawn with an aim to resolve the problem of excess stock with Food Corporation of India (FCI). Most of the states were not keen to implement the scheme as the withdrawal of MSP based procurement was not acceptable to them, since MSP was acting as a safety net universally for all the farmers during adverse price situation. However, the paper argues that farm income/revenue insurance provides a market-based solution and entitles the insured with compensation in the event of revenue loss caused by non-preventable risks. Therefore, there is a need to offer farm income/ revenue insurance along with cropyield and rainfall insurance to stabilise the farm income and promote commercialisation of agriculture. [ABSTRACT FROM AUTHOR]

Index insurance appeared recently in developing countries with the expectation to improve agricultural output and living standards in general. We investigate how experiencing extreme weather events affects farmers' decision to purchase index insurance in India. Extreme weather events are identified from historical precipitation data and matched with a randomised household panel. Excessive rainfall in previous years during the harvest increases the insurance demand, while lack of rainfall in the planting and growing periods has no effect. The latter can be explained by access to irrigation, underscoring the importance of the local context when developing insurance products to accommodate environmental risks. [ABSTRACT FROM AUTHOR]