Demand and Impact on Consumption and Production Decisions
The objective of the project is to evaluate the impact of weather securities (simple weather-indexed insurance products) on smallholder farmers’ welfare and production/consumption decisions. The weather securities will be provided to smallholder farmers in two states in India: Karnataka, where weather-indexed insurance products are subsidized by the state government, and Madhya Pradesh, where such products are not subsidized. These states were chosen because of their high rainfall risks and because HDFC ERGO General Insurance, one of the project’s collaborators, is seeking to expand the use of weather-indexed insurance products in these areas.
In addition to providing securities, the project will invest in weather station infrastructure to reduce basis risk and will conduct training on the use of weather securities to selected smallholders.
The project ultimately aims to protect smallholder farmers from weather risk by providing them with simple, flexible, and affordable insurance products.