Dynamics of Demand for National Agricultural Insurance Scheme with Special Reference to Erode District of Tamil Nadu

Abstract

The demand for crop insurance stems from two 'risky' situations that often erode farmers' income and make them vulnerable to economic distress. These include unpredictable weather and volatile prices. Although vulnerability of Indian agriculture to weather-related events such as floods and draught has always been the case, in the recent past, natural hazards such as hailstorm, cyclone, high-speed winds, heat waves, frosts, etc, have also started hitting agricultural production. In some pockets of the country, this has become a regular phenomenon. Such events are turning quite intense at the micro level. Additionally, price volatility has emerged as a serious challenge causing fluctuations in farm income. In fact, the effect of fall in prices on farm income is much stronger and widespread as compared to the effect of natural hazards. With shifts in acreages towards cash crops, increased market orientation of output, and a rise in the cost of purchased inputs and hired labour, farmers find it hard to absorb both price shocks and production shocks involved in crop production. Thus, emerges a demand for mechanism for safeguarding farmers against production risk and price risk, both of which are raising and spreading.