Farmers' preference for crop-diversification in India: does crop-insurance play a part?

Farmers face yield risks due to various factors, including climate change and extreme events, and it is being advocated to adopt climate-smart agriculture practices, including crop diversification and crop insurance. While both options provide numerous benefits, the adoption rate is observed as low, and thus, several studies identified determinants separately. These options could substitute or complement each other, and higher benefits could be derived from adopting them together. However, a dearth of studies examine the causal association among climate-smart agriculture strategies. This study addresses this gap, i.e., investigates to what extent crop insurance acts as an instrument for the diversification of crops so policies can be designed to promote combined options. This study employs logit and ordered logit models by taking the 70th (2012-13) and 77th (2018-19) rounds of the National Sample Survey Office dataset. The following observations are reported: (i) the adoption of crop diversification has declined from 49% in the kharif season of 2012-13 to 38% in the same season in 2018-19, and a similar result is also reported for several states; (ii) in particular, the adoption rate has plummeted among the smallholders; (iii) as expected, crop insurance is noticed as one of the major instruments; (iv) other determinants are household size, land size, irrigation facility, and access to various government policies such as access to Mahatma Gandhi national rural employment Guarantee scheme, and soil health card, and access to input dealer, and radio and television; (v) surprisingly, access to agricultural extension and awareness of minimum support price have negative effects. In terms of policy recommendations, this study advocates designing policies to promote a bundle of options, e.g., low insurance premium rates for farmers who opt for crop diversification. Further, it is suggested that agricultural extension services be restructured, minimum support prices be announced, and the market for various agricultural outputs be fostered. Such assessments are imperative as increasing the adoption of climate-smart agriculture options is one of the most important priorities in the current policy arena.