Agricultural risk can have implications for both efficiency and welfare. Risk management interventions are quite often undertaken by governments because agriculture plays a critical role in the economies of many developing countries. This study is about one such risk-related intervention - crop insurance - in the context of a developing country. A view which has been gaining ground in recent times, especially since the 1980s - and has become a part of conventional wisdom - is that crop insurance, as a policy instrument for risk management, is not workable, and that it may not even be justified theoretically. This study reconsiders this question. India introduced an area-yield crop insurance scheme, known as the Comprehensive Crop Insurance Scheme (CCIS), in 1985. In an area-yield insurance scheme both premium and indemnity are based on the average crop yield of a specified geographical area rather than on farm-level yield. This study analyzes, from a global perspective, the above question focusing on the financial and economic performance of the CCIS.
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