The role of non-farm income and employment support in farmers’ decisions on crop insurance

Purpose. This paper explores the farmers’ non-farm income (NFI) and individual, combined and differential effects of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) on crop insurance adoption in India under Pradhan Mantri Fasal Bima Yojana (PMFBY). Methodology / approach. This study uses the nationwide data from the 77th round of survey conducted by the National Sample Survey Office (NSSO) in two different halves of the agricultural year 2018–2019. It uses binary probit regression models where household and farm-related variables are included as control variables in addition to our interest variables. The differential impacts of non-farm income and MNREGS on crop insurance adoption at different income levels and for different farmer categories are also estimated. Results. The empirical results suggest that the households’ total non-farm income, participation in MNREGS and the non-farm income influenced by the MNREGS (MNREGS-led non-farm income) significantly increase crop insurance adoption under PMFBY. The results regarding the differentiated impact of non-farm income show a significant and positive association only for small and other farmers, while MNREGS significantly increases crop insurance adoption among all, i.e., marginal, small and other farmers. The MNREGS-led non-farm income enhances crop insurance at all income levels. The control variables representing farmers’ household-related and agriculture-specific characteristics mostly show the desired results. Originality / scientific novelty. This study primarily contributes to the literature about determinants of crop insurance adoption in India. By analysing the impact of non-farm income and MNREGS on crop insurance adoption under PMFBY, it fills the research gap, as there is little research about the impact of farmers’ non-farm income, while the impact of MNREGS on crop insurance is not explored. Further, its novelty lies in assessing non-farm income and MNREGS’ combined and differentiated impacts on crop insurance adoption at different income levels and farmer categories. Finally, the study updates the knowledge by providing insights using the reliable, latest available nationally representative data. Practical value / implications. The study provides empirical evidence that can be used to enhance crop insurance adoption to extend its benefits to maximum Indian farmers. The findings can serve as the basis for agriculture development planning through livelihood diversification and farm risk management.