We investigate the extent to which climate change will result in insurable and non-insurable losses for farmers in India. Changes in temperature and precipitation patterns may increase agricultural productivity volatility, leading to rising but insurable risk. These changes may also reduce expected productivity in an “average year,” causing non-insurable reductions in agricultural returns. A multi-segment climate model was used to forecast the future distribution of potential productivity at the district level for sixteen major crops. For the average district, a sharp decline in expected agricultural revenue is projected, but only small changes in volatility. This is because climate-induced drops—resulting in extremely low agricultural returns, previously considered 1-in-100-year events—are expected to become the norm by the end of the century. The projections therefore imply substantial non-insurable losses due to climate change for Indian farmers.

Researcher: Francisco Costa
EPGE Brazilian School of Economics and Finance (FGV EPGE)

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