Importance of Agricultural Risk Management
Agriculture and allied sectors provide the livelihood for a substantial percentage of the population in many developing countries (as high as 80% in several sub-Saharan nations, 70% in India, etc). However, investments in agriculture have not kept pace with the rest of the economy and agricultural productivity has been gradually decreasing over the past several decades.
In India, over 80% of farm holdings are managed by smallholders. Smallholding farmers assume significant risks during each growing cycle as the investments they make are highly susceptible to weather uncertainties. Roughly 60% of India’s farms still depend on rains despite recent decades’ progress made in irrigation.
Limited adoption of and/or access to agricultural risk management in India accentuates this uncertainty and significantly limits farmers’ ability and willingness to invest in superior farm inputs. The resulting low productivity and profitability can perpetuate a negative cycle with increasingly detrimental effects on the smallholding farmer and overall food security for the region.
High resolution weather data and weather-index based agricultural risk management approaches may provide significant help. However, several barriers could prevent India from significantly expanding access to weather information and weather-index based agricultural risk management without technological innovation. Expansion of existing surface meteorology networks requires significant capital for deployment and maintenance expenses. Installing weather stations is costly, with operations and maintenance required in remote areas compounding cost and complexity. Further, greenfield installation, even at very high densities, would not create the historical record needed to characterize risks or provide a way to account for uncertainties associated with distance.
As an initial step, given the diversity and scale of challenges and the associated opportunities in India, PSI and its partners are exploring technology innovation/prototypes for India which can then be replicated to other parts of the globe (with appropriate customizations).