Published Online:December 2024
Product Name:The IUP Journal of Financial Risk Management
Product Type:Article
Product Code:IJFRM011224
Author Name:Arundhati Mahapatra and Gouri Prava Samal
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:5-32
Odisha, a state heavily reliant on the fickle monsoon, has long faced challenges of uncertain agricultural production. To address this, this study explores the global regulatory landscape for rainfall derivatives and their application in agricultural risk management, and delves into the perceptions of stakeholders about introducing this innovative financial instrument, setting the stage for a more secure agricultural future. To this end, a survey of 216 experts from Odisha was conducted, including academicians, insurance and agro-based industry professionals, financial market experts, stockbrokers, regulatory body representatives, chartered accountants (CA), company secretaries (CS), and cost and management accountants (CMA). The results reveal that stakeholders in Odisha have a significantly positive perception of rainfall derivatives. These derivatives can help in mitigating risks associated with rainfall variability and enhancing financial stability for farmers. However, ensuring support for stakeholders is crucial for their successful implementation and acceptance. The study highlights the urgent need for introducing regulations for implementing rainfall derivatives, as there are currently no hedging options in place beyond traditional insurance. It suggests a pathway for the introduction of these instruments in the state, with the potential to encourage similar initiatives nationwide. This will support a diverse array of agricultural stakeholders, including farmers, agribusinesses, suppliers, cooperatives, insurers, financial institutions, policymakers, and rural communities, for effective management of rainfall risk.
Uncertainty is a fundamental aspect of agriculture. All farmers remain susceptible to climatic events together with other natural hazards. Not all farmers face risk to the same extent. As political ecologists have long argued, socioeconomic inequalities mean that some individuals face relatively fewer risks in their daily lives and are better able to cope when natural hazards occur (Blaikie et al., 2004).