Irrigation Investments in India in the Last Three Decades: An Analysis of Economic Performance

As in many other countries, the poor economic rate of return of many past irrigation projects in India contributed to the decline in irrigation investment and lending by international agencies, especially since the 1990s (Gulati and Narayanan 2003, Pitman 2002, Jones 1995). Furthermore, these low rates of economic return may have diminished the poverty reduction impacts of such irrigation projects. The performance of Indian agriculture has been closely related to changes in agricultural productivity. Increases in agricultural productivity have been partly attributed to substantial increases in irrigated area (Meizen-Dick and Rosegrant 2005, Vyas in Mundle et al. 2003). This study provides a systematic analysis of the factors determining the performance, measured in terms of economic rate of return, of irrigation projects using data from 314 irrigation projects worldwide. Specifically, this paper: (1) examines the trends in performance of irrigation investments in India over time and contrast it to trends in South Asia and worldwide; (2) establishes the factors that determine performance of irrigation projects worldwide; and (3) draws lessons for future irrigation projects in India.