Missing Water: Agricultural Stress and Adaptation Strategies in Response to Groundwater Depletion in India

Groundwater depletion is becoming a serious policy concern in many developing countries but little is known about the costs of groundwater depletion. I use annual deviations of depth to groundwater from 1999 to 2003 from the 1985-1995 decadal means for Indian districts, to investigate how production and sown area respond to groundwater fluctuations. I find that a 1 meter decline in groundwater in a year reduces food-grain production by 8 percent, water intensive crop production by 9 percent and cash crops by 5 percent. I also use year-to-year transitions of groundwater around a cutoff value, at which cost of technology required to access groundwater exogenously increases due to physical constraints, to examine coping mechanisms. I find that for short run shocks around this cutoff, sown area for food-grains and water intensive crops falls by 7 to 8 percent, whereas there is no change for cash crops. I evaluate the effect of the transition of 10 year means of groundwater around this cutoff on exit from farming. I do not find evidence of exit of marginal or small farmers from agriculture. JEL Classifications: O12, O13, Q01, Q25, ∗I wish to thank Central Groundwater Board of India for providing the groundwater data, and Ministry of Agriculture for Providing the Agricultural Census data. Paul Landefeld and Kritika Saxena provided excellent research assistance. Funding from International Growth Centre, London School of Economics(Grant # RA-2009-11-029) is greatly acknowledged. †Email: [email protected]