Like in many parts of India, Karnataka’s groundwater is a vital source of irrigation water, but has been depleted by a combination of a prolonged, multi-year drought and intensive extraction. Worsening agro-climatic and environmental conditions are threatening the incomes of smallholder farmers and hampering the continued progress in poverty eradication.

A recent study ‘Way down in the hole: Adaptation to long-term water loss in rural India’ published in the American Economic Review deals with the impacts of groundwater depletion in Karnataka. The study looks at the causal impacts of groundwater depletion on farming households using extensive household level data.

“We find that well failures are widespread, that farm income and wealth decline drastically, without sign of agricultural adaptation, and that households take up off-farm work to offset these losses, which is effective in areas with a high degree of rural manufacturing,” says Ram Fishman, one of the authors of the study.

Karnataka’s groundwater is stored in small, scattered pockets located within a hard-rock subsurface, which leads to substantial spatial variation in the volume of available groundwater at even very small distances. Importantly, this feature of the local aquifer has only become relevant with the recent drop in water levels, making continued access to groundwater subject to a high level of chance.

Using this exogenous variation in groundwater supply, the study shows that the loss of groundwater causes a sharp and persistent decline in farm income, driven by abandonment of high-value horticulture and dry-season cultivation, and leads to a substantial loss of wealth.

A short video synopsis of the research is available here:

Related study: Groundwater availability: The tale of two states

The study by David Blakeslee et al reports four main findings:

• Households suffer a dramatic decline in agricultural income following the loss of access to groundwater due to the drying up, or “failure” of their first borewell. There is little evidence that households are able to adapt in such a way as to maintain agricultural incomes.
• Households are able to largely offset the income effects of losing groundwater through increased off-farm income, primarily in nearby areas and, to a much smaller extent, through the migration of household members. Since the average borewell failure in our sample occurred about ten years prior to the survey, these should be understood as medium- to long-term adaptations rather than temporary, short-term coping mechanisms.
• The effect is mediated by the presence of local industrial development. In areas with higher levels of employment in large firms, households are better able to increase off-farm income to offset losses on the farm. Where fewer large firms exists, total income declines.
• Even when income is maintained, adaptation does not appear to be costless, as there is evidence for substantial asset decumulation and an increase in debt, which may undercut the ability of households to smooth consumption in the event of future income shocks. In addition, older children leave school and take up employment, potentially leading to long-term impacts on human capital accumulation and future income.

Conclusion

The study suggests that loss of access to irrigation water, a critical input to farming in semi-arid regions, persistently reduces the viability of agricultural livelihoods. There is little indication that households are able to adapt to these losses through shifts in agricultural practices. Much of the affected land remains fallow, or cultivated with low-value field crops, raising concerns about the impacts on aggregate food production.

On the other hand, households seem to be relatively successful in off-setting agricultural income losses through a reallocation of labor to off-farm employment, which leaves total income little affected. The reallocation of labor is achieved without substantial resort to migration or even employment in nearby villages, arguing against the likelihood that worsening groundwater trends will result in large waves of “environmental refugees”.

The ability of households to adapt their income to water loss through non-agricultural employment, however, depends on the structure of the local economy. Where large firms are relatively common, individuals are more likely to take up off-farm employment, and there are indications of a slight increase in total income. Where such firms are relatively scarce, total income declines.

These results suggest that rural industrialization and non-agricultural economic development may enable rural populations to escape the worst income-related impacts of environmental degradation and the associated loss of agricultural production. However, these adaptations are not costless, as they entail the liquidation of assets and accumulation of debt, a decline in food expenditures, and a reduction of investments in the human capital of young adolescents.

The paper can be downloaded here