Federal versus Regional Control: Implications for Groundwater Resource in India

Despite groundwater comprising around 97 percent of world's fresh water reserves and sustaining most of the world's food production, very limited research has examined the implications of groundwater stress. In developing countries, groundwater access is more salient in the generation of rural livelihood but little is known about how farmers cope with groundwater stress. The first paper “Missing Water: Agricultural Stress and Adaptation Strategies in Response to Groundwater Depletion among Farmers in India”, examines the impact of ground water stress on agricultural outcomes in India. The research uses annual deviations of district groundwater levels from 1999 to 2003 from medium run means, to investigate how production and area under cultivation respond to groundwater fluctuations. The paper finds that a 1 meter decline in groundwater level in a year reduces food-grain production by 8 percent, water intensive crop production by 9 percent and cash crops by 5 percent. 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, are used to examine coping mechanisms. The results indicate that for short-run shocks to groundwater, agricultural production for food-grains and water intensive crops are unchanged, but area under cultivation falls by 7 to 8 percent, whereas there is no change for cash crops. This suggests that farmers cultivate less area but use complementary inputs more intensively. The effect of transition of the decadal mean of groundwater around this cutoff on exit from farming is evaluated. The results show no evidence of exit of marginal or small farmers from agriculture in response to groundwater stress. The second paper “Federalism versus Regional Control: Implications for Groundwater Resource in India”, investigates the implications of federal versus regional control over provision of groundwater for long run sustainability of groundwater. This paper examines the trade-off between short term growth and long term conservation incentives of elected legislators from regional and national political parties for groundwater provision. Regional legislators have a stronger incentive to promote regional growth, which can lead to a rapid decline of resource stocks. On the other hand, regional parties are limited to contesting elections from the region, and hence have stronger incentives to conserve resources for future periods. These two effects can offset each other. This paper proposes and tests the hypothesis that under high cost of provision to the legislators, regional regimes can lead to conservation because they internalize inter-temporal externalities. The paper uses nationally representative data on groundwater from India, and an increase in the cost of groundwater provision for the legislators induced by the reforms in the electricity sector, to show that private competition induced in the electricity sector leads to groundwater conservation under regional regimes.