Groundwater depletion is becoming a serious policy concern in many developing countries but little is known about the costs of groundwater depletion. This paper examines the impact of ground water stress on agricultural outcomes in India. I use annual deviations of district groundwater levels from 1999 to 2003 from the 1985-1995 decadal means, to investigate how production and area under cultivation respond to groundwater fluctuations. I find 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. 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 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. 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.
Sheetal Sekhri. Missing Water: Agricultural Stress and Adaptation Strategies in Response to Groundwater Depletion among Farmers in India (IGC Working Paper). International Growth Centre (IGC), London, UK (2011) 27 pp.