Emerging water markets in agriculture-An economic instrument for sustainable groundwater management

Water scarcity is a paramount concern that affects growth and sustainable development. Groundwater has rapidly emerged to occupy a dominant place in India's agriculture and food security in the recent years. The number of tube wells has grown substantially, with a subsequent increase in market activity for water. An empirical research was attempted with the objective of studying the existing groundwater market condition, analyzing the economic efficiency of water use and the institutional aspects of groundwater market. This study was conducted in the Cauvery delta tail end command area of Cuddalore district in Tamilnadu, where groundwater markets are prevalent in a notable extent. The post stratification of the sample showed that the farmers involved in groundwater market activity was substantial and accounting for more that 60 per cent of the total sample size in this block. The water use efficiency using Cobb-Douglas production function analysis showed that the efficiency of input vector other that water was found to be the highest in water buyer group and efficiency of water input was found to be the highest in the case of water seller. Hence it could be asserted from the results that with growing water scarcity and changing groundwater dynamics water market option was considered as an effective tool in improving the economic efficiency of water use, and this will also ensure the minimization of over use of water. The emergence of groundwater market has also helped in increasing the agricultural production. Finally, it was concluded that encouraging the emergence of water markets in agriculture can play a significant role in improving economic efficiency and environmental sustainability of water use