Climate Sensitivity of Groundwater Systems Critical for Agricultural Incomes in South India

There are few economic studies that have estimated the impact of climate variables on agriculture by identifying their impacts on irrigation sources, even though irrigation serves as a critical adaptation strategy for farmers' in water-deficit countries such as India. In this study, we examine the implications of variations in climate variables on ground water sources of irrigation and agricultural income in the Indian state of Tamil Nadu. Our findings, based on a panel of 11 districts observed over a 40-year period, suggest that while increases in rainfall positively influence the water table, increases in maximum temperature significantly reduce ground water availability. There is also significant spatial correlation in water levels across districts. In terms of impacts on farm income, groundwater availability and free electricity have a positive effect, while increases in well density have a negative effect on income. Significantly, temperature has an inverted U-shaped relationship with income, with income decreasing at temperatures higher than a threshold temperature of 34.31°C. In our panel dataset, this threshold temperature has already been breached 61 times or in 14 % of the total number of observations. As temperatures increase as a result of climate change, our findings raise two important practical concerns for agricultural management: a) ground water reductions are likely and alternate sources of irrigation may need to be identified; and, b) because richer farmers are able to dig deeper wells, electricity subsidies will benefit the rich more and small land holders are likely to see lower returns to agriculture with increases in well density.