Estimating the impact of temperature and climate on agriculture has become an increasing focus of economic research. Many of the concerns relate to developing countries because climate impacts seem to be either present only or disproportionately, in hotter and less rich parts of the world.
STARK HETEROGENEITY: EXTREME VERSUS MODERATE SHOCKS; IRRIGATED VERSUS UNIRRIGATED AREAS
The present analysis yields two key findings. The first—and one with significant implications in the context of looming climate changes—is that the impact of temperature and rainfall is highly non-linear and felt almost only when temperature increases and rainfall shortfalls are extreme. The second is that these extreme shocks have highly divergent effects between unirrigated and irrigated areas (and consequently between crops that are dependent on rainfall), almost twice as high in the former compared with the latter.
Unirrigated areas – defined as districts where less than 50 percent of cropped area is irrigated -- bear the brunt of the vagaries of weather. For example, an extreme temperature shock in unirrigated areas reduces yields by 7 percent for kharif and 7.6 percent for rabi. Similarly, the effects of extreme rainfall shocks are 14.7 percent and 8.6 percent (for kharif and rabi, respectively) in unirrigated areas, much larger than the effects these shocks have in irrigated districts.
IMPACT ON FARM REVENUE
Extreme temperature shocks reduce farmer incomes by 4.3 percent and 4.1 percent during kharif and rabi respectively, whereas extreme rainfall shocks reduce incomes by 13.7 percent and 5.5 percent. Once again, these average effects mask significant heterogeneity, with the largest adverse effects of weather shocks being felt in unirrigated areas. Ex-ante it is not clear which direction farm revenues should move in – on the one hand, these shocks reduce yields, but on the other, the lower supply should increase local prices. The results here clearly indicate that the “supply shock” dominates – reductions in yields lead to reduced revenues.
Overall the analysis here suggests at least three main channels through which climate change would impact farm incomes – an increase in average temperatures, a decline in average rainfall and an increase in the number of dry-days. Of course, all three are likely to be correlated, and therefore the total impact of climate change will not be the simple sum of these individual effects. The policy implications are stark. India needs to spread irrigation – and do so against a backdrop of rising water scarcity and depleting groundwater resources.
Fully irrigating Indian agriculture, that too against the backdrop of water scarcity and limited efficiency in existing irrigation schemes, will be a defining challenge for the future. Technologies of drip irrigation, sprinklers, and water management—captured in the “more crop for every drop” campaign—may well hold the key to future Indian agriculture (Shah Committee Report, 2016; Gulati, 2005) and hence should be accorded greater priority in resource allocation. And, of course, the power subsidy needs to be replaced by direct benefit transfers so that power use can be fully costed and water conservation furthered.
Another conclusion is the need to embrace agricultural science and technology with renewed ardor. Swaminathan (2010) urged that anticipatory research be undertaken to pre-empt the adverse impact of a rise in mean temperature. Agricultural research will be vital in increasing yields but also in increasing reliance to all the pathologies that climate change threatens to bring in its wake: extreme heat and precipitation, pests, and crop disease. The analysis shows that research will be especially important for crops such as pulses and soyabean that are most vulnerable to weather and climate. Of course, climate change will increase farmer uncertainty, necessitating effective insurance. Building on the current crop insurance program (Pradhan Mantri Fasal Bima Yojana), weather-based models and technology (drones for example) need to be used to determine losses and compensate farmers within weeks (Kenya does it in a few days).
It is easy to say what needs to be done. How this will happen given that agriculture is a state subject is an open political economy question. Clearly, the Hirschmanian bottom-up forces of “voice” and “exit” along with benevolent-and-strategic top-down planning and reforms will all have to play a key part. The cooperative federalism “technology” of the GST Council that brings together the Center and States could be promisingly deployed to further agricultural reforms and durably raise farmers’ incomes.