Economic Survey 2018 - Vol. 1, Ch. 6: Climate, Climate Change, and Agriculture (Download PDF)

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📹 Introduction- The last few seasons have witnessed a problem of plenty: farm revenues declining for a number of crops despite increasing production and market prices falling below the Minimum Support Price (MSP).

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• The last few seasons have witnessed a problem of plenty: farm revenues declining for a number of crops despite increasing production and market prices falling below the Minimum Support Price (MSP).

• Productivity will have to be increased, and price and income volatility reduced, against the backdrop of increasing resource constraints.

• Shortages of water and land, deterioration in soil quality, and of course climate change-induced temperature increases and rainfall variability, are all going to impact agriculture.

Why Agriculture Matters: An Irony

• Agriculture matters in India for deep reasons. The characteristics of Indian farmer can be given as

• Innocent

• Unsullied

• hard-working

• in harmony with nature

• poor

• vulnerable

• the victim, first of the imperial masters and then of indigenous landlords and middlemen.

• Agriculture also matters for economic reasons because it still accounts for a substantial part of GDP (16%) and employment (49%).

• Poor agricultural performance can lead to inflation, farmer distress and unrest, and larger political and social disaffection—all of which can hold back the economy.

• Industrialization and urbanization must provide those higher productivity alternatives to agriculture.

Long Run Agricultural Performance

• The focus on agriculture is warranted by its long run economic performance.

• Real agricultural growth since 1960 has averaged about 2.8 % in India. The period before the Green Revolution saw growth of less than 2%; the following period until 2004 yielded growth of 3%.

• The volatility of agricultural growth in India has declined substantially over time: from a standard deviation of 6.3 % between 1960 and 2004 to 2.9 % since 2004. In particular, production of cereals has become more robust to drought.

• Levels of volatility continue to be high and substantially higher than in China. An important contributing factor is that agriculture in India even today continues to be vulnerable to the vagaries of weather because close to 52 % of it is still un-irrigated and rainfed.

Motivation

• All the available cross-country analysis used cross-country databases on temperature, weather, and extreme events. The difference of data can be seen in the graphs given below.

Temporal and Spatial Patterns of Temperature and Precipitation

• The graph below shows the average temperature by cropping seasons. The broad pattern of rising temperatures post 1970s is common to both seasons.

• The average increase in temperature between the most recent decade and the 1970s is about 0.45 degree and 0.63 degree in the kharif and rabi seasons, respectively.

• The rainfall patterns in the two seasons between the 1970s and the last decade can be observed from the two graphs. Annual average rainfall for this period has on average declined by about 86 millimeters.

The graph given below shows percent of very hot and cold days during the monsoon

The graph given below shows the percent of dry and wet days during monsoons

• Temperature increases have been particularly felt in the North-East, Kerala, Tamil Nadu, Kerala, Rajasthan and Gujarat. Parts of India, for example, Punjab, Odisha and Uttar Pradesh have been the least affected.

• Extreme deficiencies are more concentrated in Uttar Pradesh, North-East, and Kerala, Chattisgarh and Jharkhand.

• There has actually been an increase in precipitation in Gujarat and Odisha and also Andhra Pradesh.

Impact of Weather on Agricultural Productivity

• 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.

1. The impact of temperature and rainfall is highly non-linear and felt almost only when temperature increases and rainfall shortfalls are extreme.

2. The extreme shocks have highly divergent effects between unirrigated and irrigated areas (and consequently between crops that are dependent on rainfall).

3. Marginal changes in weather have little or noimpact, and that the adverse effects of weather are concentrated in the extremes. These findings have important implications for the impact of climate change on agriculture.

4. The second key finding that these shocks have a much greater effect on unirrigated areas compared to irrigated areas

5. Table below shows the effect of shocks on the agricultural yield.

1. Unirrigated areas – defined as districts where less than 50 % of cropped area is irrigated – bear the brunt of the vagaries of weather.

2. Several factors over and above the level of rainfall matter for agricultural yields. Even after controlling for the level of rainfall, the number of dry days exerts a significant negative influence on productivity.

3. Holding the amount of rainfall constant, each additional dry day during the monsoon reduces yields by 0.2 % on average

Crop Impacts

• The effects of temperature can be seen in the two graphs given below.

Impact on Farm Revenue

• The table given below shows the impact of extreme shocks on famer incomes, measured by value of production
• 1 $℃$ increase in temperature reduces wheat production by 4 to 5%.

• Intergovernmental Panel on Climate Change (IPCC), predict that temperatures in India are likely to rise by 3 - 4 degree Celsius by the end of the 21st century.

• These predictions combined with our regression estimates imply that in the absence of any adaptation by farmers and any changes in policy (such as irrigation), farm incomes will be lower by around 12 % on an average in the coming years.

• Unirrigated areas will be the most severely affected, with potential losses amounting to 18 % of annual revenue.

• Climate change models do not have unambiguous predictions on precipitation patterns.

• If the observed decline in precipitation over the last three decades (of over 86 millimetres) is applied to the estimates, it is found that in unirrigated areas, farm incomes will decline by 12 % for kharif crops and 5.4 % for rabi crops.

• Models of climate change also predict an increase in the variability of rainfall in the long-run, with a simultaneous increase in both the number of dry-days as well as days of very high rainfall. This would imply a decrease in farm incomes by 1.2%.

• 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.

Conclusions and Policy Implications

• Based on newly compiled weather data and a methodology that has not been applied to Indian data so far, the main findings are

1. A key finding is that the impact of temperature and rainfall is felt only in the extreme; that is, when temperatures are much higher, rainfall significantly lower, and the number of “dry days” greater, than normal.

2. These impacts are significantly more adverse in unirrigated areas (and hence rainfed crops such as pulses) compared to irrigated areas (and hence crops such as cereals).

• Applying IPCC-predicted temperatures and projecting India’s recent trends in precipitation, and assuming no policy responses, give rise to estimates for farm income losses of 15 % to 18 % on average.

• The policy implications are stark. India needs to spread irrigation – and do so against a backdrop of rising water scarcity and depleting groundwater resources.

• In the 1960s, less than 20 % of agriculture was irrigated; today this number is in the mid-40s. The Indo-Gangetic plain, and parts of Gujarat and Madhya Pradesh are well irrigated. But parts of Karnataka, Maharashtra, Madhya Pradesh, Rajasthan, Chattisgarh and Jharkhand are still extremely vulnerable to climate change on account of not being well irrigated.

• 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

• Indian agriculture should be accorded greater priority in resource allocation. And the power subsidy needs to be replaced bydirect benefit transfers so that power use can be fully costed and water conservation furthered.

• 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.

• 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.

• There is an agriculture—the well-irrigated, input-addled, and price-and-procurement-supported cereals grown in Northern India—where the challenge is for policy to change the form of the very generous support from prices and subsidies to less damaging support in the form of direct benefit transfers.

• Then there is another agriculture (broadly, non-cereals in central, western and southern India) where the problems are very different: