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Economic Survey 2017-18 Analysis: Climate, Climate Change, and Agriculture Part 2

Apr 10, 2018 10:57 IST
    Economic Survey 2017-18 Analysis: Climate Change and Agriculture
    Economic Survey 2017-18 Analysis: Climate Change and Agriculture

    Economic Survey 2017-18 has published a chapter on the topic- Climate, Climate Change, and Agriculture. Here, we have published the second part of the topic in continuation of the fairs part published earlier. The given topic is very important for IAS Exam 2018. Every year, UPSC asks questions based on the topics given in the Economic Survey of the respective year.

    Economic Survey 2017-18 Analysis: Climate, Climate Change, and Agriculture Part 1

    Impact of Weather on Agricultural Productivity

    The dependency of agriculture on weather and climate is higher in India and estimating the impact of temperature and climate on agriculture is a subject of economic research. The Economic Survey 2016-17 has focused on the impact of temperature and climate on agriculture through disaggregated data at the district level. However, they conducted analysis for the seasons of Kharif and Rabi separately.  The analysis by Economic Survey 2016-17 yields two key findings:

    The impact of temperature and rainfall is highly non-linear and felt almost only when temperature increases and rainfall shortfalls are extremely based on the significant implications in the context of looming climate changes.

    The 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.

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    The above two findings for the seasons of Kharif and Rabi have been illustrated graphically as follows:

    Fig: 1 Effects of Temperature on Yields

    Economic Survey 2017-18 for IAS Analysis
     
    In the above graph, x-axis depicts deciles of temperature and rainfall, with the 5th decile being the middle category (normal temperature and rainfall) against which all comparisons are made. So, consider the left panel if the temperature was in the 10th decile of the temperature distribution (i.e. the hottest possible), kharif yields in unirrigated areas (the red line) would be 10 percent lower than if the temperature was normal, i.e. in the 5th decile.

    Fig: 2 Effects of Rainfall on Yields

    Economic Survey Analysis for IAS
     
    In the above graph, the left panel shows that if rainfall were in the 1st decile (cases of drought and drought-like conditions), kharif yields would be 18 percent lower in unirrigated areas than if rainfall was normal (i.e. in the 5th decile).

    The first key finding that only high-temperature shocks matter is reflected in the fact that the red line in the temperature graphs in Figure 1 (both panels) is very close to the x-axis for nearly the entire part of the distribution except toward the right corner. That is, under any condition of less-than-extreme heat, the impact is close to zero, and it is as if the temperature is normal. Similarly, the fact that only extreme rainfall shortages matter is reflected in the fact that the red line in the rainfall graphs in Figure 2 is close to the x-axis except towards the left extreme.

    The Economic Survey 2016-17 through this chapter has analysed that the marginal changes in weather have little or no impact 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 since most climate change models predict an increase in extreme weather events.

    The second key finding that these shocks have a much greater effect on unirrigated areas compared to irrigated areas is reflected in the fact that in all panels of Figures 1 and 2, the green line (showing the impact on irrigated areas) tend to be closer to the x-axis (of zero impact) than the corresponding red lines.

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    Impact on Farm Revenue

    The impact of extreme shocks on farmer's incomes is measured by the value of production.
    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. (See Table 1)

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    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.

    What do the numbers from Table 1 imply for the impact of climate change on agriculture performance in the long run? Climate change models, such as the ones developed by the Inter-Governmental 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 percent on an average in the coming years. Unirrigated areas will be the most severely affected, with potential losses amounting to 18 percent of annual revenue.

    Climate change models do not have unambiguous predictions on precipitation patterns. But 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 percent for kharif crops, and 5.4 percent for Rabi crops.

    Finally, 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. If the observed increase in the number of dry days over the past 4 decades is applied to the short-run estimates, this channel alone would imply a decrease in farm incomes by 1.2 percent.

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    Conclusions and Policy Implications

    Based on newly compiled weather data and a methodology that has not been applied to Indian data so far, this chapter estimated the impact of temperature and precipitation on agriculture. The main findings are as follows:

    • A key finding—and one with significant implications as climate change looms—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.

    • A second key finding is that 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 percent to 18 percent on average, rising to 20 percent-25 percent for unirrigated areas. At current levels of farm income, that translates into more than Rs. 3,600 per year for the median farm household.

    The policy implications are stark. India needs to spread irrigation – and do so against a backdrop of rising water scarcity and depleting groundwater resources. Figure 14 shows the increase in irrigation across time and space in India. In the 1960s, less than 20 percent 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, Chhattisgarh and Jharkhand are still extremely vulnerable to climate change on account of not being well irrigated.

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