Agricultural policies to improve the sustainable use of water in regions with informal water markets in India

• Applicant: Juliane Hänsch, Ph.D.
• Subject Area: Agricultural Economics, Agricultural Policy, Agricultural Sociology ; Human Geography ; Hydrogeology, Hydrology, Limnology, Urban Water Management, Water Chemistry, Integrated Water Resources Management
• Term: since 2026
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 580588570

Agriculture is the largest freshwater user in India. Many water resources are degraded due to climate and anthropogenic changes. Especially groundwater overuse is risking agricultural development, (rural) livelihoods as well as related food, energy and environmental systems. Groundwater use is typically not monitored and many aquifers are depleted in areas where farmers buy water in informal water markets. Managing water resources sustainably is becoming increasingly urgent with widening water demand and supply gaps. Different policy approaches were attempted with little empirical knowledge about their impact, interlinkages and effectiveness in different contexts. Implementing certain policies in the presence of informal water markets can have unintended (welfare) consequences but is so far under-researched. There is a need for a comprehensive policy testing process across multiple contexts for better policy decision-making. The objective of this study is to critically review and analyse water demand management policy instruments adopted in India and affecting its irrigated agriculture during the last three decades. It is the aim to isolate the extent to which agricultural policies impact the sustainable use of water, especially in regions where informal water markets are prevalent. The focus will be on regulatory, economic (e.g. incentives) or other participatory/institutional policies that received less attention in empirical analysis. The policy impact will be analysed with regards to different indicators of water use along the sustainability dimensions, such as farmers’ water productivity, efficiency, profitability, access and use, to capture different values of water use and potential unexpected (e.g. rebound) effects. It is of particular interest to investigate the causal policy impact and possible policy combinations and trade-offs. As a foundation, first a systematic policy review and secondary data collection from various (governmental) sources will be conducted. Various water use indicators will be calculated, specifically different types of water productivity, to explore the environmental, economic, social and nutritional value of water use. Second, the causal (ex-post) policy impact analysis will be conducted using a difference-in-difference approach, while an (ex-ante) policy scenario analysis will be added by developing an agent-based model. This proposed project provides important methodological and empirical contributions to improve the understanding of policy impacts on water use. The results of this proposed project are also relevant for countries that currently undergo major irrigation development, such as in Africa or other Asian countries, where groundwater levels are similarly declining and informal water trading is widespread, but so far overlooked in policy-making.

• DFG Programme: Research Grants