Modelling the Impact of Power Subsidies in Agriculture on Water Use in India

South Asia, home to around one-eighth of the world’s population, is a region rich in natural resources and has some of the world's most populous growing economies. Rapid urbanization and migration are placing a great deal of strain on the urban and semi-urban areas of this region. With water tables dropping at an unsustainable rate, the worrying depletion of clean water resources is one of the new concerns brought on by this demographic shift. In the upcoming years, the area will likely experience a severe water scarcity situation. The relationship between energy, water and food is an important topic of discussion in public policy around the world, especially in South Asia. In India, with power subsidies being provided to farmers, there has been an excessive use of electricity. That in turn has resulted in significant groundwater depletion due to irrigation and has moreover added a financial burden to the government. This paper builds on the foundational work of Prof. Parikh, who in his 1999 (Parikh in Vikalpa: The Journal of Decision Makers 24(2), 1995) paper in Vikalpa, developed comprehensive economic models to address these issues. Developing the global dynamic Computable General Equilibrium (CGE) model by Narayanan et al. (Water scarcity in South Asia: A dynamic computable general equilibrium analysis. 2015 AAEA & WAEA Joint Annual Meeting, July 26–28, San Francisco, California 205651, Agricultural and Applied Economics Association), this study focuses on energy, agricultural and water issues. Its primary purpose is to assess the effects of decrease or complete eradication of agricultural power subsidy on water consumption, farmers’ practices and the economy in general.