The Impact of Irrigation On Agricultural Productivity: Evidence From India

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The impact of Irrigation on Agricultural Productivity: Evidence from India
Article · January 2012
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Songqing Jin1
Winston Yu2
Hans G.P. Jansen2
Rie Muraoka1
1) Department of Agricultural, Food, and Resource Economics, Michigan State University,

East Lansing, MI 48824
[email protected]
2) World Bank, 1818 H St., NW, Washington DC
Selected Poster prepared for presentation at the International Association of Agricultural Economists (IAAE)
Triennial Conference, Foz do Iguaçu, Brazil, 18-24 August, 2012.
Copyright 2012 by [authors]. All rights reserved. Readers may make verbatim copies of this document for non-
commercial purposes by any means, provided that this copyright notice appears on all such copies.
Using plot level production data from a nation-wide survey in India, we study the impact of
irrigation on crop productivity, land prices and cropping intensities. Our main identification
strategy is based on a sufficient number of households cultivating multiple plots of different
irrigation status. After household fixed effects and plot characteristics are controlled for, our
estimations show that irrigation has a strong and significant impact on all these outcomes with the
dominant effects on cropping intensities. We find quality of irrigation also matters. Our results
provide support for continuing investments to improve access and quality of irrigation in India.
Crop yields everywhere in the developing world are consistently higher in irrigated areas than in rainfed
areas (Rosegrant and Perez 1997; Ringler et al. 2000; Hussain and Hanjra 2004; Lipton et al. 2005).
About 17% of global agricultural land is irrigated contributing about 40% to the world’s production of
cereal crops (WCD 2000). A comprehensive review of World Bank-assisted irrigation projects during
1994-2004 (IEG 2006) and a review of irrigation projects in Asia that received assistance from the
International Water Management Istitute (ADB/IWMI 2005) confirmed the significant role that irrigation
plays in poverty reduction and economic growth. The impacts of irrigation on poverty reduction are both
direct and indirect. Direct benefits of irrigation include higher farm productivity through crop yield
increases and diversification of cropping patterns and crop technologies. These in turn result in higher
household income, , consumption and employment. To the extent that irrigation results in higher
marketed surpluses and increased employment opportunities, it also indirectly benefits the landless
through higher wages). Finally irrigation may lead to lower food prices which is especially beneficial to
the poor since they spend a disproportionally large share of their income on food.
Access to irrigation water is widely credited to be one of the major underlying factors for the
substantial productivity gains obtained during the Green Revolution in Asia in the 1960s and 1970s
(Pingali et al. 1997; Bhattarai et al. 2002).In light of the recent rises in food prices and increasing demand
for non-agricultural use of land, raising agricultural productivity is more important than ever. Will
improvements in irrigation be able to contribute to further gains in crop productivity? If so, to what extent
and how can we maximize the potential of irrigation? Some recent studies based on regional or state-
level data suggest that further investments in irrigation would make only a moderate contribution to
1
agricultural production and agricultural GDP (Fan et al. 2000; Fan and Chan-Kang 2004). At the same
time, however, others claim that the economic gains from further improvements in irrigation are
potentially large (Datt and Ravallion 1997; Rosegrant et al. 1998; Barker et al. 2004; Hussain and Hanjra
2004; Huang et al. 2005). There exist a large number of reports and research papers that analyze the
economic impact of irrigation. However, the issues being analyzed as well as the data and methods being
used suffer from various limitations including aggregation bias, small sample problems and inability to
establish the true causal relationship between irrigation and impact of irrigation.
In this paper we review some of the existing methods that have been used to evaluate the economic
returns of access to irrigation water. Based on their advantages and disadvantages. we propose an
improved method for analyzing the productivity impact of irrigation, usin a unique National Council of
Applied Economic Research (NCAER) dataset that contains detailed plot level information on
agricultural production and access to different types of irrigation services for 16 states in India.
Review of past studies regarding the economic impact of irrigation
While macro-level analyses can be useful for providing overall directions for public investment allocation,
they cannot identify the heterogeneous impacts of infrastructure services. As demonstrated by Van de
Walle and Gunewardena (2001), failing to take heterogeneous impacts of irrigation into account can lead
to considerable bias. Understanding the different effects of public investments in different regions and on
different households is crucial to ensure that public resources are most efficiently spent to achieve
economic growth and poverty reduction. Micro-level analyses using household survey data are needed in
this regard. A variety of empirical methods have been adopted to analyze the impact of access to
irrigation at the level of the household. In recent years the literature in this area has expanded
considerably - see Hussain (2007), Hussain et al. (2007) and Lipton (2007) for comprehensive reviews of
the literature). Below we review some of the main methods used in these studies, especially in some of
the more recent ones.
2
A series of recent studies funded by the Asian Development Bank (ADB) and the IWMI evaluate the
poverty impact of irrigation systems that received assistance from IWMI in six Asia countries -
Bangladesh, China, India, Indonesia, Pakistan and Vietnam (Hussain and Wijerathna 2004)1. Household
level samples were drawn from a multistage sampling method. Poverty impact analyses was conducted
for all the study countries using econometric models. Except for Bangladesh where a linear regression
model was used to assess the impact of irrigation on household income, for all the other countries a
logistic/probit model was used to estimate the impact of irrigation on poverty. In the logistic/probit
models, the dependent variable is a dichotomous variable (=1 for poor households whose income is below
the national poverty line, and 0 for non-poor households). Linear regression models were also used to
analyze annual expenditure, gross value product, and yield in some countries. The explanatory variables
included household demographic characteristics, farm productivity/income, asset holdings (such as land)
and availability/access to irrigation. Irrigation variables included dummy variables for access to irrigation
and location within the command area (i.e., head, middle, and tail). In the cases of Indonesia and
Vietnam, sufficiency of water supply, time accuracy of water supply and distance to the water gate, 5 year
incidence of drought and 5 year incidence of inundation were also included. And in the Pakistan study,
ground water quality was also included as an explanatory variable. Among the 6 countries studied, the
methods and data used in the China case were the broadest (Huang et al. 2005). Both econometric
estimation and simulation based on the econometric results were used to assess the change in poverty
incidence arising from a change in a specific factor (e.g., irrigation access). The impact on inequality was
also evaluated by three different decomposition methods. The main innovation in the China study
concerns the detailed input and output data at the plot level. The plot level production data were used to
analyze the impact of irrigation on agricultural productivity. The availability of data regarding plot level
characteristics allows to control for land quality in the productivity regression. Moreover, data from
1
These countries together account for over 51 percent of global net irrigated area and over 73 percent of net
irrigated area in Asia, with most of this area located in China, India and Pakistan.
3
multiple plots for the same household also allow to control for household fixed effects (i.e. any
unobserved factors that are correlated with household access to irrigation and yield levels).
A strong correlation between irrigation and poverty was identified in almost all case studies. Poverty
incidences are 20-30 percent less in settings with irrigation compared to those without irrigation. But the
positive impact of irrigation on poverty reduction varies across irrigation systems, location of households
within the system (head, tail and middle), quality of water supply (sufficiency and time accuracy), and
size and distribution of land holdings. Moreover, in Indonesia the marginal poverty reduction effect is
bigger in irrigated areas than in rainfed areas. These highly heterogeneous impacts of access to irrigation
further highlight the need for these types of analyses to be conducted at the household level.
Van den Berg and Ruben (2006) used cross-sectional household level data from rural Ethiopia to
analyze the distributional impacts on levels of household expenditure and labor demand, as well as the
indirect effects of irrigation on expenditure levels of non-irrigation households. In this way these authors
sought to determine whether the poor lose due to land consolidation or displacement of labor as a result of
mechanization or increased use of agrochemicals caused by irrigation system improvement. In their
econometric model, expenditures and labor use are a function of a set of household and community level
variables. Owned area with irrigation and without irrigation are included in the model to test the effect of
irrigation access on consumption and employment. The share of area irrigated in total agricultural area at
the community level is also included to capture the spillover effects of irrigation on other households.
The models were estimated using standard the OLS estimation approach. The findings suggest that
irrigation is highly beneficial to those households directly involved, but the hypothesized positive
spillover effects on other households were not significant. Given that farmers with irrigated land on
average were poorer than farmers without irrigated land, the authors further argued that irrigation has
stimulated growth without deepening inequality.2
2
The finding of a positive effect of irrigation on equity is likely to be location specific. The results are beased on a sample from the (Tigray
region in northern Ethiopia where livestock and other non-farm activities (rather than crops) are dominant activities and land holdings are
negatively correlated with household income and wealth. The equity result has therefore limited relevance to other contexts.
4
Based on household data from the Philippines, a similar study by Shively (2001) showed that
irrigation development in lowland agriculture increased the probability of employment for upland
residents. However, the same study also showed that irrigated farms exhibited more intensive use of
fertilizers and pesticides, leading to reductions in labor use. Simulations based on results from stochastic
production function estimation indicate that labor use is likely to fall under the assumption of profit
maximization.
A number other studies have examined the choice of irrigation services and the impact of different
types of irrigation on productivity and income. Munir et al. (2002) estimated a stochastic frontier
production function of wheat production using farm level data from Pakistan. Three irrigation dummies
(canal, tubewell, and both canal and tubewell) were included in the model. Canal irrigation is the least
reliable source of water, the combination of tubewell and canal is considered most reliable, and tubewell
irrigation is in the middle. As expected, the estimation results showed productivity of farms with any of
the three types of irrigation to be significantly higher than that of farms without any irrigation. Perhaps
more interesting are the findings that productivity is highest on farms with access to the most reliable
form of irrigation (i.e. access to both canal and tubewell), and second highest on farms with only access to
tubewell, followed by those with only canal irrigation.
Based on household data from Pakistan, Meinzen-Dick and Sullins (1994) obtained similar results by
assessing the yield difference among different types of water supply (public canal, public tubewell,
purchased private tubewell, and own tubewell). Regression results based on a logit model suggested that
young households with less land are more likely to purchase groundwater than older households with
more land which are also more likely to own their own tubewell. Descriptive analysis shows that yields
on land with access to water from an own tubewell are significantly higher than yields on land with any of
the other three types of irrigation. Yield on irrigated land with access to water from a public canal only is
the lowest among the four types of water supply. Productivity of land with access to purchased water
from a private tubewell is similar to productivity of land with a public tubewell. The insignificant
productivity difference between purchased tubewell and public tubewell is because the purchased water
5
supply is almost as unreliable as the public tubewell (i.e. farmers are not guaranteed to have enough water
to purchase). This finding is highly consistent across all three types of crops analyzed (i.e. wheat, maize
and cotton) and was further supported by multivariate regression analysis using plot level production
functions for wheat.3
The main drawback of the majority of existing household level analyses regarding the impact of
irrigation on poverty reduction/income/consumption/inequality is the use of cross-sectional data (Hussain
et al. 2007). Analysts who use cross-sectional data to analyze the impact of irrigation access face a
number of econometric challenges – chiefly among them are heterogeneity and simultaneity. The
estimation results will be biased if there are unobserved factors that are simultaneously correlated with
access to irrigation (or improvement in irrigation services) and the outcome indicators/dependent
variables (e.g., income/consumption/poverty/inequality). For example, households with access to
irrigation might be also better farmers. In that case the estimated coefficients on access to irrigation based
on cross sectional data are likely to be biased upward. Two common strategies to deal with the
simultaneity problem includethe use of instrumental variables (IVs) or panel data. An IV is a variable
that is correlated with the variable of interest (e.g. farmer access to irrigation) but uncorrelated with the
outcome/dependent variable (or the error of the impact equation). The problem is that it is usually very
difficult to find good IVs because most variables that are correlated with access to irrigation are also
correlated with the outcome/depedent variable of interest. Kajisa et al. (2007) used an instrumental
variables approach; however, their sample size was very small.
An alternative strategy to IVs is to use panel data. Panel data or plot level data that include indicators
of access to and quality of irrigation services are rarely available and costly to obtain. 4 Meinzen-Dick and
Sullins (1994) used plot level analysis, but the sample size again was very small. Huang et al. (2005) also
used plot level information, but the input and output information was by crop rather than plot. As a result
they had to rely on the extrapolation of data which potentially introduces bias to the data. In the next
3
However, the number of observations for wheat was only 200 while maize and cotton had insufficient observations
to allow multivariate regressions.
4
A short panel may not be able to get enough variability in irrigation access.
6
section, we will describe how we were able to use the long panel of NCAER data to perform similar types
of household analyses but with improved control of theseeconometrics problems.
Methods to analyze the NCAER data
Data
The household-level data used in our analysis are from three rounds of the ARIS/REDS 5 survey
conducted by India’s National Council for Applied Economic Research (NCAER) in respectively 1982,
1999 and 2006. The ARIS/REDS survey builds on a set of households who were first interviewed in
1968-1971 to evaluate the impact of an agricultural development program covering the relatively
advantaged areas in most states. Even though the first round sample of 1968-1971 (which is stratified by
farm size and wealth class) was limited to project areas, coverage of the survey was significantly
expanded in 1982 to make it more representative at the national level while also increasing the sample
size to slightly below 5,000 households (Foster and Rosenzweig 1996). The 1999 sample contains all of
the households included in 1982 as well as replacements for households who were no longer present. If
the original household had split, all of the households belonging to the same dynasty in the original
village plus a sub-sample of successor households outside the village were interviewed, lifting the sample
size total to about 7,500 households (Foster and Rosenzweig, 2004). To make sure the new households
who split from the original 1999 households were also included in the 2006 round survey, a listing
exercise of all the households in each of the surveyed communities was conducted. In this exercise
information on income by source, consumption, irrigated and non-irrigated land in 2006 and 10 years
before, for all the households in the community was collected.
The NCAER survey consists of two modules: a household module and a village module. In the
village module, information regarding basic village characteristics including detailed information on land
(e.g., total cultivated land area and land under different types of irrigation infrastructures - government
5
ARIS is the acronym for ‘Additional Rural Income Survey’ whereas REDS stands for ‘Rural Economic and Demographic Survey’.
7
canal, private tanks, wells, and other streams), village economic conditions and different economic
activities, agricultural technology and level of production, governance, weather and other external shocks
was collected.
The household module included not only most of the variables included in a standard
multipurpose household survey (such as household characteristics, expenditure, assets, income sources
etc.) but also detailed input-output information for all the plots under cultivation. In addition, the
household survey also collected data regarding specific plot characteristics including soil quality, access
to different types of irrigation services - surface water, ground water, pond, well, as well as information
on the availability and reliability of water supply.
Plot level productivity analysis
The detailed plot level input and output data were used to estimate a production function to study the
impact of irrigation on productivity. The model specification is similar to the one used in Huang et al.
(2006). Specifically, we estimated the following model:
ln Qijk   i   1m Dijk
m
  2 Pijk   3 ln H ij   4 ln Z j   ijk (1)
In equation (1) lnQijk is the productivity of plot k of household i located in village j;  i represents
household fixed effects (e.g., household farming ability, access to credit, risk attitude of the households,
m
etc.); Dijk is a dummy variable for plot i with access to the mth type of irrigation infrastructure (=1 if
irrigation is type m, =0 otherwise); lnHij is a vector of other observable household characteristics (age,
gender, education and off-farm experience of the household head, etc.); lnPijk is a vector of plot
characteristics (land size, soil type, land quality, plot specific shocks, crop type, season type, etc.); Zj is a
vector of village j’s characteristics including village level technology, access to extension services,
market development, local economic opportunities, weather, and other natural disasters (e.g., breakouts of
diseases and insect infestation) etc.
8
It is well known that equation (1) cannot be estimated by OLS if  i is correlated with Dijk
m
(or
with any other variable on the right hand side). To purge  i , we take advantage of the multiple plot data
for each household and estimate equation (1) using a panel fixed effect estimation approach. This is
equivalent to estimating the following equation:
ln Qijk  ln Qij   1m ( Dijk

m
 Dijm )   2 (ln Pijk  ln Pij )   ijk (2)
In equation (2), observed and unobserved household and village characteristics (  i , lnHij, lnZj) have
dropped out. Our main interest is the estimated parameter vector,  1m .
Additional practical care is warranted when estimating equation (1). The fact that some plots are
cultivated during only one season while others are cultivated during multiple seasons, combined with
different plots being cultivated with different crops in a given season makes the estimation more difficult.
We therefore tried a number of different estimation strategies: (1) estimating land productivity on an
annual basis; (2) estimating land productivity on a seasonal basis; and (3) estimating productivity for
those plots that are cultivated with the same crop in the same season.
Descriptive Analysis
Irrigation in India
Despite the enormous progress in India’s irrigation system in the past, access to irrigation is still a big
challenge for farmers in many parts of rural India. The NCAER data indicate that only about half of the
agricultural plots in the sample are irrigated - 27% by public irrigation (i.e., canal irrigation), 18% by
private irrigation schemes (e.g., ponds, wells, etc.) and about 4% by both public and private irrigation.
The remaining half of the plots are rainfed (Table 1). However, access to irrigation varies sharply across
states in India. While 94% of farm plots in Tamil Nadu are irrigated, almost all the plots in Himachal
Pradesh are rainfed. Other states where the majority of plots have access to irrigation include
Chhattisgarh (77% of plots), Gujarat (76%), and Punjab (73%). States besides Himachal Pradesh where
9
the majority of plots remain rainfed include Bihar (67% of plots), Jharkhand (79%) and Karnataka (80%).
Although on average public irrigation is more important than private irrigation (27% versus 18% of plots),
the relative importance of the two irrigation systems varies from state to state. For example, while canal
irrigation dominates in Chhattisgarh, Tamil Nadu, Orissa, and West Bengal, tubewells are the dominant
irrigation source in Gujarat. On average, less than four percent of the plots in our sample have access to
both private irrigation and public irrigation systems; on the other hand, 17% of plots in Punjab and 19%
of sample plots in Tamil Nadu have access to both types of irrigation.
Irrigation and Land Productivity
A casual examination of the relationship between irrigation and land productivity using NCAER data
tends to provide a justification for the huge investments made in public and private irrigation systems in
India. Table 2 reports, for each state, annual gross revenue of crop production per acre of land and annual
net revenue of crop production per acre of land by plots of different types with irrigation (e.g., plots with
both public irrigation and private irrigation, plots with only public irrigation, plots with only private
irrigation) and rainfed plots. The simple tabulation of annual gross revenue per acre and annual net
revenue per acre of land by irrigation status and by states reveals a number of consistent and expected
patterns.6
First, irrigation is positively correlated with agricultural productivity as both annual gross revenue
per acre of land and annual net revenue per acre of land are lowest for rainfed plots in almost all states.7
According to the NCAER data, the national average of annual gross revenue per acre of land is 15,415
Rupees for rainfed plots, significantly below the 22,376 Rupees, 21,143 Rupees and 24,960 Rupees,
respectively for plots with private irrigation, plots with public irrigation and plots with both types of
irrigation. In terms of percentage increases (columns 5-9), compared to rainfed plots, annual gross
6
To address the concern that a comparison of the level of productivity between different types of plots may be
influenced by extreme values in the data, we also calculated the logarithm of gross revenue and net revenue. The
results are highly consistent with those based on the level of revenue.
7
The difference between gross and net revenue is accounted for by production costs (excluding family labor).
10
revenues per acre for plots with access to public irrigation systems, for plots with private irrigation only,
and for plots with both public and private irrigation, respectively are 51 percent, 56 per cent, and 69
percent higher than that for plots without any irrigation access. Similar trends also hold when outcome is
measured by annual net revenue per acre of land.
Second, the impact of irrigation on agricultural productivity varies sharply across states. For
example, while the difference in the log of gross revenue between irrigated plots and rainfed plots is
substantial in Andhra Pradesh (ranging from 9.35 to 9.78 for irrigated plots depends on type of irrigation
versus 8.77 for rainfed plots), Jharkhand (9.38-10.09 versus 8.64) and West Bengal (9.57-10.14 v.s. 9.26),
the difference is almost negligible in the states of Haryana (9.92-10.20 versus 10.02) and Tamil Nadu
(9.84-10.10 versus 9.84). Similar patterns are observed when productivity is measured by annual net
revenue per acre. In the same way that the overall impact of irrigation on productivity varies across states,
so does the relative importance between public irrigation and private irrigation. While private irrigation is
much more important than public irrigation in Chhattisgarh and West Bengal, the opposite is true for the
states of Gujarat, Kerala and Orissa.
Third, the data point toward significant complementarity between private irrigation and public
irrigation, as illustrated by the fact that plots with access to both types of irrigation tend to have the
highest annual revenue per acre. The national average of annual gross revenue per acre on plots with both
types of irrigation is 24,960 Rs., 28 percent higher than that on plots with only public irrigation and 79
percent higher than that on rainfed plots. Again a similar pattern is observed when productivity is
measured by annual net gross revenue instead of annual gross revenue.
There are two potential avenues through which irrigation increases annual crop revenues. First,
irrigation increases annual revenue per acre of land through its direct positive effect on total crop
production in a given cropping season. Second, irrigation may allow a plot to be planted for an extra crop
season for a given year. The NCAER data allow us to investigate each of these two factors. Table 3
presents average gross and net revenue per acre per season for plots with different irrigation status by
state. Like in the case of annual gross or net revenue per acre of land, average gross or net revenue per
11
acre per season is also lowest among the rainfed plots, and the difference of season-based revenue per
acre of land between public irrigation and private irrigation is again small. As in the case of annual gross
or net revenue per acre, there exists substantial heterogeneity regarding the impact on season-based gross
or net revenue across states. Differences in season-based revenues between irrigated plots and rainfed
plots are much smaller than annual-based revenues. For example, while average gross revenues per acre
for an average season from plots with public (or private) irrigation is 16 (or 20) percentage points higher
than that of plots without any irrigation, the corresponding figures are 51 percent for public and 56
percent when annual revenue is used. Similarly, the impact of irrigation on net revenue per acre for an
average season is also much smaller than the impact of irrigation on annual net revenue per acre of land.
And the general results are largely consistent no matter whether all crops are included in the calculation
of revenue of an average season (columns 2-9 in Table 3) or when only a selected set of crops (i.e.,
cereals, beans and oil crops) are included in the calculation (columns 10-17 in Table 3).
The NCAER data also indicate that the difference in gross or net revenue per acre for an average
season between plots with both types of irrigation versus plots with only one type of irrigation (either
public irrigation or private irrigation) is much smaller than that of gross or net revenue per acre per annum.
There are even occasional cases where the average gross or net revenue per acre for an average season is
smaller for plots with both types of irrigation than for plots with only one type of irrigation. This is in
stark contrast to the large difference in annual gross or net revenue per acre between plots of two types of
irrigation and plots with only one type of irrigation. The noticeable difference between the impact of
irrigation on annual revenue and seasonal revenue suggests that irrigation also has considerable impact on
land use intensity (i.e. number of cropping seasons).
Irrigation and land use intensity
Table 4 strongly supports our hypothesis that irrigation has a big impact on intensity of land use. Overall,
plots with access to both types of irrigation have the highest number of cropping seasons (2.02) followed
by plots with access to only private irrigation (1.82) or only public irrigation (1.75). On the other hand,
12
rainfed plots are associated with the lowest land use intensity (1.5 cropping seasons). This pattern is
consistent in most states. On the other hand the size of the impact of irrigation accesson plot use
intensityvaries considerably from state to state. For example, the number of cropping seasons for
irrigated plots is almost twice as high as that for rainfed plots in the Maharashtra (2.03 versus 1.17) and
West Bengal (2.37 versus 1.11). On the other hand, the difference is negligible in Punjab (2.04 versus
1.98). The variation of the impact of irrigation on plot use intensity across states is not unexpected
because land use intensity is likely to be influenced by agro-ecological factors besides irrigation access.
Irrigation and input use
It is widely argued that irrigation tends to increase the responsiveness of agricultural output to inputs and
therefore is likely to be positively correlated with input use intensity. The descriptive evidence based on
the NCAER data tends to support this argument (Table 5). At a national average of 5,186 Rs. (accounting
for 1/3 of total revenue), the annual cost of production per acre for rainfed plots is the lowest among all
the plots in most states. In spite of the higher annual cost of irrigated agriculture compared to rainfed
agricultural production, the higher annual net revenue of irrigated plots implies that the more intensive
input use yields net positive returns. The results are largely consistent even when the average cost of
production is measured on a per season basis rather than per year.
Further analysis of the cost data by comparing input use between irrigated plots and rainfed plots
for the major types of agricultural inputd provides additional insights (Table 6). Except for family labor
use which shows little variation across irrigation status, irrigation generally increases of the use of all
other inputs. Compared to rainfed plots, expenditures on fertilizers and other agrochemicals are almost
double on irrigated plots. Even though the impact of irrigation on seed expenditure is less pronounced
compared to expenditure on fertilizers and pesticides, the use of seed & seedlings on irrigated plots is also
significantly higher than on rainfed plots (19% to 98% higher depending on the specific type of irrigation).
Irrigation also stimulates labor use in agricultural production, with the largest increase in the use of hired
labor.
13
Econometric results
The findings from our descriptive analysis suggest potentially large productivity gains of irrigation
investments and point toward the potential avenues through which irrigation may affect productivity.
Annual and seasonal gross and net revenues per acre, land prices, input use and number of cropping
seasons are consistently higher on irrigated plots than on rainfed plots. However, the descriptive statistics
do not help identification of the causal relationships between irrigation and outcome indicators. The
observed differences in all these outcome indicators may be partially or fully due to
differences in other factors such as observed plot or soil characteristics, or
unobserved household characteristics such as farming ability etc. Regression analysis is
therefore required to identify the causal relationships that underly the impacts of irrigation on productivity
and to further quantify the magnitude of those impacts.
The key identification strategy of our regression analysis relies on variation of irrigation status
within the same households. The strategy of using plot level production of multiple plots operated by the
same households has been used in some of the most influential articles in the literature (e.g. Shaban 1987;
Udry 1996). Taking advantage of the fact that the NCAER data contain a large number of households
who cultivated multiple plots of different irrigation status (i.e., plots with only public irrigation, plots with
only private irrigation, plots with both private and public irrigation, and plots without irrigation) in a
given season or a given year, we were able to identify the impact of different irrigation status on land
productivity, plot use intensity, input use intensity and land price using household fixed effect estimation.
To address the concern that the estimation results may be sensitive to of the way in which
productivity is measured, we tried a number of different measures (i.e. gross revenue, net revenue, and
yield) and based on annual production or seasonal production. If land markets are functioning reasonably
well, the main characteristics of plots including irrigation status are supposed to be implicitly capitalized
in the land price (Jacoby 2000). We estimated a fixed-effect price regression of land plots with varying
14
irrigation status after controlling for a detailed set of plot and soil characteristics. We also estimated the
impact of different types of irrigation on land use intensity (i.e., number of cropping seasons) and input
use intensity.
Our econometric results strongly substantiate most of the descriptive evidence discussed above.
The estimation results suggest that irrigation has a significant and large impact on annual gross and net
revenues per acre of land. We also find that a large proportion of the impact of irrigation on annual
productivity is realized through its impact on land use intensity. As expected, irrigation also has a
positive and significant impact on land prices. The quality of irrigation also matters as plots with both
private irrigation and public irrigation tend to generate the highest revenues among all plots. And among
plots with public irrigation, those with continuous water always availability produce higher yields than
plots with less frequent water availability.
Irrigation and Productivity
Revenue per acre per annum
We first explore the impact of irrigation on annual crop productivity (measured by annual gross revenues
or net revenues per acre of land). Equation (2) was estimated using a household fixed-effect approach. In
order for the household fixed-effect model to function, it is necessary for the sample to contain a
sufficiently large number of households with multiple plots of different irrigation status. Among the
4,386 sample households which reported agricultural production in 2007, 998 households cultivated
multiple plots of different irrigation status (3,135 plots in total). In light of the fact that the impact of
different types of irrigation on productivity can only be identified by the 3,135 plots of 998 households,
equation (2) was estimated using this subset of households. In addition equation (2) was also estimated
using the entire sample in view of efficiency gains (Jacoby and Mansuri 2008).
Table 7 reports the estimation results regarding the impact of different types of irrigation on
annual gross and net revenues per acre using the entire sample (columns 2-5) as well as the subsample of
998 households (columns 6-9). Given that the results are almost identical no matter whether the entire
15
sample is used or only the subsample is used, our discussion will focus on the results based on the entire
sample. The base model includes three irrigation dummies and size of the plot (columns 2 and 4). In the
augmented model (columns 3 and 5) the base model was expanded by including the distance between the
plot and the homestead, land price, and a set of soil and plot characteristics to control for the quality of
each plot. The base category of irrigation dummies excluded from the equation is the rainfed plot dummy.
The most consistent results include a set of significant and positive coefficients of relatively large
magnitude for all three irrigation dummies (i.e. private irrigation only, public irrigation only, both types
of irrigation), implying a significant impact of irrigation on annual gross and net revenues per acre of land.
The base model results (columns 2 and 4) suggest that private irrigation, public irrigation and both private
and public irrigation increase annual gross (or net) revenue per acre of land by 39% (or 40%), 39% (or
43%), and 52% (or 53%), respectively (in comparison to rainfed plots). As expected, the coefficients of
the irrigation dummies become somewhat smaller when a set of plot and soil characteristics are added
(columns 3 and 5). But the magnitude of most coefficients remains large. For example, the coefficient
for plots with both types of irrigation (or with private irrigation) dropped from 0.51 (0.40) to 0.46 (0.37).
The results regarding distance between the plot and the homestead and land price are also as expected
since the coefficient for the former is negative (though significant only in one case), and the latter is
positive and statistically significant at the 1% level. A 10 percent increase in the land price is associated
with a 1.5% increase in gross annual revenue per acre and a 1.7% increase in net annual revenue per acre,
suggesting that land prices may be a good measure for land quality. On the other hand, variables
regarding soil type and soil quality have only limited impact on gross and net revenues per acre. This
result may have something to do with the small variation in soil types and soil quality within the same
households (after land prices have been accounted for).
Rice and wheat yields
A potential concern is that revenue per acre may be subject to measurement errors. The price of a
particular agricultural commodity is calculated as the ratio of the total sales value to total quantity sold.
16
Butsince many households did either not sell any or only part of their crops, prices often had to be
extrapolated from data of other households in the sample – a procedure that may introduce measurement
error. Crop yields on the other had are less subject to measurement error because both area and
production can be directly obtained from the survey data. Rice and wheat are two most important crops
cultivated in the two main cropping seasons in India. We therefore estimated equation (2) for wheat and
rice using crop yield as the measure of productivity.
The results for the fixed effect regressions in Table 8 suggest that irrigation is more important for
rice production than for wheat production - two of the three irrigation dummies are positive and
significant in the rice regressions, but none of the irrigation dummies are significant in the wheat
regressions. In the rice regression, access to both public and private irrigation increases yields by 15% and
having access to private irrigation would lead to a 9% increase in yield. However, it is surprising to note
that public irrigation alone is not significant in the yield regression. Again the results do not change much
when plot and soil characteristics are added to the regressions.
Irrigation and plot use intensity
Both the descriptive evidence and the regression results suggest that irrigation has a substantially larger
impact on annual productivity than on yield productivity. The descriptive data also suggest that irrigation
has a significant impact on plot use intensity. To check whether this descriptive evidence holds up in the
regression analysis, we estimated equation (2) using the number of cropping seasons for each plot as the
dependent variable. The results based on the entire sample are reported in columns 2 and 3 of Table 9.
Again, the results of the estimations based on respectively the entire sample and the sample with only
households that have plots with differenty irrigation status are quite similar. Therefore we only report the
results of the entire sample.
Our econometric results are highly consistent with the descriptive findings that irrigation access
significantly increases the number of cropping seasons. In the base model, plots with both types of
irrigation, plots with private irrigation and plots with public irrigation increase the number of crop seasons
17
by respectively 0.37, 0.25 and 0.34. Adding plot and soil characteristics only slightly reduces the
magnitude of the estimated coefficients of the irrigation dummies. In light of the fact that the average
number of cropping seasons for rainfed plots is 1.5, irrigation access increases the number of seasons by
17% - 25% depending on the type of irrigation. The estimated coefficients of the distance between the
plot and the homestead and the land price both have the expected signs - the number of cropping seasons
decreases with the distance between the plot and the homestead but increases with the land price.
Land price regression
In an environment where land markets are functioning well, the price of land should reflect the present
value of the land. Any factor that is likely to increase the present value of the land should therefore
increase the price of land. If irrigation has a positive impact on land productivity, it should also have a
positive impact on the land price – after controlling for plot and soil characteristics other than irrigation.
Based on this argument, we can implicitly test the impact of irrigation on productivity by estimating a
plot level land price regression using a household fixed-effect approach. This is equivalent to estimating
equation (2) using the land price as the dependent variable. The estimation results are reported in the last
two columns of Table 9. Only FE results are reported as OLS results are biased for the reasons discussed
in the section III.2.
The positive and significant estimated coefficients of all three irrigation dummies suggest a
strong impact of irrigation on the price of land. While access to both private and public irrigation and
having access to public irrigation only increase land price by a similar magnitude (around 20%), access to
private irrigation only increases land prices by about 10%.
Irrigation and input use intensity
The estimated results regarding the impact of irrigation on input use intensity (including fertilizers and
pesticides, seed & seedlings, total labor use, use of family labor and hired labor, and other inputs) are
reported in Columns 2-7 (annual data) and columns 8-13 (seasonal data) of Table 10. The regression
18
results further substantiate the descriptive finding that input use intensity is higher on irrigated than
rainfed plots. The results are robust across different types of inputs and consistent no matter whether
annual data or seasonal data is used.
Besides crop productivity, land use intensity and land prices, input use intensity is also highest o
plots that have access to both private and public irrigation. This is not surprising because economic
returns to input use are generally higher (and more stable) under conditions of secure water availability.
Compared to rainfed plots, fertilizer and pesticide use is almost double while use of other inputs is
between 60% and 70% higher on plots with access to both private irrigation and public irrigation (as
compared to rainfed plots). The impact of a single type of irrigation (either public irrigation or private
irrigation) on input use intensity is also substantial (32% - 70% higher than on rainfed plots depending on
the type of input and type of irrigation).
The magnitude of the estimated coefficients for all three irrigation dummies is reduced (though
only by a small magnitude – approximately 2-5 percentage points) once plot and soil characteristics are
controlled for – consisten with earlier findings. The estimated coefficients for the three irrigation
dummies are significantly smaller when seasonal data instead of annual data are used. This is also not
surprising as we have already shown that irrigation not only increases input use intensity in a given
cropping season but has an even larger impact on the number of cropping seasons. Thus, the impact of
irrigation on annual input use intensity is bound to be substantially larger than the impact on seasonal
input use intensity.
The large and significant estimated coefficients of the irrigation dummies suggest that irrigation
creates considerable employment opportunities in agriculture. Having access to both types of irrigation
increases total labor use per acre by more than 60% on an annual basis (or by 17% for a given season).
Public irrigation alone or private irrigation alone would lead to an increase in annual labor use by
respectively 41% and 36%, and total labor use in a given season by 10%. The estimated coefficients for
family labor use and hired labor use are rather similar.
19
Impact of Irrigation Quality
We already noted that irrigation quality (measured by whether or not a plot has access to both private and
public irrigation) matters a lot in terms of the the impact of irrigation on various outcomes of interest.
The 2007 NCAER survey also collected data on the frequency at which water is available on plots with
public irrigation access. The three pre-coded answers included the following: 1=water always available;
2=water only available occasionally; and 3=water rarely available. We took advantage of this
information to further explore the impact of irrigation quality. In particular, we created a public irrigation
quality dummy variable which equals 1 if water is always available and zero otherwise. We estimated
equation (2) by replacing the irrigation dummies with the public irrigation quality dummy and ran the
regression based on a subsample composed of plots with only public irrigation access. The results are
depicted in Tables 11 and 12. In order to estimate the fixed-effect regression, we relied on the variation
of public irrigation quality status within households. In the entire sample, there are only 47 households
with 99 plots of varying public irrigation status that meet this requirement, so we interpret the results with
caution.
The estimated coefficient of the quality dummy variable is consistently positive and significant in
all regressions presented in Table 11, suggesting that the quality of irrigation plays an important role in
raising crop productivity, land use intensity and land price. The magnitude of the estimated coefficient of
the quality dummy variable is also large, ranging from 0.46 to 0.67 in the revenue regressions and 0.31-
0.32 in the land use intensity regressions. In fact, these estimates are comparable to those of the dummy
variable for plots with both public and private irrigation in the previous regression using the entire sample.
In light of the fact that the omitted comparison group in Table 11 is “other plots with public irrigation”, as
opposed to rainfed plots which are the comparison group in the previous regressions (Tables 7, 9 and 10) ,
the actual impact of this quality variable (water always available for plots with public irrigation) is even
more striking.
Unlike its highly significant effect on revenues, cropping intensity and land prices, the coefficient
of the quality dummy variable is insignificant in most of the input use intensity regressions (Table 12).
20
The only statistically significant coefficient (even though only at the 10% level) is obtained in the labor
use regression and then only when plot and soil characteristics are not controlled for. This is quite
unexpected and in stark contrast to the input intensity use regression results reported earlier (see Table 10).
One explanation could be that farmers reported the availability of water based on ex-post information. If
farmers knew the availability of water beforehand, one would expect them to use more inputs on plots
with more reliable irrigation access, similar to the case where both private and public irrigation are
available.
Impact of Irrigation across States
Our econometrics analyses so far have focused on the average impact of irrigation on crop productivity at
the national level. But the descriptive evidence suggests substantial inter-state variation in the impact of
irrigation on crop productivity. To assess whether and to what extent the strong and significant effects of
irrigation on productivity found at the national level also hold for each individual state, we augmented the
set of explanatory variables in equation (2) by a set of interaction terms between state dummies and the
irrigation dummies. To identify the average impact of different types of irrigation in a given state, we
needed to have sufficient households that cultivated multiple plots with varying irrigation status in that
state. In light of the fact that in most states the number of households with crop plots accessible to both
private and public irrigation is quite limited, we did not interact state dummies with the dummy for access
to both private and public irrigation. Instead we only included the other two irrigation dummies (i.e.,
public irrigation and private irrigation dummy) and all the state dummies. The regression results for, are
shown in Tables 13. The results are broadly consistent with the state-wise descriptive evidence and those
based on the regressions without the interaction terms between state dummies and the two irrigation
dummies. The impact of irrigation on cropping seasons and land prices (Table 13, columns 2-5) is
unambiguously positive and statistically significant in all other states. The magnitude of the impact is
quite large though varying across states. For example, the elasticity of land prices ranges from 0.07 to
0.38 for public irrigation and from 0.81 to -0.003 for private irrigation . The impact of private irrigation
21
relative to that of public irrigation also varies considerably from state to state. While the data show that
private irrigation is more important than public irrigation in and to a lesser extent also in Tamil Nadu, the
reverse is true in Madhya Pradesh, Rajastan, Haryana, Punjab, Uttar Pradesh, and Bihar.
Conclusions
The majority of existing studies that investigate the impact of irrigation either use macro analysis based
on highly aggregated data, or household level data which tend to suffer from omitted variable bias.
Moreover, the relatively few studies that use plot level data either suffer from small sample sizes or use
inaccurate measures of output (e.g., output data recorded by crop rather than plot). In this paper, we take
advantage of a large sample of plot level production data covering 16 states in India. Our identification
strategy relies on considerable variation in irrigation status for multiple plots cultivated by the same
households.
Both the descriptive and econometric analyses confirm that irrigation has a strong impact on land
productivity. More importantly, the results show that the productivity impact tends to vary by type of
irrigation as well as quality of irrigation. The results are robust across a number of different measures of
productivity as well as across different subsamples. In particular our analysis highlights the importance
of irrigation quality. Plots that have access to both private and public irrigation, or public irrigation with
guaranteed water availability, have significantly higher land productivity. Finally, the main channel
through which irrigation impacts on land productivity is via its effect on cropping intensity (number of
cropping seasons). These findings are largely consistent across the majority of states in India even though
the magnitudes of the impacts vary from state to state.
The results in this paper provide strong support for continuing investment in irrigation
infrastructure in India. On the other hand the analyses in this paper do not identify the reasons why
irrigation is more effective in some state than in others. Understanding the factors behind the
hetereogenous impacts of irrigation across states is important for ensuring the optimal allocation of
irrigation investment funds and is a topic for future research.
22
Table 1: Percentage of Plots by Irrigation Status and State
Both Public and Private

State Irrigation Public Irrigation Private Irrigation Rainfed Number of Observations
ANDHRA PRADESH 1.11% 20.67% 31.56% 46.67% 450

BIHAR 1.48% 15.76% 15.27% 67.49% 203
CHHATTISGARH 0.82% 69.49% 6.57% 23.12% 731
GUJARAT 3.22% 12.06% 60.59% 24.13% 373
HARYANA 7.57% 34.26% 21.38% 36.79% 753
HIMACHAL PRADESH 0.00% 0.56% 0.00% 99.44% 357
JHARKHAND 0.41% 16.33% 4.49% 78.78% 245
KARNATAKA 1.87% 10.41% 7.72% 80.00% 855
KERALA 0.00% 16.67% 19.44% 63.89% 36
MADHYA PRADESH 2.42% 23.21% 16.15% 58.22% 991
MAHARASHTRA 1.09% 22.74% 18.54% 57.63% 642
ORISSA 0.83% 34.16% 0.28% 64.74% 363
PUNJAB 16.89% 32.45% 33.44% 17.22% 302
RAJASTHAN 2.31% 14.55% 21.38% 61.76% 1,127
TAMIL NADU 19.03% 52.23% 22.67% 6.07% 247
UTTAR PRADESH 5.43% 32.97% 20.87% 40.72% 1,859
WEST BENGAL 4.13% 35.43% 13.91% 46.52% 460
Total 3.78% 27.42% 18.23% 50.57% 9994
23
Table 2: Annual Gross and Net Revenue* of Crop Production (Rps/Acre/Year) by Irrigation Status and State
Gross Revenue Logarithm of Gross Revenue Logarithm of Net Revenue Number
of
Both Public Private Both Public Private Both Public Private Observations
Irrig. Irrig. Irrig. Rainfed Irrig. Irrig. Irrig. Rainfed Irrig. Irrig. Irrig. Rainfed
ANDHRA PRADESH 17915 17270 15395 8458 9.78 9.61 9.35 8.77 9.27 7.91 7.23 6.71 449
BIHAR 28955 21484 19706 17665 10.27 9.94 9.83 9.61 9.71 9.60 9.26 8.90 203
CHHATTISGARH 17155 16355 27518 16953 9.67 9.44 10.16 9.56 9.34 8.40 9.86 9.01 731
GUJARAT 25585 23754 22936 15731 10.07 10.04 9.85 9.48 9.12 9.40 9.30 9.08 373
HARYANA 26255 23782 29425 26162 10.11 9.92 10.20 10.02 9.52 9.42 9.75 9.54 753
HIMACHAL PRADESH 12725 24403 9.30 9.25 9.12 8.58 357
JHARKHAND 24200 14002 18875 9862 10.09 9.38 9.69 8.64 9.77 9.04 9.41 8.06 245
KARNATAKA 25668 25168 25262 13573 9.93 9.56 9.73 9.04 9.72 8.60 8.91 7.95 854
KERALA 34306 22816 21892 10.39 9.64 9.88 9.84 8.04 9.19 36
MADHYA PRADESH 12498 14932 13826 9992 9.30 9.33 8.82 8.60 8.81 8.71 7.66 7.21 991
MAHARASHTRA 16986 26974 20478 10856 9.70 9.99 9.66 9.03 7.66 8.30 8.76 7.63 641
ORISSA 17016 17852 7500 10129 9.65 9.37 8.92 9.01 8.93 8.70 8.37 8.09 363
PUNJAB 34098 32206 34878 27281 10.36 10.24 10.39 10.05 9.79 9.72 9.69 9.12 302
RAJASTHAN 18767 16628 17449 13315 9.73 9.52 9.61 9.05 8.91 8.84 8.87 8.20 1,127
TAMIL NADU 26879 19909 27864 21518 10.10 9.84 10.07 9.84 9.37 9.11 8.93 8.65 247
UTTAR PRADESH 20998 24159 23139 20646 9.88 9.91 9.84 9.65 8.79 9.18 8.07 8.41 1,856
WEST BENGAL 27852 22342 25705 13102 10.14 9.57 9.95 9.26 6.07 7.94 8.59 8.59 458
Total 24960 21143 22376 15415 9.98 9.70 9.75 9.19 9.04 8.82 8.66 8.17 9,986
* Net revenue is the difference between the gross revenue and the total cost of production (excluding family labor).
24
Table 3: Average Gross and Net Revenue (Rps/Acre/Season), by Irrigation Status
All Crops Cereal, Beans, and Oil Crop
Gross Revenue Net Revenue Gross Revenue Net Revenue
Both Public Private Both Public Private Both Public Private Both Public Private
Irrig. Irrig. Irrig. Rainfed Irrig. Irrig. Irrig. Rainfed Irrig. Irrig. Irrig. Rainfed Irrig. Irrig. Irrig. Rainfed
ANDHRA PRADESH 8958 9808 9454 6842 5603 4346 4616 2214 8958 9589 9004 6629 5603 3759 4085 2088
BIHAR 11933 12223 10936 10408 7831 8012 7227 7073 11923 12225 10610 10451 7213 8808 7052 7170
CHHATTISGARH 10293 13951 15059 12088 7431 9717 11385 8113 9827 13802 15040 12088 6915 9452 11371 8113
GUJARAT 15443 13161 13298 12783 12294 7254 8555 8617 15277 13287 13238 13133 12178 7358 8479 8965
HARYANA 12810 11697 14356 13858 7677 7739 9786 9702 14059 13458 16194 15200 8356 9076 11379 10765
HIMACHAL PRADESH 6176 13199 4935 11517 6176 11151 4935 9649
JHARKHAND 12100 8751 11631 8243 8707 6709 9417 5790 12100 8540 11631 8243 8707 6511 9417 5790
KARNATAKA 13253 15302 13696 12238 11552 11643 10073 9560 9377 9926 8263 9537 7746 6933 5028 6988
KERALA 18712 12286 14386 11131 5464 8629 18712 12286 14559 11131 5464 8835
MADHYA PRADESH 9653 9333 9512 7085 6656 6094 6372 4456 6750 9338 8311 7112 4056 6095 5175 4476
MAHARASHTRA 9565 14163 15575 9862 4746 7344 10537 5827 10118 13397 11198 9690 5362 6385 6700 5701
ORISSA 10210 10326 7500 8148 5862 6423 4329 5228 10210 10103 7756 5862 6362 4780
PUNJAB 15769 15363 16705 14725 11566 10640 10854 9255 18447 17827 18045 17995 13594 12458 11009 10118
RAJASTHAN 10073 8743 9629 9083 3143 4434 6254 6203 9593 8880 8649 8514 2540 4324 5374 5638
TAMIL NADU 11122 10100 13672 14516 6727 6086 8495 6568 9736 9144 12915 14516 5436 5079 7536 6568
UTTAR PRADESH 11538 13342 14279 12298 6337 9211 6601 6943 10806 12315 11094 10352 6648 8853 7184 6655
WEST BENGAL 12605 12782 14816 12191 3274 5678 5907 8046 9027 10147 9960 11529 1715 4322 3168 7898
Total 12543 12592 13036 10849 7643 8147 7878 7317 12150 12154 11563 9839 7528 7881 7229 6654
25
Table 4: Average Number of Cropping Seasons per Year, by Irrigation Status and State
State Entire sample Public & Private Irrigation Public Irrigation Private irrigation Rainfed
ANDHRA PRADESH 1.52 2.00 1.77 1.73 1.24
BIHAR 1.98 2.67 1.94 2.19 1.91
CHHATTISGARH 1.29 1.67 1.19 1.85 1.41
GUJARAT 1.62 1.92 1.89 1.72 1.21
HARYANA 2.02 2.14 2.05 2.01 1.96
HIMACHAL PRADESH 1.93 n.a. 1.50 n.a. 1.94
JHARKHAND 1.31 2.00 1.60 1.64 1.22
KARNATAKA 1.43 1.81 1.65 1.73 1.38
KERALA 1.64 n.a. 1.83 1.86 1.52
MADHYA PRADESH 1.57 1.75 1.63 1.80 1.47
MAHARASHTRA 1.49 2.00 2.03 1.80 1.17
ORISSA 1.58 1.67 1.89 1.00 1.39
PUNJAB 2.04 1.96 2.04 2.11 1.98
RAJASTHAN 1.64 1.81 1.87 1.86 1.48
TAMIL NADU 2.07 2.40 1.98 2.07 1.40
UTTAR PRADESH 1.78 1.90 1.89 1.72 1.71
WEST BENGAL 1.55 2.37 1.82 1.83 1.11
Total 1.65 2.02 1.75 1.82 1.50
26
Table 5: Annual Costs of Crop Production Inputs (Rps/Acre) by Irrigation Status and State
Total cost of Production (Rps./Acre) Log of Cost of Production
Public & Private Public Irrigated Private Irrigated Public & Private Public Irrigated Private Irrigated
Irrigated Plots Plots Plots Rainfed Plots Irrigated Plots Plots Plots Rainfed Plots
ANDHRA PRADESH 6709 9120 8285 5612 8.79 8.80 8.81 8.29
BIHAR 12238 6394 7896 6176 9.41 8.62 8.91 8.63
CHHATTISGARH 4771 5137 6716 5576 8.37 8.43 8.71 8.48
GUJARAT 6020 10125 8116 4826 8.66 8.90 8.88 8.29
HARYANA 10407 7885 9117 7909 9.20 8.86 9.05 8.79
HIMACHAL PRADESH 1838 3169 7.46 7.96
JHARKHAND 6785 3269 3761 3011 8.82 7.98 8.17 7.85
KARNATAKA 3695 5893 6506 3771 7.88 8.44 8.45 7.92
KERALA 13899 12668 8761 9.49 9.37 9.02
MADHYA PRADESH 4541 5248 5202 3641 8.29 8.37 8.23 7.84
MAHARASHTRA 9087 13410 7649 4638 9.04 9.33 8.75 8.23
ORISSA 7499 7117 3171 4029 8.88 8.72 8.06 8.17
PUNJAB 9492 10039 12778 10981 9.04 9.12 9.36 9.13
RAJASTHAN 14243 7012 6201 4250 8.69 8.41 8.57 8.06
TAMIL NADU 10413 8013 11702 10093 9.10 8.90 9.15 8.78
UTTAR PRADESH 9269 7579 12945 8889 8.96 8.73 9.06 8.66
WEST BENGAL 21610 12851 15297 4517 9.81 9.12 9.42 8.16
Total 9831 7605 9217 5186 8.94 8.70 8.85 8.21

Note: Family labor use is not included in the total cost.
27
Table 6: Annual Cost of Different Inputs by Irrigation Status and State
(Rps./Acre/Year for fertilizer & fungicide, seeds & seedling, and other production costs; Days/Acre/Year for family and hired labors)
Both Public & Private Irrigation Public Irrigation Private Irrigation Rainfed
Fertilizer Other Total Total Other Total Total Fertilizer Other Total Total Other Total Total
& Seeds & producti family hired Fertilizer & Seeds & producti family hired & Seeds & producti family hired Fertilizer & Seeds & producti family hired
fungicide seedling on cost labor labor fungicide seedling on cost labor labor fungicide seedling on cost labor labor fungicide seedling on cost labor labor
AP 1908 157 1011 58 70 1928 104 1290 93 98 1761 251 1618 98 84 1193 126 1241 60 58
BIHAR 1643 3537 7571 128 68 1177 1955 3247 51 106 1476 1819 4140 72 77 1181 894 3259 54 19
CHHATTISGAR 862 519 2388 75 1 1096 705 2544 76 24 1986 614 2554 31 35 1490 816 2153 55 20
GUJARAT 2229 1030 1260 69 11 3262 2653 3358 23 13 3269 2130 1853 24 18 2516 755 899 14 12
HARYANA 3443 1303 4526 27 19 2151 918 3573 40 13 2378 825 4241 36 18 1937 723 3735 67 11
HP 42 336 756 137 0 215 2247 1196 118 26
JHARKHAND 2138 314 3840 11 20 1090 212 1240 56 3 1006 135 1855 36 26 1011 346 967 40 14
KARNATAKA 722 836 819 135 32 1537 443 1397 212 71 1555 698 2231 131 71 929 677 1338 78 34
KERALA 1429 9145 2206 70 70 1668 411 3368 42 50 1562 403 2274 57 40
MP 1120 828 1741 39 18 1699 1124 1794 35 17 1510 1218 1854 29 8 847 769 1605 20 7
MAHARASHTRA 1238 975 4296 86 34 2026 1791 5443 172 85 1106 1058 3087 120 55 769 677 1719 108 36
ORISSA 1835 1919 1901 72 40 1417 1053 2402 77 68 425 100 1427 78 23 797 885 1096 53 43
PUNJAB 4533 702 2901 18 18 4190 979 3421 28 18 4177 1393 5451 27 23 2984 1256 5070 45 13
RAJASTHAN 1455 1049 10811 22 13 1129 749 4246 30 12 1254 657 3144 28 16 780 461 2120 32 11
TAMIL NADU 2721 789 3236 158 87 1933 496 2535 117 69 3447 1675 3902 151 91 2291 765 2892 155 75
UP 1773 2597 3609 41 40 1694 2302 2648 68 40 1674 6729 3378 53 24 1353 3672 3370 65 20
WEST BENGAL 4153 3628 10766 231 61 3085 4182 4479 98 58 3737 3343 4986 52 67 1075 477 1623 58 31
Total 2519 1531 4127 66 36 1792 1427 2917 75 39 2095 2374 3071 54 33 1052 1201 2031 61 23
28
Table 7: Fixed-effect Estimation of Impact of Irrigation on Crop Productivity
Dependent variable: Logarithm of gross/net revenue (Rupees per acre per year)
All households Households with plots of different irrigation status
Gross revenue Gross revenue Net revenue Net revenue Gross revenue Gross revenue Net revenue Net revenue
both public & private irrigation dummy 0.510 0.459 0.526 0.438 0.510 0.456 0.529 0.443
(7.41)*** (6.58)*** (6.68)*** (5.51)*** (7.00)*** (6.14)*** (6.54)*** (5.39)***
private irrigation dummy 0.397 0.368 0.392 0.343 0.390 0.353 0.376 0.330
(13.80)*** (12.48)*** (11.89)*** (10.20)*** (12.67)*** (10.99)*** (11.01)*** (9.28)***
public irrigation dummy 0.389 0.337 0.431 0.351 0.393 0.342 0.441 0.360
(7.87)*** (6.65)*** (7.61)*** (6.06)*** (7.60)*** (6.35)*** (7.68)*** (6.05)***
log of area (acre) -0.083 -0.084 -0.066 -0.061 -0.070 -0.068 -0.044 -0.044
(7.76)*** (7.66)*** (5.41)*** (4.92)*** (4.10)*** (3.84)*** (2.30)** (2.25)**
log of distance from fragment to home -0.006 -0.033 -0.026 -0.026
(meter) (0.48) (2.20)** (1.28) (1.19)
log of land price per acre (Rps) 0.150 0.174 0.172 0.212
(3.71)*** (3.78)*** (3.29)*** (3.67)***
Land quality and Soil type dummies No Yes No Yes No Yes No Yes
Observations 9214 9214 9214 9214 3135 3135 3135 3135
Number of Interview Number 4386 4386 4386 4386 998 998 998 998
R-squared 0.05 0.06 0.83 0.84 0.08 0.10 0.84 0.84
Robust t statistics in parentheses.
* statistically significant at 10% level; ** statistically significant at 5% level; *** statistically significant at 1% level.
Joint test for the coefficients for all the soil and land quality variables being zero rejected at 5% significance level.
29
Table 8: Fixed-Effect Estimation of Impact of irrigation on Rice and Wheat Yields
Dependent variable: Logarithm of yield (Kg per acre per season)
Rice Wheat
both public & private irrigation dummy 0.153 0.154 0.099 0.098
(2.96)*** (2.94)*** (1.41) (1.37)
private irrigation dummy 0.087 0.088 0.037 0.042
(3.07)*** (3.02)*** (1.30) (1.43)
public irrigation dummy 0.011 0.001 -0.010 -0.018
(0.31) (0.04) (0.17) (0.30)
log of area (acre) -0.168 -0.168 -0.177 -0.182
(20.31)*** (20.04)*** (16.54)*** (16.40)***
Land quality and Soil type dummies No Yes No Yes
Observations 4840 4840 3600 3600
R-squared 0.14 0.15 0.14 0.15
Number of households 2282 2282 1941 1941
Absolute value of t statistics in parentheses.
Joint test for the coefficients for all the soil and land quality variables being zero rejected at 5% significance level.
30
Table 9: FE Estimation of land use intensity (number of crop seasons per year per plot) and land price (rupees/acre)
No. of crop seasons Land Price
both public & private irrigation 0.371 0.331 0.216 0.209
dummy (9.28)*** (8.18)*** (16.39)*** (15.82)***
private irrigation dummy 0.250 0.225 0.197 0.189
(14.96)*** (13.16)*** (19.11)*** (18.23)***
public irrigation dummy 0.337 0.300 0.100 0.097
(11.70)*** (10.20)*** (18.24)*** (17.46)***
log of area (acre) 0.019 0.020 0.004 0.004
(3.05)*** (3.18)*** (1.77)* (1.74)*
squared of log of area(acre) -0.001 -0.001
(1.34) (0.94)
Land quality and Soil type dummies No Yes No Yes
Observations 9214 9214 18385 18385
Number of households 4386 4386 4838 4838
R-squared 0.07 0.08 0.04 0.06
The number of observations for the land price analysis is much larger than other for other regressions. In the land price analysis, subdivision (instead of plot) is the unit of analysis. Subdivisions of the
same soil type located next to each other under the same cultivation system (planted with thesame crop) are treated as one plot during the data collection.
31
Table 10: Fixed Effect Estimation of Impact of Irrigation Facilities on Input Use Intensity
Dependent variable: Logarithm of value of input use per acre per year or per acre per season
Annual (Rupees or Number of days per acre per year) Seasonal (Rupees or number of days per acre per crop season)
Fertilizer Seed & All labor Family Hired labor Other inputs Fertilizer & Seed & All labor Family Hired labor Other inputs
& Seedlings use labor use use pesticide Seedlings use labor use use
pesticide
both public & private irrigation 0.924 0.581 0.583 0.579 0.583 0.561 0.276 -0.146 0.165 0.205 0.173 0.100
dummy (8.52)*** (4.04)*** (9.90)*** (9.63)*** (7.81)*** (9.43)*** (2.94)*** (1.03) (4.05)*** (4.66)*** (2.96)*** (2.07)**
private irrigation dummy 0.491 0.647 0.361 0.347 0.316 0.368 0.148 -0.041 0.103 0.157 0.091 0.107
(10.68)** (10.64)*** (14.48)*** (13.66)*** (9.97)*** (14.60)*** (3.58)*** (0.66) (5.73)*** (8.13)*** (3.56)*** (5.09)***
*
public irrigation dummy 0.667 0.244 0.406 0.428 0.262 0.436 0.248 -0.156 0.091 0.085 -0.021 0.031
(8.43)*** (2.33)** (9.47)*** (9.77)*** (4.81)*** (10.07)*** (3.49)*** (1.46) (2.96)*** (2.55)** (0.47) (0.86)
log of area (acre) 0.031 -0.082 -0.460 -0.585 -0.133 -0.115 -0.116 -0.087 -0.321 -0.631 -0.144 -0.221
(1.82)* (3.62)*** (49.91)*** (62.09)*** (11.15)*** (12.31)*** (7.62)*** (3.80)*** (48.74)*** (88.69)*** (15.29)*** (28.39)***
Land quality & soil type dummies Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Observations 9214 9214 9214 9214 9214 9214 16316 16316 16316 16316 16316 16316
Number of Interview Number 4386 4386 4386 4386 4386 4386 4386 4386 4386 4386 4386 4386
R-squared 0.31 0.17 0.37 0.47 0.24 0.08 0.43 0.47 0.41 0.54 0.33 0.27
32
Table 11: Fixed-effect estimation on impact of public irrigation quality on productivity, land use intensity and land price
Log of annual gross revenue Log of annual net revenue Number of crop seasons Long of land price
Dummy for plot always has access to 0.558 0.462 0.672 0.658 0.306 0.318 0.144 0.07
public irrigation (3.24)*** (2.56)** (2.84)*** (2.68)*** (3.21)*** (3.20)*** (5.94)*** (2.61)***
Log of area (acre) -0.032 -0.032 0.129 0.123 0.015 0.016 0.015 0.014
(2.22)** (2.17)** (6.49)*** (6.07)*** (1.38) (1.37) (3.86)*** (3.57)***
Square of log of area (acre) 0.046 0.046 0.066 0.065 -0.006 -0.006 0.002 0.002
(8.86)*** (8.84)*** (9.36)*** (9.19)*** (1.32) (1.38) (1.82)* (1.58)
Land quality and soil dummies included No Yes No Yes No Yes No Yes
Observations 2180 2180 2198 2198 2670 2670 5621 5621
R-squared 910 910 915 915 1239 1239 1385 1385
Number of Interview Number 0.14 0.14 0.86 0.86 0.01 0.03 0.01 0.02
33
Table 12: Fixed-effect estimation on impact of public irrigation quality on input use intensity
Fertilizer & Seed & All labor Family Hired labor Other inputs Fertilizer & Seed & All labor Family Hired labor Other inputs
pesticide Seedlings use labor use use pesticide Seedlings use labor use use
Dummy for plot always has access 0.036 -0.028 0.267 0.188 -0.182 -0.038 0.022 -0.062 0.233 0.128 -0.174 -0.053
to public irrigation (0.22) (0.25) (1.89)* (1.15) (0.87) (0.24) (0.13) (0.53) (1.58) (0.75) (0.80) (0.32)
Log of area (acre) -0.09 -0.058 -0.289 -0.532 -0.16 -0.223 -0.092 -0.062 -0.284 -0.538 -0.157 -0.221
(6.53)*** (6.22)*** (24.29)*** (38.76)*** (9.06)*** (16.84)*** (6.49)*** (6.47)*** (23.37)*** (38.44)*** (8.75)*** (16.28)***
Squared log of area (acre) 0.023 0.008 0.003 0.056 0.041 -0.02 0.024 0.007 0.004 0.055 0.043 -0.02
(4.75)*** (2.47)** (0.73) (11.48)*** (6.65)*** (4.35)*** (4.77)*** (2.19)** (0.90) (11.26)*** (6.86)*** (4.16)***
Land quality and soil type dummies No No No No No No Yes Yes Yes Yes Yes Yes
Observations 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198
No. of interviewers 915 915 915 915 915 915 915 915 915 915 915 915
R-squared 0.25 0.85 0.48 0.75 0.46 0.23 0.26 0.85 0.48 0.75 0.47 0.23
34
Table 13: FE Estimation of Impact of Irrigation on Cropping Seasons and Land Price across States
Number of Cropping Seasons per annum Land Price per acre (in logarithm)
(1) (2) (3) (4) (5)
Both public & private irrigation dummy 0.339 0.33 0.189 0.177
(7.52)*** (7.26)*** (12.64)*** (11.79)***
Public irrigation*Karnataka 0.12 0.103 0.325 0.31
(1.45) (1.23) (10.24)*** (9.79)***
Public irrigation*Maharashtra 0.858 0.85 0.378 0.355
(8.42)*** (8.31)*** (8.23)*** (7.76)***
Public irrigation*Madhya Pradesh 0.406 0.417 0.274 0.269
(5.31)*** (5.43)*** (9.95)*** (9.76)***
Public irrigation*Rajasthan 0.354 0.358 0.139 0.143
(4.28)*** (4.34)*** (4.26)*** (4.39)***
Public irrigation*Haryana 0.362 0.338 0.199 0.174
(5.65)*** (5.18)*** (11.27)*** (9.77)***
Public irrigation*Punjab 0.261 0.256 0.103 0.095
(3.07)*** (3.00)*** (4.26)*** (3.91)***
Public irrigation*Uttar Pradesh 0.203 0.197 0.091 0.088
(3.23)*** (3.13)*** (3.92)*** (3.80)***
Public irrigation*Bihar 0.067 0.066 0.106 0.103
(0.35) (0.34) (1.20) (1.18)
Public irrigation*West Bengal 0.261 0.257 0.197 0.188
(2.40)** (2.36)** (5.40)*** (5.20)***
Public irrigation*Jharkhand 0.538 0.538 0.227 0.22
(3.25)*** (3.24)*** (2.95)*** (2.87)***
Public irrigation*Chattisgarh 0.055 0.043 0.155 0.156
(0.50) (0.39) (3.55)*** (3.59)***
Public irrigation*Orissa 0.439 0.434 0.229 0.245
(5.67)*** (5.59)*** (8.70)*** (9.31)***
Public irrigation*Andhra Pradesh 0.505 0.504 0.299 0.301
(3.48)*** (3.48)*** (5.43)*** (5.50)***
Public irrigation*Tamil Nadu 0.342 0.343 0.07 0.078
(2.41)** (2.41)** (1.44) (1.62)
Private irrigation*Karnataka 0.352 0.339 0.393 0.384
(4.58)*** (4.41)*** (12.42)*** (12.20)***
Private irrigation*Maharashtra 0.74 0.732 0.255 0.218
(11.29)*** (11.03)*** (9.26)*** (7.88)***
Private irrigation*Guharat 0.74 0.724 0.744 0.808
(7.20)*** (6.75)*** (16.23)*** (17.32)***
Private irrigation*Madhya Pradesh 0.342 0.333 0.171 0.168
(7.74)*** (7.51)*** (11.27)*** (11.10)***
Private irrigation*Rajasthan 0.201 0.197 0.038 0.036
(5.82)*** (5.71)*** (3.51)*** (3.36)***
Private irrigation*Haryana -0.024 -0.035 0.042 0.038
(0.49) (0.73) (3.56)*** (3.28)***
Private irrigation*Punjab 0.107 0.105 0.063 0.059
(1.42) (1.39) (3.32)*** (3.12)***
Private irrigation*Uttar Pradesh 0.086 0.083 0.007 0.005
(2.33)** (2.25)** (0.48) (0.31)
Private irrigation*Bihar -0.136 -0.136 0.076 0.086
(1.21) (1.21) (2.67)*** (3.00)***
Private irrigation*West Bengal 0.453 0.445 0.173 0.163
(4.60)*** (4.52)*** (5.32)*** (5.05)***
Private irrigation*Jharkhand 0.307 0.3 -0.003 -0.025
(1.85)* (1.81)* (0.04) (0.33)
Private irrigation*Chattisgarh 0.191 0.194 0.108 0.099
(2.16)** (2.18)** (3.90)*** (3.57)***
Private irrigation*Orissa 0.791 0.796
n.a. n.a. (4.47)*** (4.52)***
Private irrigation*Andhra Pradesh 0.566 0.563 0.257 0.258
(8.60)*** (8.51)*** (9.62)*** (9.71)***
Private irrigation*Tamil Nadu 0.45 0.441 0.119 0.117
(2.68)*** (2.63)*** (2.18)** (2.16)**
Other control variables included Yes Yes Yes Yes
Soil type and soil quality No Yes No Yes
Observations 9214 9214 18385 18385
Number of Interview Number 4386 4386 4838 4838
R-squared 0.11 0.12 0.08 0.1
Kerala and HP are excluded from the regression due to two few observation for the former and no variation in irrigation type (99.5% of plots are rainfed) for the
latter. Orissa has too few observations for plots with private irrigation, and therefore the coefficient for the private irrigation variable cannot be estimated.
The number of observations for the land price analysis and cropping intensity analysis is different. For the land price analysis, subdivision rather than plot is the unit
of analysis. Subdivisions with thesame soil type and located next to each other under the same cultivation system (i.e. planted with thesame crop) are treated as one
plot during the data collection.
35
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The impact of Irrigation on Agricultural Productivity: Evidence from India

Article · January 2012

Songqing Jin Winston H. Yu

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1) Department of Agricultural, Food, and Resource Economics, Michigan State University,

Review of past studies regarding the economic impact of irrigation

the more recent ones.

mechanization or increased use of agrochemicals caused by irrigation system improvement. In their

stimulated growth without deepening inequality.2

tubewell, followed by those with only canal irrigation.

functions for wheat.3

irrigation on poverty reduction/income/consumption/inequality is the use of cross-sectional data (Hussain

variables (e.g., income/consumption/poverty/inequality). For example, households with access to

variables approach; however, their sample size was very small.

of household analyses but with improved control of theseeconometrics problems.

Methods to analyze the NCAER data

before, for all the households in the community was collected.

on the availability and reliability of water supply.

Plot level productivity analysis

(2006). Specifically, we estimated the following model:

diseases and insect infestation) etc.

equivalent to estimating the following equation:

ln Qijk  ln Qij   1m ( Dijk

dropped out. Our main interest is the estimated parameter vector,  1m .

of sample plots in Tamil Nadu have access to both types of irrigation.

Irrigation and Land Productivity

measured by annual net revenue per acre of land.

states of Gujarat, Kerala and Orissa.

measured by annual net gross revenue instead of annual gross revenue.

land use intensity (i.e. number of cropping seasons).

Irrigation and land use intensity

Irrigation and input use

production is measured on a per season basis rather than per year.

differences in other factors such as observed plot or soil characteristics, or

unobserved household characteristics such as farming ability etc. Regression analysis is

and to further quantify the magnitude of those impacts.

plots with less frequent water availability.

Irrigation and Productivity

Revenue per acre per annum

households (after land prices have been accounted for).

Rice and wheat yields

rice using crop yield as the measure of productivity.

when plot and soil characteristics are added to the regressions.

Irrigation and plot use intensity

results of the entire sample.

Land price regression

in the section III.2.

private irrigation only increases land prices by about 10%.

Irrigation and input use intensity

annual data or seasonal data is used.

the type of input and type of irrigation).

input use intensity.

Impact of Irrigation across States

the magnitudes of the impacts vary from state to state.

irrigation investment funds and is a topic for future research.