Water Markets in India: Economic and Institutional Aspects

Abstracts

Water scarcity is an acute problem for a monsoon-dependent country such as India, since a large part of its farm output, income, and employment emanates from a relatively small irrigated area. How farmers cope with such wa ter scarcity at the micro-level is as important, if not more, as how policy-makers deal with it at the macro-level. Local-level water scarcity does motivate farmers not only to improve on-farm water-use efficiency but also to develop new approaches for inter-farm water sharing. An eminent case is the spontaneous emergence and growth of water markets in many parts of India. Although buying and selling of water are nothing new in India,¹ the recent water markets are significant in that they occur in an entirely different economic, institutional, and technological environment. While modern water trading practices in India have been traced to the 1920s, a systematic documentation of them began only in the late 1960s (e.g., Patel and Patel, 1969; Shah, 1985 and Shah, 1993; Shah and Raju, 1988; Copestake, 1986; Kolavalli, et al, 1989 and Kolavalli, et al, 1990; Saleth, 1991 and Saleth, 1994; Shankar, 1992; and Janakarajan, 1994.