Water markets in India: Extent and impact

Abstract

Local level water scarcity does motivate farmers not only to improve on-farm water use efficiency but also to evolve new and informal institutional arrangements for inter-farm water sharing. An eminent case here is the spontaneous emergence and growth of water markets (WMs) in many parts of India. Even though Indian WMs are localized, fragmented, and uneven across regions, they are growing in magnitude and gaining in significance. This chapter evaluates the major economic and institutional aspects of Indian WMs based on a critical review and synthesis of available empirical evidence on the subject. Specifically, this chapter attempts to (a) provide an idea about the magnitude and value of water trade, especially at the national level, (b) outline the technical and institutional environment within which Indian WMs are operating, (c) describe their major economic and institutional features, (d) evaluate their efficiency, equity, and sustainability implications, and, (e) suggest the legal and institutional changes needed to make WMs an efficient option for water management in India.