Elsevier

Agricultural Systems

Volume 173, July 2019, Pages 345-354
Agricultural Systems

Crop diversification and resilience of agriculture to climatic shocks: Evidence from India

https://doi.org/10.1016/j.agsy.2019.03.005Get rights and content

Highlights

  • There exists a dynamic relationship between climatic shocks, diversification and system productivity.

  • Climatic shocks adversely affect system productivity, and the effect intensifies with their rising severity.

  • Diversification enhances resilience of production system to climatic shocks.

  • Resilience benefits of diversification are more apparent in the long-run.

Abstract

Indian agriculture is highly vulnerable to climate shocks, such as floods, droughts and heat-stress. In this paper, using a dynamic panel-data approach we have assessed the impact of rainfall-deficit and heat-stress on agricultural productivity, and subsequently evaluated effectiveness of crop diversification in mitigating their adverse effects. The findings show that both rainfall-deficit and heat-stress damage agricultural productivity, and the damage increases with increase in their severity. Nevertheless, we find crop diversification as an important ex ante adaptation measure to climatic shocks and its adaptation benefits are more apparent against severe shocks and in the long-run. Our findings reinforce the dynamic role of crop diversification in improving resilience of agricultural production systems to climatic shocks.

Introduction

Globally, climate change has become a big threat to sustainable development of agriculture and agriculture-based livelihoods. The threat is more conspicuous in the case of extreme changes in climate, manifested as droughts, floods, heat-waves and cyclones. Frequent occurrence of such extreme events adversely affects agricultural productivity and food supplies, causes loss to productive assets (e.g., livestock), exacerbates rural poverty, forces out-migration, reduces demand for industrial goods and services, and triggers over-exploitation of natural resources i.e., water, land and forests.

The frequency of extreme climatic events has increased in the recent past, and is predicted to rise in the plausible future scenario (World Bank, 2013). The developing countries, as India, are more vulnerable to climatic shocks because of their greater dependence on agriculture, small landholdings and lack of financial resources, technologies, infrastructure and institutions to cope with such shocks. Carter et al. (2014) observe that in developing countries, farmers' frequent exposure to climatic shocks is one of the major causes of low agricultural productivity, slow economic growth and persistent poverty. Bhandari et al. (2007) provide an evidence from India that in case of a severe drought the household incomes fall by 25–60% and incidence of poverty rises by 12–33%. Likewise, from a study in Nigeria, rainfall shocks have been reported to reduce agricultural productivity by 42% and household consumption by 38%, and the impact being larger on the asset-poor households (Amare et al., 2018). Bhandari et al. (2007) and Amare et al. (2018) have further noticed that despite the use of several risk-coping mechanisms, farm households were unable to recover the loss of assets ex post the shock.

It is, however, increasingly recognized that the adverse effects of climate change on agriculture can be minimized following an integrated approach encompassing advancements in the science of agriculture, meteorology and information communication, and traditional adaptation practices that farmers use ex ante and ex post the shock. Farmers, depending on their degree of risk-aversion, access to information on weather and availability of resources for their adoption, undertake a number of adaptation measures to cope with production risks. Risk-averse farmers, who anticipate occurrence of a shock, often rely on ex ante risk management strategies, such as building of savings, diversification towards non-farm activities and choosing a less risky crop portfolio, to achieve a stable stream of income.

There are two important channels through which climatic shocks impact agriculture. One, climatic shocks influence farmers' decisions to adopt productivity-enhancing inputs and impose ex ante barriers to their use, that in turn affect agricultural productivity (Dercon and Christiaensen, 2011; Di Falco and Chavas, 2009; Amare et al., 2018). Two, they reinforce changes in production portfolio towards crops or their varieties that are less-vulnerable to climatic shocks, but at the same time these crops may also be less remunerative compared to others. Crops differ in their response to climatic shocks, and the risk-averse farmers prefer choosing a combination of crops with low-correlated returns to spread risks across crops. If a crop does not perform well under risk, the loss, to an extent, can be compensated by the gains in another crop that withstands the risk better. The literature shows that in developing countries, where formal markets for risk products are under-developed, crop diversification is one of the widely used ex ante adaptation measures to cope with climatic shocks (Jodha, 1981; Bromley and Chavas, 1989; Rosenzweig and Binswanger, 1993; Dercon, 1996; Valdivia et al., 1996; Di Falco and Chavas, 2009; Seo and Mendelsohn, 2008; Seo, 2010; Macours et al., 2012).

Indian agriculture being rain-dependent is highly exposed to climatic shocks (Easterling et al., 2007). About 45% of the total cropped area in the country is rainfed, and the evidence shows that rainfed production systems are more vulnerable to rainfall and temperature shocks (Birthal et al., 2014). Note, the frequency of climatic shocks in India has increased in the recent past and is predicted to rise in the future (World Bank, 2013), that will accentuate their adverse effects on agriculture and agriculture-based livelihoods in the absence of adaptations. A majority of Indian farmers are small landholders,1 who are often risk-averse and lack resources to invest in costlier adaptations to cope with risk ex ante. For most farmers, crop diversification is one of the low-cost, effective adaptations to avoid productivity loss due to climatic shocks.

Using a panel of district-level data, this paper evaluates effectiveness of crop diversification in mitigating harmful effects of climatic shocks on the performance of agriculture in a dynamic setting. In doing so it makes an important contribution to the empirical literature in understanding the dynamics of agricultural production systems. Although there are several studies that examine the effect of crop diversification on agriculture in the presence of climatic shocks, but most of these apply static modelling approaches, ignoring the dynamic relationships that exist in the production systems. Farmers' current year decisions on the choice of crop portfolio and input-use are influenced not only by the anticipated weather conditions but also by their past experiences. We model this dynamic aspect of production systems by estimating a dynamic generalized method of moments (GMM) with lags of dependent and independent variables as instruments. This approach also addresses the issue of potential endogeniety of the explanatory variables.

Our results show that (i) there is a dynamic relationship among climate shocks, crop diversification and agricultural productivity, and (ii) diversification enhances resilience of agricultural production systems to climatic shocks, and its adaptation benefits are more apparent in the long-run. It may be noted that our findings reflect aggregate response of farmers to climatic shocks at district-level, although the farmer-specific responses vary within and across districts due to heterogeneity in their socio-economic conditions, and access to technologies, inputs and information that shape their attitude towards risk and risk management strategies.

Rest of the paper is organized as follows. Section 2 describes the method that we have employed to assess adaptation benefits of crop diversification in the presence of climatic shocks. In Section 3, we provide a brief discussion on data sources, and preliminary analysis of the relationship among climatic shocks, agricultural productivity and crop diversification. Econometric results are discussed in Section 4, and concluding remarks are made in the final section.

Section snippets

Empirical method

Several methods are used to quantify the impact of climatic shocks on crop yields or productivity of agricultural system. In the simplest form, the impact of a climatic shock can be assessed by regressing crop yield or agricultural productivity on climate variables (Cabas et al., 2010; Kaufmann and Snell, 1997; Mendelsohn and Dinar, 1999; Lobell and Asner, 2003). ‘Value at risk’ is the other approach that is widely used to estimate climate-induced loss in agriculture as the product of (i) the

Data sources

We have used data from two main sources. The data on area, crop output, and inputs used (fertilizers, irrigation, agricultural workers, draught animals and tractors) for the period 1966 to 2011 on 311 districts at their 1970 boundaries have been extracted from the data-base maintained by the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), Patancheru, India (http://vdsa.icrisat.ac.in/vdsa-database.htm). This data-set is used to estimate diversity and productivity of

Results and discussion

We estimate Eq. (3) applying system GMM estimator (Arellano and Bover, 1995; Blundell and Bond, 1998; Roodman, 2009). In our production function, we consider conventional inputs (labour, fertilizers, tractors, draught animals and irrigation) as pre-determined, (E[xitϵis] ≠ 0 for s < t but E[xitϵis] = 0 for all s > t); lags of dependent variable, and diversification as endogenous, (E[xitϵis] ≠ 0 for all s ≤ t but E[xitϵis] = 0 for all s > t); and climatic shocks as strictly exogenous, (E[xitϵis

Concluding remarks

Increasing frequency of extreme climatic events is threatening the sustainable development of agriculture and agriculture-based livelihoods, especially in developing countries, like India, because of their greater dependence on agriculture, small landholdings, and lack of financial resources, technologies, infrastructure and institutions to cope with such shocks, ex ante or ex post. In this paper, we have assessed effectiveness of crop diversification in mitigating harmful effects of climatic

Acknowledgments

This work has been funded by the Indian Council of Agricultural Research under the National Professorial Chair to the first author.

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