# **6 Impact on farm revenues**

By facilitating recharge that raised groundwater levels MNREGA appears to have led to an increase in the cropped area that farmers irrigated. A number of recent papers have shown that increases in access to groundwater can increase the productivity of Indian farmers (Bhattarai et al., 2021), increase farm profits (Ryan and Sudarshan, 2020), and reduce rural poverty (Sekhri, 2014). Those results pose a natural follow-on question to our main effects: how much did the improved access to groundwater due to MNREGA benefit farmers?

Answering this question is not straightforward. Because MNREGA had a variety of impacts on rural economies that plausibly effected farmer income and profits through channels other than changes in groundwater levels we cannot simply apply the identification strategy we use in our main approach to estimate the impact on farm income or profits.<sup>22</sup> Instead, we derive a predicted change in farmer incomes based on our estimated changes in groundwater levels and the changes in farmer production due to changes in groundwater levels that have been empirically measured in other work. Specifically, we rely on the estimated impact of a 1m change in depth to groundwater on farm productivity for rabi season plantings in Bhattarai et al. (2021).<sup>23</sup> We start with our estimates of the change in the depth to groundwater at the start of the rabi season after the implementation of MNREGA. We find that, on average, depth to groundwater declines by 1.23 meters after the implementation of MNREGA in Star states relative to the average depth to groundwater in the three years prior to the implementation of MNREGA in those states. Using the estimated change in production of rabi rice and rabi wheat from Bhattarai et al. (2021) per 1 meter change in depth to groundwater, combined with the average production of these crops in Star states in the three years prior to MNREGA implementation, we estimate that higher ground water facilitated an increased production of rabi rice by 6,793 tons and rabi wheat by 3,882 tons in Star states after the implementation of MNREGA.<sup>24</sup> Using market prices of rice and wheat assembled by the Centre for Economic Data & Analysis at Ashoka University we can convert these changes in production into changes in gross income for farmers.<sup>25</sup> We find that the increase in production of rabi rice generates an additional 75 million |

> 22We’re not interested in the overall impact of MNREGA on these outcomes here but rather the portion of these total effects that can be attributed to the change in groundwater levels we document. This same challenge applies in the context of our main estimation but in that estimation we rely on the assumption that the only way MNREGA would have led to higher groundwater levels is via changes in infrastructure facilitating recharge. As we discuss in 5.4 there are other channels through which MNREGA might have impacted groundwater levels but they do not appear to explain the full set of our results.

23 For the full details of these calculations see Appendix A3 . In our analysis of the impact of higher groundwater levels on production we do not consider the change in fruits and vegetables because Bhattarai et al. (2021) do not provide estimates of the productivity impacts of groundwater on these crops.

> 24These changes are relative to a counterfactual of higher groundwater levels but no other changes induced by MNREGA. The assumption of no other changes in agricultural markets due to MNREGA are clearly not satisfied and so our predicted changes in production should not be interpreted as predictions of the actual change in production after the implementation of MNREGA. Rather, they are estimates of one component of the change in farmer incomes and profits due to MNREGA. In practice the other impacts of MNREGA on farmer income and profits could have added to or subtracted from these estimated changes.

25 We use the average of rice and wheat across all of India, taken over the years from 2009 to 2013, following MNREGA implementation. Data available here: `https://agmarknet.ceda.ashoka.edu.in/` 14