Mixed correlations between groundwater extraction in India and accumulation of physical and human capital

Abstract The idea of weak sustainability posits that the exploitation of a natural resource, even if it depletes it, could be accompanied by investments in man-made forms of capital that may help maintain human wellbeing in the long run. Here, we conduct an initial test of the empirical evidence that such investments were made in the context of groundwater extraction in India. Irrigation with groundwater has played a crucial role in India’s rural development, but also made it the world’s largest consumer of groundwater with fast depleting aquifers. We test whether in locations that have extracted greater amounts of water between 1966–2009, there are indications of greater accumulation of household level physical (assets) and human (education and health) capital, presumably through the investment of income generated from irrigation. We document positive correlations between groundwater utilization and the accumulation of physical assets. The results are more mixed for correlations with health and learning outcomes, which are likely the most important for the diversification of income away from farming once irrigation is no longer viable.