Drought events, which are projected to become more common with climate change, have critical impacts on agricultural production, particularly in low- and middle-income countries in the Indian subcontinent and Sub-Saharan Africa. Yet there is little consensus on how droughts should be measured and defined. In the economics literature, drought research and policy tend to either define droughts based purely on rainfall or focus on certain categories of drought event. As a result of using these methods, an unknown number of drought events are being overlooked and their impacts unaccounted for.

The authors of this paper have developed a flexible, rainfall-temperature drought index that captures all dry events, including a previously overlooked class of drought they term ‘cold’ droughts – those characterised by below-average temperature as well as below-average rainfall. Cold droughts are found to have consistent, negative impacts that are comparable with those of hot droughts. Omitting cold droughts from the analysis of drought impacts leads to a large underestimation of impact in terms of yield and economic cost.

This research suggests that by using a more flexible measure of droughts policy-makers could more effectively shape policy responses relating to climate adaptation and more accurately identify agricultural locations more vulnerable to climate change.

Key points for decision-makers

  • This research proposes a new index for measuring the severity of droughts.
  • Droughts have critical impacts on India including lowered annual GDP, increased poverty and declining household incomes.
  • There is presently little consensus on how to measure and define ‘drought’. Some indices simply measure rainfall while others are more complex, accounting for rainfall, temperature and potential evapotranspiration. In the economics literature, simpler indices are typically preferred.
  • How drought is defined plays a central role in policy responses in the agricultural and water sectors and in early-warning systems. Omitting certain classes of drought has implications for their efficacy, in India and elsewhere.
  • Recent research shows that droughts have been increasing in severity due to higher temperatures rather than reduced rainfall. Thus, not considering the effect of temperature could underestimate drought impacts, including future agricultural production losses likely to result from climate change.
  • The authors have developed a simple rainfall-temperature index. Its novelty is to include both droughts characterised by above-average temperatures (‘hot’ droughts), as well as ones characterised by below-average temperatures (‘cold’ droughts) – which have not been explicitly studied before. The index is an extension to one originally developed by Yu and Babcock (2010).
  • The index was applied to a panel dataset of Indian districts over the period 1966–2009. The results suggest a statistically significant relationship between the index and cereal yields.
  • The authors find that omitting cold droughts from the analysis of drought impacts leads to a large underestimation of impact. Yield losses arising from hot droughts are underestimated by up to 33 per cent; when including both hot and cold droughts, total economic losses are underestimated by up to 107 per cent.
  • Policymakers should therefore seek not to impose a priori arbitrary classifications of drought that exclude events with potentially destructive impacts on agriculture. In addition, understanding the differential role of different types of drought (e.g. hot and cold droughts) can help policymakers account for how temperature determines crop losses as well as tailor their responses to specific drought events. This is likely to become increasingly important as hotter temperatures increase the frequency of hot droughts with climate change.

ISSN 2515-5717 (Online) – Grantham Research Institute Working Paper series

ISSN 2515-5709 (Online) – CCCEP Working Paper series

Keep in touch with the Grantham Research Institute at LSE
Sign up to our newsletters and get the latest analysis, research, commentary and details of upcoming events.