The Economics of Non-Renewable Natural Resource Depletion Externalities: Lessons from Groundwater Overdraft in North-Western Bangladesh

In Bangladesh, agriculture has been the most significant sector of the economy, contributing about 11.02 percent of the country's total GDP in the FY2023-24 (BBS, 2024). It offers direct and indirect em-ployment to nearly 45 percent of the total population against the global average employment rate of 26.86 percent employment in ag-riculture, with more than 70 percent of its land dedicated to growing crops. The Barind tract, a special topographic upland in the North-Western part of Bangladesh, is a noteworthy agrarian region contrib-uting the lion's share to this sectoral GDP of Bangladesh. Owing to the significant dependency upon groundwater-based irrigation, the whole region is now going through a critical phase of agricultural dis-economies and livelihood insecurity. This research attempts to estimate the costs of groundwater depletion and the resulting negative externalities in three topographically different areas within the Barind region. Alongside, a household income function will be established which can be replicated in similar contexts to understand and monitor resource vulnerability. Intensive agricultural drive has been obtained from the study areas, with almost 60-85 percent of their total land area being used for farming. The essentially closer proximity between ir-rigation wells (0.13-0.16km) has significantly hampered adjacent aq-uifers and equitability of groundwater access. While investigating probable shifts in irrigation infrastructure in the past 05 years, it was found that Porsha, located within the elevated lands, had to deepen almost 03 times (-21.32 ft) more than Godagari, a comparatively low Barind region. The direct cost of resource degradation, depicting eco-nomic externalities, ranges from BDT 52 to 250 per acre, varying due to the linear correlation with water resource depletion. The gradual economic burden has resulted into 3-8 percent decline in area under irrigation within the study region, mostly depriving the marginal farmers. The indirect costs highlighted a contrasting scenario, exhib-iting inverse relationship with the groundwater level which pointed out a key outcome of the study; shifting towards low-intensive crops being an economically and environmentally ideal solution of dealing with groundwater vulnerability. Calculating household income func-tion by Ordinary Least Squares Regression method depicted similar assumptions, negative externalities caused by over-irrigation, dimin-ishing social profit that suggests regulation for sustainable resource utilization.