Moody’s says India’s worsening water shortage may impact its sovereign credit strength

NEW DELHI: Moody’s Ratings on Tuesday said that India’s worsening water shortage, triggered by high consumption amid rapid economic growth and frequent natural disasters, can negatively impact its sovereign credit strength.
“This is detrimental to the credit health of the sovereign, as well as sectors that heavily consume water, such as coal power generators and steel-makers,” Moody’s Ratings said in a note.
“In the long term, investment in water management can mitigate risks from potential water shortages,” it added.
It is to be highlighted that millions of Indians face water shortages every summer when water demand rises in farms, offices and homes against a limited supply.
A prolonged heat wave this year has worsened the shortfall, including in Delhi and the southern tech hub of Bengaluru.
According to the Ministry of Water Resources, India’s average annual water availability per capita is likely to drop to 1,367 cubic meters by 2031 from an already-low 1,486 cubic meters in 2021.
A level below 1,700 cubic meters indicates water stress, with 1,000 cubic meters being the threshold for water scarcity.
Moody’s further said that the decrease in water supply can disrupt agricultural production and industrial operations, resulting in inflation in food prices and decline in income for affected businesses and communities, while sparking social unrest.
This, in turn, can exacerbate volatility in India’s growth, it warned.
Increases in the frequency of water shortage, severity or durations of extreme climate events stemming from climate change will exacerbate the situation because India heavily relies on monsoon rainfall for water supply, the global agency said.
Industrialisation and urbanisation will intensify competition for water among businesses and residents, it added.
It is to be highlighted that India has 18 per cent of the world’s population but only 4 per cent of its water resources, making it among the most water-stressed countries.
The average per capita water availability for 2031 has been assessed to be 1367 cubic metres.

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