Water crisis could damage India’s sovereign credit strength: Moody’s

Water shortage could disrupt agriculture and industry, and lead to inflation in food prices while sparking social unrest, says Moody’s Ratings

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Delhi and Bengaluru have been among the worst affected regions of India this year, with a long-lasting heatwave making matters worse

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Water crisis in India is increasing as an outcome of a high rate of consumption amidst frenetic economic development and frequent natural disasters, and this in turn could have an adverse effect on the country’s sovereign credit strength, a report by Moody’s Ratings said on Tuesday.

The report brings back to focus the estimate by the Ministry of Water Resources that the per capita average annual availability of water in the country could go down to 1,367 cubic metres by 2031. The availability, at 1,486 cubic metres, was already deemed low in 2021. Any water level under 1,700 cubic metres is considered as water stress, with 1,000 cubic metres being regarded as the water scarcity threshold.

This year, the Capital city of Delhi and the tech hotspot Bengaluru have been among the worst affected regions of the country, with a long-lasting heatwave only making matters worse across towns and villages, homes and workplaces alike.

The situation in India “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 its report, and added: “In the long term, investment in water management can mitigate risks from potential water shortages.”

“Decreases in water supply can disrupt agricultural production and industrial operations, resulting in inflation in food prices and declines in income for affected businesses and communities, while sparking social unrest,” Moody’s warned, adding that the situation could disturb India’s growth process.

Climate change is a factor that could increase occurrences of water shortage as well as the duration of harsh weather. It could impact the monsoon, too, on which India primarily depends on for water supply, Moody’s noted, adding rapid urbanisation and growth of industry could lead to a race to hoard water among individuals and businesses alike.

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