India (Commonwealth Union)_ Water shortage in India has emerged as a critical issue with far-reaching implications for the nation’s development trajectory. As one of the most populous countries and a rapidly industrializing economy, India faces significant challenges in managing its water resources effectively. This looming crisis threatens not only the agricultural sector, the backbone of the economy, but also industrial production and overall socio-economic stability. Addressing this issue is crucial for sustaining India’s growth momentum and ensuring a secure future for its people.
Also read: UK is India’s most preferred investment hub
According to Moody’s Ratings, India’s water scarcity poses significant risks to its economic growth and the financial stability of key sectors. Accordingly, Moody’s cautioned on June 25 that India’s dwindling water resources could adversely impact the creditworthiness of critical entities such as coal-fired power producers and steel manufacturers, which heavily rely on water. The rating agency underscored that the escalating water crisis could amplify economic volatility and weaken India’s resilience against unforeseen shocks.
Also read: India will be a reliable friend to Sri Lanka – Indian FM
In a recent report, Moody’s highlighted that India’s rapid economic expansion, driven by industrialization and urbanization, is increasingly straining water availability in the world’s most populous nation. The report noted, “India’s fast economic growth, accompanied by rapid industrialization and urbanisation, is reducing water availability in the world’s most populous country”. Moreover, Moody’s emphasized that a diminishing water supply threatens agricultural output, potentially leading to higher food inflation and reduced incomes for affected businesses. Moody’s also noted that India ranks lowest among G-20 nations in terms of access to essential services, including water, a crucial metric in assessing the credit implications of Environmental, Social, and Governance (ESG) factors.
Currently, Moody’s holds a sovereign rating of Baa3 for India with a stable outlook, projecting it to maintain its position as the fastest-growing major economy with a projected growth rate of 6.5 percent in 2024. According to experts, despite overall inflation dropping below 5 percent, India continues to grapple with persistent food inflation, which remained stubbornly high at 8.7 percent in May and is expected to remain elevated in the near term. Looking forward, Moody’s suggested that long-term risks could be mitigated through investments in water infrastructure and renewable energy. The agency also highlighted India’s expanding market for sustainable finance as a potential avenue for funding critical water-related projects.
Recent examples include the Vadodara Municipal Corporation’s contribution of $12 million in green bonds to improve liquid wastewater management infrastructure in February 2024, and Ghaziabad’s raising of $18 million in 2021 for water treatment facilities. Additionally, in a budgetary allocation, the Indian government earmarked $2.52 billion for the Ganga Rejuvenation Project, underscoring its commitment to addressing water-related challenges. Furthermore, Moody’s projected that India’s per capita annual water availability could decline to 1,367 cubic meters by 2031, down from 1,486 cubic meters in 2021, a level already considered critically low by global standards, as per the Ministry of Water Resources.
The agency pointed out that India’s water stress threshold is set at 1,700 cubic meters per capita, with levels dropping below 1,000 cubic meters indicating acute water scarcity. Going forward, the industrial sector’s demand for water is projected to double from 2.1 percent in 2025 to 4.4 percent by 2050, while the energy sector’s demand for water might rise six-fold to reach 9 percent during the same period, leading to an extreme water shortage across the country.
Addressing India’s water shortage is not just a matter of environmental concern but a critical imperative for economic and social stability. Sustainable water management practices, coupled with innovative solutions and concerted efforts from all stakeholders, are essential to mitigate the impact of water scarcity on India’s growth prospects. By prioritizing water conservation, efficient usage, and infrastructure development, India can safeguard its future development while ensuring equitable access to this vital resource for all its citizens.
