A Moody's report evaluating environmental risks in India's economy has said that growing water shortages can disrupt the country's farm and industry sectors. It is also detrimental to the credit health of the sovereign as rising food inflation and a decline in income may spark social unrest.
The report emphasised that decreases in water supply can disrupt agricultural production and industrial operations, resulting in high levels of food inflation, which can spook the credit health of water-reliant sectors, such as coal power generators and steel-makers.
India's fast economic growth, accompanied by rapid industrialisation and urbanisation, will reduce water availability in the world's most populous country, it said.
Furthermore, the report highlights that water stress is not a standalone issue, but a symptom of a larger problem--an acceleration of climate change. This is causing increasingly intense and frequent extreme climate events such as droughts, heat waves and floods, further exacerbating the water stress. The situation is dire and demands immediate attention.
Increasing consumption, rapid economic growth, and increasingly frequent natural disasters attributable to climate change are relentlessly pushing India to the brink of a water crisis, according to a report by Moody's on environmental risks.
The report comes amid a growing water crisis faced by residents in some parts of the national capital, which has led to protests and political conflict. Delhi Water Minister Atishi, who began her hunger strike on June 21 over the issue, was hospitalised on Tuesday morning after her health deteriorated.
According to Ministry of Water Resources data, Moody said 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, according to the ministry.
Moody's said a heat wave in June 2024, with temperatures hitting 50 degrees Celsius in Dehli and the northern Indian States, strained water supply. Floods, one of the most common types of natural disasters in India, disrupt water infrastructure, which is insufficient to retain water from sudden large downpours.
According to an SBI estimate, floods in northern India and Cyclone Biparjoy in Gujarat in 2023 caused economic losses of USD 1.2-1.8 billion and damage to infrastructure. The Moody's report suggests that such events are just a sign of things to come.