People fill up with water from a Delhi Jal Board tanker amid the ongoing water crisis in Delhi’s Baljeet Nagar on June 22, 2024.
Hindustan Times | Hindustan Times | Getty Images
Moody’s Ratings has warned that India’s severe water shortages could undermine the country’s creditworthiness and that a water crisis could lead to social unrest if the agricultural and industrial sectors are disrupted.
Rapid industrialization, urbanization and rapid economic growth are combining to cause severe water scarcity.
Extreme weather events such as heat waves and droughts are worsening the situation, putting the world’s most populous country at risk, Moody’s said in a report on Tuesday, warning that water shortages could undermine the country’s sovereign credit health.
Credit rating agencies are India’s Baa3 rating.
India is highly dependent on monsoon rains for its water supplies, but is also prone to severe and extreme weather conditions.
Delhi, one of the world’s most densely populated cities with a population of over 200 million, is facing a severe water crisis.
“There are 2.8 million people in the city who are struggling for even a drop of water,” Delhi Water Minister Atishi was quoted as saying on Monday, a day before ending a hunger strike over the water crisis. My health has deteriorated.
Given that more than 40% of India’s workforce is employed in agriculture, this could exacerbate India’s growth volatility and undermine the economy’s resilience to shocks.
Last week, the Minister She vowed to take part in a hunger strike. This continued until the northern Indian state of Haryana increased water releases from the Yamuna River into Delhi, detailing a drop of 110 million gallons of water per day.
Earlier in June, the minister had said the city was facing a daily water shortage of 50 million gallons due to inadequate raw water supply from the Yamuna and other sources. The Economic Times reported..
Moody’s warned that water shortages could disrupt agricultural production and industrial activity, “leading to higher food prices and reduced incomes for affected businesses and workers, especially farmers, as well as social unrest.”
“Given that more than 40% of India’s workforce is employed in agriculture, this could exacerbate India’s growth volatility and undermine the economy’s resilience to shocks.”
Agriculture in danger
“Reduced water supplies could disrupt agricultural production and industrial activity, leading to higher food prices and reduced income for affected businesses and communities, as well as sparking social unrest,” said the Moody’s report, led by John Wang, vice president and senior analyst at the financial services firm.
“This could exacerbate India’s growth volatility and undermine the economy’s resilience to shocks,” the report said.
According to the company, water supplies are expected to fall by 1,367 cubic metres by 2031.
according to Ministry of Water Resources, IndiaA drop in water level below 1,700 cubic metres indicates water stress, while a drop in supply below 1,000 cubic metres is defined as water shortage.
Highest risk sectors
Moody’s said water-dependent sectors such as coal-fired power plants and steelmakers would be hit hardest, explaining that operational disruptions would hamper earnings growth and reduce creditworthiness.
“In India, coal-fired power plants are by far the largest consumer of water due to the country’s heavy reliance on coal-fired electricity generation,” the report noted.
“As water scarcity worsens, coal-fired power plants in water-stressed regions may face operational interruptions during droughts as securing drinking water takes priority over commercial water supplies.”
Moody’s said further investment in water infrastructure and renewable energy could mitigate these risks and improve water-use efficiency.