Global rating agency Moody’s has raised concerns about India’s escalating water scarcity and its potential ramifications for the country’s sovereign credit strength. The report underscores that India’s water crisis poses significant challenges to sectors crucial for economic stability, including agriculture and industry.
According to Moody’s, diminishing water resources due to climate change-induced factors such as droughts, heat waves, and floods are exacerbating water stress across India. The firm warns that reduced water availability could disrupt agricultural output and industrial operations, leading to inflationary pressures, decreased income for affected sectors, and possible social unrest. These factors collectively threaten India’s economic resilience and its ability to absorb shocks. Highlighting the economic implications, Moody’s points out that sectors heavily reliant on water, such as coal power generators and steel manufacturers, face operational disruptions that could erode their credit profiles. The report cites instances where floods and extreme weather events have already caused significant economic losses and infrastructure damage, underscoring the immediate need for robust water management strategies.
India’s average annual water availability per capita is projected to decline further, from 1,486 cubic meters in 2021 to 1,367 cubic meters by 2031, reinforcing the severity of the water stress situation. The Ministry of Water Resources identifies any level below 1,700 cubic meters per capita as indicative of water stress, with 1,000 cubic meters marking scarcity. Moreover, Moody’s notes that recent initiatives by the Indian government to invest in water infrastructure and promote renewable energy are steps in the right direction. These efforts aim to mitigate long-term risks associated with water management while supporting sustainable economic growth. In conclusion, while Moody’s acknowledges India’s proactive measures, it emphasizes the urgent need for comprehensive strategies to address water scarcity and enhance resilience against climate-related challenges. The effectiveness of these measures, particularly in sectors vulnerable to water shortages, will be crucial in safeguarding India’s economic stability and sovereign credit health in the years ahead.
