Fallouts of a crisis
The water crisis prevailing across different regions of the country is palpable. It is also well-known that such situations recur year after year, perhaps with greater intensity each time. The latest Moody’s report has validated this anomaly, and forecasted the grim consequences it can have on the country’s credit ratings, investment, and overall economy. The agency, which currently holds a 'Baa3' rating—the last investment-grade rating—on India with a stable outlook, highlighted that the water crisis poses a significant risk to various sectors, particularly those heavily reliant on water, such as coal power generators and steel-makers.
India's economic ascent, characterised by rapid industrialisation and urbanisation, is intensifying the strain on its already limited water resources. According to Moody’s, the increased frequency, severity, and duration of extreme climate events such as droughts, heatwaves, and floods are compounding the water scarcity issue.
Needless to say, the implications of water shortages are far-reaching. Decreased water supply can disrupt agricultural production and industrial operations, leading to food price inflation and income declines for businesses and communities. One is tempted to highlight a range of water-related woes experienced by the agriculture sector. A large part of the country is still dependent on rain-fed irrigation, while the existing irrigation infrastructure is tilted heavily in the favour of Green Revolution states that mostly go against their clime and soil to cultivate water-guzzling crops. While there is water stress at the national level, one also has to factor in the glaring inequalities in access to water across India. This fact is not just applicable to the agriculture sector.
Although the situation is more or less similar in other states, Maharashtra presents a textbook example of water inequality. Many posh areas in the state have multi-storied building complexes with each floor having inbuilt swimming pools. Contrasting this luxurious elegance are people lined in queues to get their drinking water. It may be argued that landform variations have a part to play in this type of inequality, but socio-economic drivers of water inequality can also not be ruled out. Coming back to agriculture, food inflation has already been upsetting India’s monetary health by driving inflation upwards. Water shortage in the medium and long run will only compound the problem. Among industrial sectors, coal power generators and steel-makers are most at risk. These industries depend heavily on water for production, and growing shortages threaten to disrupt their operations, eroding their revenue generation and credit strength.
As things stand today, India’s average annual water availability per capita is projected to drop from an already-low 1,486 cubic meters in 2021 to 1,367 cubic meters by 2031. The Ministry of Water Resources identifies levels below 1,700 cubic meters as indicative of water stress, with 1,000 cubic meters marking the threshold for water scarcity. Evidently, India’s water regime is not headed towards a favourable future, and it is time to make serious amends. The report highlighted the importance of investment in water infrastructure and renewable energy to mitigate these risks. India’s growing sustainable finance market also offers a promising avenue for financing water management investments. To address the water crisis effectively, India needs to enforce existing regulations and incentivise water-efficient practices. State governments and municipal corporations should link rainwater harvesting with tax regimes, such as property taxes, and penalise non-compliance in construction projects.
