Acute Water Crisis in India Could Lead to Unrest, Moody’s warns

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The leading global provider of credit ratings said more investments in water infrastructure and renewable energy can mitigate these risks.

Team Clarion

NEW DELHI – Severe water crisis in India could lead to a disruption of agriculture and industrial sectors and result in social unrest, according to Moody’s Ratings warning. The water shortage could also hurt India’s sovereign credit strength, it said.

Rapid industrialisation and urbanisation, coupled with a meteoric economic expansion, has led to severe water shortage. Extreme weather conditions including heatwaves and drought have exacerbated the situation, placing the world’s most populous country in a dangerous spot, Moody’s said in a report this week, warning that water scarcity might affect the country’s sovereign credit health.

India relies substantially on monsoon rain for its water supply, but is also prone to severe and extreme weather conditions

New Delhi, one of the world’s most densely populated cities with over 200 million people, is knee-deep in a water crisis.

“There are 2.8 million people in the city who are aching for just a drop of water,” Delhi Water Minister Atishi was quoted as saying on Monday, a day before she ended her hunger strike over the water crisis, as her health deteriorated.

Last week, the minister proclaimed that she would partake in a hunger strike until the neighbouring state of Haryana released more water to Delhi from the Yamuna river, elaborating that it had released 110 million gallons per day less water.

In early June, the minister was quoted by The Economic Times as saying that the city was facing a water shortage of 50 million gallons daily due to a lack of raw water supply from the Yamuna river and other sources.

The water shortage could interrupt agricultural production and industrial operations, “resulting in inflation in food prices and declines in income for affected businesses and workers, especially farmers, while sparking social unrest,” Moody’s warned.

“This in turn can exacerbate volatility in India’s growth and undermine the economy’s ability to withstand shocks, given that more than 40% of the country’s workforce is employed in agriculture.”

Agriculture accounts for 90% of water usage in India.

Water-dependent sectors like coal power generators and steel-makers would be worst hit, Moody’s highlighted, explaining operational disruptions will hinder revenue growth and curtail credit strength.

“In India, thermal coal power plants are by far the largest consumers of water as the country heavily relies on coal-based power generation,” the report pointed out.

“As water shortages worsen, coal power plants in water-stressed areas can face operational disruptions during droughts when securing water for drinking becomes a higher priority than supplying water for businesses.”

Moody’s said more investments in water infrastructure and renewable energy can mitigate these risks and improve water efficiency usage.

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