Millions of Indians face water shortages every
summer when water demand rises in farms, offices and homes against a limited
supply, but a prolonged heatwave this year has worsened the
shortfall, including in Delhi and the southern tech hub of Bengaluru.
"This is
detrimental to the credit health of the sovereign, as well as sectors that
heavily consume water, such as coal power generators and steel-makers,"
Moody's Ratings said in a note.
"In the long
term, investment in water management can mitigate risks from potential water
shortages," it added.
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, according to the Ministry
of Water Resources.
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.
"Decreases in
water supply can disrupt agricultural production and industrial operations,
resulting in inflation in food prices and declines in income for affected
businesses and communities, while sparking social unrest," Moody's said.
This, in turn, can
exacerbate volatility in India's growth, it warned.
Increases in the
frequency of water shortage, severity or durations of extreme climate events
stemming from climate change will exacerbate the situation because India
heavily relies on monsoon rainfall for water supply, the global agency said.
Industrialisation
and urbanisation will intensify competition for water among businesses and
residents, it added.
The sustainable
finance market in India can provide companies and regional governments with a
critical avenue to raise funds, it said. Moody's currently has a Baa3 rating on
India with a stable outlook.
