Water shortage injurious to India’s credit health

New Delhi: Moody’s Ratings on Tuesday said India’s growing water shortage can disrupt farm and industry sectors and is detrimental to the credit health of the sovereign as rising food inflation and decline in income may spark social unrest.

It said decreases in water supply can disrupt agricultural production and industrial operations, resulting in inflation in food prices.Hence, it can be detrimental to credit health of sectors that heavily consume water, such as coal power generators and steel-makers. India’s fast economic growth, accompanied by rapid industrialisation and urbanisation, will reduce water availability in the world’s most populous country, it said.

Also, the water stress is worsening because of an acceleration of climate change, which is causing increasingly intense and frequent extreme climate events such as droughts, heat waves and floods. India is facing a growing water shortage as water consumption increases amid rapid economic growth and increasingly frequent natural disasters due to climate change, Moody’s said in a report on environmental risk facing India.

“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. In the long term, investment in water management can mitigate risks from potential water shortages,” Moody’s Ratings said in the report.