The intensifying water scarcity in India could potentially harm the country’s credit strength, incite social unrest and cause fluctuations in economic growth, as per a recent report by Moody’s Ratings.

What Happened: Moody’s cautioned that India’s escalating water crisis could negatively impact the nation’s credit health. The report particularly identified sectors such as coal power generation and steel manufacturing as the most vulnerable to water stress.

Diminishing water supply can disrupt agricultural and industrial activities, leading to a surge in food prices and a drop in income for affected businesses and communities, potentially triggering social unrest. This could further destabilise India’s growth and weaken the economy’s resilience to shocks.

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The report also underscored that India’s swift urbanisation and industrialisation are putting pressure on its already scarce water resources. The trend towards industrial and urban expansion is expected to heighten competition for water resources among businesses and residents.

India is among the countries most susceptible to risks associated with water management and has the poorest access to basic services, including water, among G-20 economies. The report also noted that India’s average annual water availability per capita is projected to drop to 1,367 cubic meters by 2031 from 1,486 cubic meters in 2021.

The sectors most at risk, such as coal power generation and steel manufacturing, are crucial to India’s economy and any disruption in their operations could have far-reaching effects.

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