The water shortage triggered by high consumption amid rapid economic growth and frequent natural disasters caused by climate change could hurt India’s sovereign credit strength, global credit rating agency Moody’s Investors Service said on Tuesday, reported Reuters.

“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 Ratings said in its report. “This in turn can exacerbate volatility in India’s growth and undermine the economy’s ability to withstand shocks.”

A prolonged heatwave this year has worsened water shortages across the country, including in Delhi and Bengaluru.

The Environmental risks – India: Worsening water shortage will pressure sovereign and water-intensive sectors report said that increase in the frequency of water shortage, severity or durations of extreme climate events will exacerbate the situation because India heavily relies on the monsoon for water supply and agriculture, reported Reuters.

“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 said. “In the long term, investment in water management can mitigate risks from potential water shortages.”

By 2031, the average annual water availability per capita in India is likely to drop to 1,367 cubic metres from an already-low 1,486 cubic metres in 2021, Reuters reported citing data from the water resources ministry.

A level below 1,700 cubic metres indicates water stress, with 1,000 cubic metres being the threshold for water scarcity, according to the ministry.

Competition for water among businesses and residents will intensify by industrialisation and urbanisation, the report added.

This comes as the India Meteorological Department last week said that India will receive “below normal” rainfall in June.

The weather agency predicted that the rainfall across the country in June was likely to be less than 92% of the Long Period Average. The Long Period Average rainfall is the mean rainfall during the four-month monsoon season over the last 50 years. The mean rainfall figure for June from 1971 to 2020 was 16.69 centimetres, the weather agency said.

June accounts for about 15% of the country’s rainfall during the southwest monsoon, while July and August account for about 35% each.

The southwest monsoon season generally begins in June and starts to retreat by September.

Also read: