"This in turn can exacerbate volatility in India's growth and undermine the economy’s ability to withstand shocks.
"India is experiencing rapid urbanization and industrialization as its economy advances, exacerbating the strain on already limited water resources, says the report.
"It says, in India, thermal coal power plants are by far the largest consumers of water as the country heavily relies on coal-based power generation.
"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.
"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.
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India's worsening water shortage crisis can adversely impact the nation's credit health while sparking social unrest and exacerbating the volatility in its economic growth, rating agency Moody's Ratings said in a report on Tuesday.In addition, coal power generators and steel makers are most vulnerable to water stress , Moody's said.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, as per the report. "This in turn can exacerbate volatility in India's growth and undermine the economy’s ability to withstand shocks."India is experiencing rapid urbanization and industrialization as its economy advances, exacerbating the strain on already limited water resources, says the report. The country has substantial potential for industrial and urban growth, with the industrial sector contributing 25.7% to GDP in 2022, lower than the G-20 emerging market median of 32%, as reported by the World Bank.Additionally, "urban residents accounted for only 36% of the total population in 2022, a figure expected to rise considering the G-20 emerging market median of 76%." This trend towards industrial and urban expansion will heighten competition for water resources among businesses and residents, according to the report.India is one of the sovereigns that are the most vulnerable to risks associated with water management, the report suggests. India also has the poorest access to basic services including water among G-20 economies, a key component for an assessment of the credit impact of ESG factors, it adds."The agricultural sector consumes the most water and is the largest hirer in India. Changing rainfall patterns and reductions in water availability will make farmers and lower income communities increasingly vulnerable to unexpected drops in production, which will reduce their income, while inflating food prices and increasing social discontent."The report points out that among companies they rate, coal power generators and steel-makers are the most vulnerable to water stress as they heavily depend on water for production. "Growing water shortages can disrupt their operations and hamper their revenue generation, eroding their credit strength."It says, in India, thermal coal power plants are by far the largest consumers of water as the country heavily relies on coal-based power generation."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."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.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.
