India’s rising water stress can dent its sovereign credit profile: Moody’s Ratings

Moody’s Ratings warned on June 25 that India’s growing water shortage and increasingly frequent climate change-driven natural disasters, amid a rise in consumption and rapid economic growth, can negatively affect the country’s sovereign credit strength. Currently rated Baa3 stable by Moody’s, which denotes the lowest investment grade rating, India is susceptible to increasing water stress, and any drop in water supply, for which it is heavily reliant on monsoon rains, could disrupt operations in factories and farms. “This in turn can exacerbate volatility in India’s growth and undermine the economy’s ability to withstand shocks given that more than 40% of the country’s workforce is employed in agriculture,” Moody’s said in a note on environmental risks for India, identifying coal-fired power generation and steel production as the industrial sectors most vulnerable to water stress. Pointing to the strain on water supply due to the current heat wave, with temperatures hitting 50 degrees Celsius in Delhi and northern Indian States, Moody’s said floods that are one of the most common types of natural disasters in India, also disrupt water infrastructure as it is insufficient to retain water from sudden large downpours.