Moody's Warns: Water Stress Threatens India's Credit Health and Economic Growth

Moody's warned on Tuesday that India's increasing water scarcity poses significant risks to both agricultural and industrial sectors, impacting the sovereign's credit health. The agency highlighted concerns over rising food prices and declining incomes, potentially leading to social unrest. The water stress is exacerbated by accelerating climate change, which is resulting in more frequent and severe weather events, according to Moody's.

Moody's currently rates India at Baa3 stable, the lowest investment grade rating, indicating susceptibility to heightened water stress. The nation heavily depends on monsoon rains for its water supply, and any reduction could disrupt operations in factories and farms.

According to the report, India is undergoing rapid urbanization and industrialization as its economy progresses, intensifying pressure on already scarce water resources. The country boasts significant potential for industrial and urban expansion, with the industrial sector contributing 25.7% to GDP in 2022, a figure lower than the G-20 emerging market median of 32%, as reported by the World Bank.