A report by Moody’s released on Tuesday warns the nation’s water crisis could dampen growth and even threaten its creditworthiness. The confluence of rapid economic expansion and a changing climate is squeezing India’s water resources.

The report emphasised that rising food inflation and declining incomes could lead to social unrest, straining the country’s economic stability.

The report paints a grim picture. Per capita water availability is projected to fall below the water stress threshold of 1,700 cubic meters by 2031, according to the ministry of water resources. This threatens to disrupt agricultural production, a mainstay of the economy, and cripple water-intensive industries like steel and coal power.

Climate change is a major factor worsening India’s water stress, according to the report. The increasing frequency and intensity of extreme weather events, such as droughts, heatwaves, and floods, are putting additional pressure on the country’s already strained water resources.

“India is facing a growing water shortage as consumption rises amid rapid economic growth and frequent natural disasters due to climate change,” the report stated.

The warning from Moody’s comes as parts of India, including the national capital, are grappling with severe water shortages.

The ripple effects could be significant. Food price inflation, declining business incomes, and potential social unrest are all on the table, Moody’s warns. These factors could weaken India’s economic resilience and cast a shadow on its sovereign credit rating.

The report acknowledges investments in water infrastructure and a push for renewable energy, which could lessen dependence on water-hungry coal plants.