India thirsts for answers to looming water crisis
BUSINESSES AND FUNDS WORRY THAT A WEAK MONSOON COULD FURTHER ADD TO BURDEN
Few expected India’s science minister to cut the monsoon outlook as he unveiled a weather forecasting system on June 2. The surprise contributed to a Rs1.5 trillion (Dh86.7 billion, $23.7 billion) two-day slump in the nation’s equities.
The rupee also slid as Harsh Vardhan’s prediction of weaker rainfall stoked concern that reduced farm output may hurt the economy. The episode is the latest example of growing water risks for investors and companies in India.
About half of the country’s 1.26 billion people face potential surface-water supply disruptions, setting the stage for clashes with thirsty industries just as Prime Minister Narendra Modi seeks to make his nation a manufacturing power. And India isn’t alone: From Africa to the Americas, surging demand is exacerbating a global water deficit as groundwater diminishes.
“While India is just one of many markets that’s being impacted by water issues, it appears to be particularly acute there,” said Ben Caldecott, a programme director at Oxford University’s Smith School of Enterprise and the Environment. Water risk will be of increasing importance for investment decisions, he said.
India relies on groundwater as piped supplies can’t meet demand, but the World Bank has flagged aquifer over-exploitation by farms, businesses and cities. The University of California at Irvine says the Indus basin aquifer of northwestern India and Pakistan is the second-most overstressed in the world. The impact on companies is wide and deep.
Extraction
Coca-Cola last year scrapped a $24-million expansion in Uttar Pradesh state, citing delays in water extraction permits. Farmers there had protested about dwindling supplies. Brewer SABMiller’s local unit has studied the aquifers it relies on and is trying to manage usage with the local population.
ITC, British American Tobacco’s Indian associate, plans to double its agribusiness watershed management programme to cover 1 million acres of farmland by 2018. “If we don’t have a long-term perspective, our raw material availability is at risk,” said Ashesh Ambasta, a vicepresident at Kolkata-based ITC.
Modi has unveiled some steps to avert a crisis. The agenda includes reviving a 30-yearold plan to link Himalayan and peninsular rivers to channel supplies to deficient basins. He also wants to curb toxic discharges into the Ganges River.
The market capitalisation of India’s benchmark S&P BSE Sensex equity index fell Rs1.5 trillion to Rs44.6 trillion by the end of the next trading day.
“Water risk is only recently appreciated as a systemic and material investment risk,” said Piet Klop, senior adviser at Netherlands-based PGGM, which manages about €200 billion ($225 billion) in pension funds. “We do expect that the importance of water in investment decisions and the quality of the data will increase.”
❝ Water risk is only recently appreciated as a systemic and material investment risk. We do expect that the importance of water in investment decisions.”