India’s growth depends on water— and climate change is making it scarcer for everyone
Once a silent constant in India’s growth story, water is turning into a wildcard on the risk front. As erratic monsoons, vanishing aquifers and rising industrial demand collide, the question isn’t just who will adapt, but which businesses will survive if taps start going dry.
Businesses in India have typically treated water as a steady input—not perfect, but reliable enough. Climate change is unravelling that assumption. Variable rainfall, falling groundwater tables, depleting aquifers and intensifying floods are reshaping how firms source this most basic of industrial inputs. Water has quietly become a new frontier of business risk.
Rising temperatures, erratic monsoons, frequent droughts and increasingly likely extreme weather events are reducing reliable water availability while driving up demand, especially from water-intensive industries like power generation, textiles and steel. By 2030, for instance, 70% of India’s thermal power plants are projected to face severe water stress, threatening energy security.
India’s economy is thirsty. Besides agriculture, textile factories, power plants, steel mills, food processors and drugmakers have long relied on abundant and predictable water supplies. This certainty is receding. As much as 17% of India’s groundwater blocks are already overexploited and the situation is worsening every year, according to the Central Water Commission. The Niti Aayog warns that almost 600 million Indians live under high to extreme water stress.
These numbers matter to business even if Indian industry, unlike farming, does not dominate India’s water withdrawal. Industries rely on consistent quality and timely supply. A thermal power plant cannot run if its cooling water fails. Textile dyeing, pulp and paper mills and steel production all suffer when water fails in quantity or reliability, or is too polluted.
In India’s energy sector, where about 70% of electricity generation depends on thermal plants, water is both lifeblood and liability. In 2016, several plants in Karnataka, Maharashtra and Tamil Nadu were forced to shut down when reservoirs ran dry. More than 40% of India’s thermal capacity is in areas of high water stress, according to the Central Electricity Authority.
With climate change making rainfall more erratic, irrigation, power generation and municipal supply will vie harder for water. Each constraint raises costs and slows generation, even as warming increases demand for cooling purposes.
In the textile hub of Tiruppur, groundwater depletion is worsened by erratic monsoon recharge. Factories face rising pumping costs and saline intrusion. Huge investments in wastewater recycling and zero liquid discharge infrastructure have kept it afloat, but at a steep cost—raising operating expenditure by 10-15%. Lacking such infrastructure, smaller clusters elsewhere remain exposed. The shift is clear: water risk is no longer about absolute shortage but volatility. Businesses built for stability must plan for fluctuations.
This escalating water risk demands a reorientation by policymakers and businesses. It is not just an operational headache, but a macro risk. National modelling by the World Bank suggests unmanaged scarcity could shave as much as 6% off India’s GDP by mid-century. Companies that do not price in water stress will face rising insurance premiums, tighter financing conditions and reputational blowback from investors.
India must integrate water scarcity into carbon pricing mechanisms, adopt dynamic water pricing that reflects scarcity and promote market-based water trading to reward efficiency. A rapid scale-up of circular water economy models like water-as-a-service, industrial symbiosis and digital water intelligence platforms could drive profitable conservation.
Government initiatives like Atal Bhujal Yojana and nationwide aquifer mapping show rising awareness in India. Yet, industrial oversight is patchy, focused more on compliance than resilience. The opportunity is clear. The circular use of water—reuse, closed-loop systems and real-time monitoring—could be a competitive advantage. Firms that treat water as a strategic variable will lead. Early movers gain advantages of lower energy intensity, reduced penalties and better access to finance.
For businesses that require reliable water, the risk must move from the margins of planning to core strategy. Risk assessments should include basin-level projections of rainfall and recharge; contracts should assume potential supply disruptions; and capex should account for reuse, treatment, buffer storage, flexible cooling systems or alternative water sources. Firms that take pre-emptive action can protect productivity, reduce costs and guard reputations. Those that do not will find themselves exposed.
Water will not stop flowing for everyone at once. But in a warming world, the places where supply fails first will set new cost, constraint and opportunity patterns. It will force investment decisions, regulatory design and corporate responsibility to change. Reforms could generate net benefits of ₹2-4 trillion over two decades, as estimated, though this depends on consistent policy implementation and sustained technology adoption—difficult tasks, given our ground realities.
India’s economic growth and energy transition hinge on reliable water. Yet, that reliability is slipping. Firms cannot diversify away from it, nor insure against it meaningfully. The only path forward is adaptation through foresight, efficiency and cooperation between industries, governments and communities sharing the same basins. As rainfall patterns shift, groundwater levels drop and hydrological regimes change, water is no longer just another input. It has become a barometer of resilience.
The author is an independent expert based in New Delhi, Kolkata and Odisha. Twitter: @scurve Instagram: @soumya.scurve.
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