India Market Watch April 9th, 07

CitiViews – India Market Watch
➤ Spotlight on Water Management in India: With “inclusive growth” becoming the new mantra of policy makers, water management is an emerging focus area for India, given that both agriculture and the provision of basic services – two basic offshoots of inclusive growth depend on it. Inaugurating the 2007 World Water Day which focused on “Coping with Water Scarcity,” two interesting comments from PM Singh were that water is now fast becoming the most critical constraint for India’s agricultural development and that un-cleaned dirty water is a major cause for child mortality. This issue is further compounded by concerns on climate change which India is most vulnerable to as its monsoon systems and flow of Himalayan rivers are all dependent on current climatic patterns1.
➤ Water: A growing critical constraint for agriculture: Though total precipitation in India, including snowfall, amounts to 4000bn cubic meter across the country, 50% of the precipitation takes place in 15 days and 90% of the rivers are filled within four months. This makes the availability and distribution of water in India uneven across both space and time. Another concern is that storage facilities are poor – Indian dams can store only 200 cubic meters per capita, as compared to over 1,000 cubic meters in China and 5,000 in the US. All of this has resulted in erratic trends in the agriculture sector. This points to emerging opportunities in irrigation, tube-wells as well as building more dams, as climate change is likely to further increase the variability of rainfall in India.
➤ Water Treatment – An emerging opportunity: Another water-related challenge is provision of basic services which includes the quality of water. The UN estimates that 1.1bn people do not have access to an improved sources of drinking water which is a major cause of child mortality. Child mortality rates in India are still high at 65 per 1000 vs. 30 in China and 6.4 in the US. To this end,companies that have made forays in water treatment/water purification facilities in India include Thermax, Ion Exchange, HLL, Eureka Forbes and WHI2.
➤ Measures to curb the crisis are encouraging: To its credit, the government has recognized the urgent need to address water infrastructure and has declared 2007 as the Water Year. Further, its National Water Policy recognizes water as a ‘national asset’ and prioritizes water allocation; encouraging various forms of rain water harvesting. Moreover, the proposed establishment of a water authority for the Brahmaputra along the lines of the Tennessee Valley Authority would combine water infrastructure with modern management approaches to make water a stimulus for growth. One study finds that for every Rs100 of direct benefits, the construction of a dam in northern India generated Rs90 of indirect benefits for the regional economy as well. Government efforts are positive and could help solve the water crisis, provided they are implemented.