March 4, 2026
Observer Research Foundation
By Dhaval Desai
As the world wrestles with the existential threats posed by climate change, water is no longer a matter of managing a natural resource. It is now about urgently addressing the systemic and structural vulnerabilities that have emerged from the misuse of water over the centuries, especially as the definitions of water scarcity, water stress, and water crises, used hitherto to identify and respond to water issues, may no longer adequately reflect the severity of current global hydrological concerns.
The United Nations University Institute for Water, Environment and Health’s (UNU-INWEH) latest study has coined the term “water bankruptcy” to describe emerging trends in global water dynamics. The study, ‘Global Water Bankruptcy: Living Beyond Our Hydrological Means in the Post-Crisis Era,’ defines water bankruptcy as the near-permanent erosion of the natural resilience and recovery of water ecosystems due to the exploitation of water beyond its renewable capacity.
This new analytical framework has far-reaching implications for India, a country already dealing with escalating water deficits and complex water governance challenges.
Defining Water Bankruptcy: Beyond Scarcity, Stress, and Risks
The study identifies water stress as conditions in which, although demand overshoots the limits of available and renewable water supply, the impact on overall water availability is mostly reversible. Water crises, on the other hand, are mainly episodic, acute shortages caused by droughts or infrastructure failures, which can be managed through emergency responses. However, it defines water bankruptcy as a persistent post-crisis state in which water use consistently exceeds renewable freshwater inflows and the safe limits of natural storage depletion.
Such water bankruptcy results in the severe depletion of both ‘checking accounts’ and ‘savings accounts’ of this natural resource. Checking accounts refer to the natural replenishment of rivers, wetlands, and reservoirs over time. However, as recharge of natural water sources is inconsistent, replenishment of checking accounts can show extreme fluctuations relative to the long-term average in wet and dry conditions. Conversely, the savings accounts refer primarily to groundwater sources, including soil moisture, shallow groundwater, glaciers, and aquifers, where the replenishment often occurs over several decades to even millennia. The shrinking of such savings accounts leads to disproportionate social, economic, and environmental costs.
Simultaneous evidence of the depletion of both checking and savings accounts signals a worrying worldwide breach of thresholds in basins and aquifers, leading to water bankruptcy. The UNU-INWEH thus defines water bankruptcy as the persistent post-crisis condition, in which:Withdrawal from surface and groundwater sources (the checking and savings accounts, respectively) exceeds the renewable freshwater inflows and the safe limits of extraction of water reserves, and
The resulting degradation of natural capital causes irreversible damage to water availability.
The frequent recurrence of droughts, which were earlier episodic, is a clear sign of water bankruptcy, a direct result of the degradation of hydrological conditions to a point where recovery of water levels becomes nearly impossible. The study calls for an urgent, fundamental reset of the global water agenda, from knee-jerk emergency responses to focused, sustained bankruptcy management, by acknowledging the limits, embracing transparent water accounting, setting enforceable depletion thresholds, and prioritising the protection of natural water generation through aquifers and wetlands.
Global Indicators of Water Bankruptcy
The evidence of water bankruptcy is stark across continents, with multiple indicators highlighting irreversible pressures. For example, with 70 percent of aquifers in steady decline, the current dependence of 50 percent of global domestic supply and 40 percent of irrigation water on groundwater could be severely threatened, pushing the world deeper into an era of severe water insecurity. Already, an estimated 4 billion people experience severe water scarcity for at least one month each year, and nearly 75 percent of the global population lives in countries that are either water-insecure or critically water-insecure.
With over half of all large freshwater lakes steadily shrinking since the 1990s, more than 25 percent of the global population depending on those lakes could face heightened water insecurity. Several rivers now also fail to reach the sea, indicating altered hydrological connectivity.
The study identifies water stress as conditions in which, although demand overshoots the limits of available and renewable water supply, the impact on overall water availability is mostly reversible. Water crises, on the other hand, are mainly episodic, acute shortages caused by droughts or infrastructure failures, which can be managed through emergency responses. However, it defines water bankruptcy as a persistent post-crisis state in which water use consistently exceeds renewable freshwater inflows and the safe limits of natural storage depletion.
Such water bankruptcy results in the severe depletion of both ‘checking accounts’ and ‘savings accounts’ of this natural resource. Checking accounts refer to the natural replenishment of rivers, wetlands, and reservoirs over time. However, as recharge of natural water sources is inconsistent, replenishment of checking accounts can show extreme fluctuations relative to the long-term average in wet and dry conditions. Conversely, the savings accounts refer primarily to groundwater sources, including soil moisture, shallow groundwater, glaciers, and aquifers, where the replenishment often occurs over several decades to even millennia. The shrinking of such savings accounts leads to disproportionate social, economic, and environmental costs.
Simultaneous evidence of the depletion of both checking and savings accounts signals a worrying worldwide breach of thresholds in basins and aquifers, leading to water bankruptcy. The UNU-INWEH thus defines water bankruptcy as the persistent post-crisis condition, in which:Withdrawal from surface and groundwater sources (the checking and savings accounts, respectively) exceeds the renewable freshwater inflows and the safe limits of extraction of water reserves, and
The resulting degradation of natural capital causes irreversible damage to water availability.
The frequent recurrence of droughts, which were earlier episodic, is a clear sign of water bankruptcy, a direct result of the degradation of hydrological conditions to a point where recovery of water levels becomes nearly impossible. The study calls for an urgent, fundamental reset of the global water agenda, from knee-jerk emergency responses to focused, sustained bankruptcy management, by acknowledging the limits, embracing transparent water accounting, setting enforceable depletion thresholds, and prioritising the protection of natural water generation through aquifers and wetlands.
Global Indicators of Water Bankruptcy
The evidence of water bankruptcy is stark across continents, with multiple indicators highlighting irreversible pressures. For example, with 70 percent of aquifers in steady decline, the current dependence of 50 percent of global domestic supply and 40 percent of irrigation water on groundwater could be severely threatened, pushing the world deeper into an era of severe water insecurity. Already, an estimated 4 billion people experience severe water scarcity for at least one month each year, and nearly 75 percent of the global population lives in countries that are either water-insecure or critically water-insecure.
With over half of all large freshwater lakes steadily shrinking since the 1990s, more than 25 percent of the global population depending on those lakes could face heightened water insecurity. Several rivers now also fail to reach the sea, indicating altered hydrological connectivity.
India’s Hydrological Reality: Stress Meeting Bankruptcy
A water-bankrupt world has enormous implications for India, given its high dependency on groundwater, burgeoning demand, and an uneven spatial distribution of renewable water sources. India has an extractable quantum of about 407.75 billion cubic metres (bcm) out of its total estimated annual groundwater recharge potential of 448.52 bcm. However, the country currently extracts around 247.22 bcm annually, representing more than 60 percent of the national extractable threshold.
Groundwater supports 62 percent of irrigation and up to 85 percent of domestic water use, making it the backbone of both food and drinking water security. Such overreliance on groundwater is driving Punjab, Haryana, Rajasthan, and parts of the Indo-Gangetic plains toward “irreversible overexploitation.”
Urban water systems, already grappling with an ever-increasing demand-supply gap, experience intensified stress. For example, the “day zero” scenario witnessed in Chennai in 2019 and the increasing reliance on groundwater, especially through the rampant, often unregulated digging of borewells, characterise the overexploitation of groundwater beyond sustainable limits. According to NITI Aayog’s 2019 Composite Water Management Index, the demand-supply gap in urban India is estimated to reach ~50 BCM by 2030. Already, five Indian cities — Delhi, Kolkata, Chennai, Bengaluru, and Hyderabad — are among the world’s 20 most water-stressed cities. This situation could also pose a grave public health risk, with 8 million childrenunder 14 at risk due to poor water quality.
On the other hand, agriculture accounts for nearly 87 percent of all freshwater withdrawals. Water-intensive staples, especially paddy and wheat, promoted through subsidies and minimum support price (MSP) since the implementation of India’s Green Revolution in the mid-1960s, have contributed to this enormous demand. Consequently, emphasis on such water-guzzling crops in Punjab and Haryana, which are crucial to India’s food security and exports, has accelerated groundwater depletion.
Policy Imperatives for a Post-Crisis Water Era
The UNU-INWEH study calls for comprehensive legal, institutional, and policy changes to address the looming global era of water bankruptcy. Post-crisis water management, it insists, should: i) impose clear limits on withdrawal of groundwater, ii) target investments to restore natural water systems. These changes must also integrate new water realities into climate, food, and biodiversity policies. India must adapt these recommendations and urgently recalibrate its water governance.
First, India must reduce its focus on water-guzzling staples such as rice and wheat, and comprehensively transform its cropping patterns to include millets, the primary traditional staple for most Indians for centuries. Millets, with their high nutritional value, are often touted as a “one-stop solution” amid climate change, water scarcity, and drought. Millets need 70 percent less water than paddy. They grow about 50 percent faster than wheat. They also need 40 percent less energy to process. Channelling subsidies and raising MSP for millets can help India reduce groundwater extraction and strengthen overall resilience.
Second, India must immediately undertake sweeping reforms of its urban water systems and create a robust circular water economy by combining enhanced storage, wastewater recycling, and leakage reduction under an integrated water strategy. Cities must focus on demand-side management measures rather than solely investing in capital-intensive source-augmentation projects. For example, India generates over 72 billion litres of sewage daily but treats only about 28 percent of sewage. As a result, it discharges more than half (~52 billion) of untreated wastewater into waterbodies or allows seepage, polluting both surface water sources and groundwater aquifers. Supply-side measures to continuously augment the water supply will only worsen groundwater depletion and disbalance the surface water availability. India must use this situation to its advantage and adopt best practices from cities in developing economies, such as São Paolo (Brazil), Buenos Aires (Argentina), Dakar (Senegal), and Arequipa (Peru), to explore circular economy solutions.
Third, India must urgently consider an Atal Bhujal Yojana-Urban to replicate the successes of the existing rural India-focused, participatory Atal Bhujal Yojana (ABY) to leverage community-led groundwater management efforts to address the fast-depleting aquifers in its cities. The absence of a coordinated, mission-mode response to this catastrophic trend has led to fragmented regulations, leaving cities with limited technical capacity. Designing ABY-Urban to address the unique complexities of cities, with robust regulatory frameworks, compulsory aquifer mapping and digital monitoring, participatory governance, performance-linked funding of central schemes and missions, and integrating groundwater management with AMRUT 2.0, can signal a proactive national commitment to sustainable cities.
Conclusion
Addressing water bankruptcy begins with recognising how much the hydrological landscape has changed and what these shifts mean for the choices societies must make. It requires India to re-examine long-standing assumptions about availability, revisit patterns of use, and build policies that reflect the limits of its natural water systems. The window for course correction is narrowing, and India must act decisively to secure its water future.
About the author: Dhaval Desai is a Senior Fellow and Vice President at the Observer Research Foundation.
Source: This article was published by the Observer Research Foundation.
Observer Research Foundation
ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.
Observer Research Foundation
ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.
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