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India is facing an escalating water crisis driven by rapid urbanisation, population growth, and climate change. Per capita water availability is projected to decline sharply from 1,486 cubic meters in 2021 to 1,367 cubic meters by 2031, placing the country’s water security at significant risk. Furthermore, projections indicate that 11 out of India’s 15 major river basins will be water-stressed by 2025, intensifying competition among agricultural, industrial, and domestic sectors. In response, innovative solutions like water credits—a market-based mechanism inspired by carbon credits—offer a promising pathway to incentivising water conservation and ensuring sustainable water management.
A new book by the Observer Research Foundation (ORF), in collaboration with Bisleri International, lays out a roadmap for operationalising this concept. Titled Trading Blue Gold: A Blueprint for Water Credit Valuation in India and authored by Nilanjan Ghosh and Soumya Bhowmick, the book was launched at the Raisina Dialogue 2025 and proposes a comprehensive framework for valuing and trading water credits in India.
Water credits are a market-based mechanism that incentivise sustainable water management. These credits are generated through activities such as water conservation, rainwater harvesting, wastewater treatment, and efficient water use. Entities—such as industries, municipalities, or farmers—can earn credits by implementing such measures and trade them to offset water consumption. The aim is to monetise conservation efforts and encourage more responsible water use practices. Similar to carbon credits, companies can purchase water credits to offset their water consumption and promote responsible water stewardship.
The framework proposed in Trading Blue Gold addresses a major gap in India’s water governance: the lack of water valuation mechanisms that reflect both economic and ecological considerations. Co-author Nilanjan Ghosh, vice president of development studies at ORF, noted, “The water credit valuation framework developed in this study will help in discovering the value of water, thereby reinforcing its sustainable use and emphasising the critical need for conserving water instream. This will further support ecosystem services and the life-support systems of the planet. In the process, by driving cross-sector awareness and action, this brings us a step closer to realising the Hon’ble Prime Minister’s 'Lifestyle for Environment' (LiFE) initiative, which promotes individual and community-driven efforts to safeguard the environment.”
The economic and ecological valuation of water credits highlights their potential to bridge the gap between resource conservation and financial sustainability. Traditional water management practices in India have largely focused on supply augmentation, leading to over-extraction of groundwater, inefficient irrigation methods, and poor water infrastructure. By contrast, a well-defined water credit market can align economic incentives with conservation priorities, ensuring that water-saving initiatives generate tangible financial benefits for stakeholders.
One of the most significant applications of water credits is in agriculture, which accounts for nearly 80 percent of India’s freshwater withdrawals. Excessive reliance on groundwater, inefficient irrigation techniques, and climate-induced variability have made water-intensive crops such as rice and sugarcane unsustainable.
Green water credits offer a structured framework to incentivise farmers to adopt sustainable water practices. Drip irrigation enhances water-use efficiency by delivering water directly to plant roots. Land levelling reduces runoff and improves soil moisture retention. Crop diversification encourages a shift from water-intensive crops to drought-resistant varieties. Rainwater harvesting enhances groundwater recharge and mitigates dependency on monsoons. By implementing these measures, farmers can earn Green Water Credits, which can be sold to industries or municipalities seeking to offset their water footprint.
The effectiveness of a water credit system depends on its ability to establish a transparent and efficient pricing mechanism. The valuation of water credits considers multiple factors. Marginal productivity of water measures the incremental increase in crop yield due to optimised water use. Ecosystem services account for the role of water conservation in groundwater recharge, biodiversity support, and climate regulation. Market demand reflects the willingness of industries and municipalities to invest in water credits to offset their consumption. Regulatory frameworks define policies governing water credit issuance, trading, and compliance mechanisms.
Industries, particularly those reliant on substantial water use such as the beverage, textile, and energy sectors, can play a crucial role in institutionalising water credits. The beverage industry, for instance, has pioneered sustainable water stewardship through multiple initiatives. Public-private partnerships (PPPs) foster collaboration between governments and NGOs to implement structured water credit programs.
Supply chain integration ensures that sustainable water practices are mandated within supplier agreements. Environmental, social, and governance (ESG) investments allow corporations to utilise water credits as an offset mechanism to meet corporate sustainability goals. By actively participating in water credit markets, industries can enhance their sustainability credentials while contributing to broader water conservation goals.
The successful implementation of water credits requires a robust policy framework that includes several key elements. Standardised measurement criteria must be established to create uniform methodologies for assessing water savings and credit valuation. Regulatory oversight is essential for monitoring compliance, preventing market manipulation, and ensuring the equitable distribution of credits. Integration with national water policies aligns water credit mechanisms with existing government initiatives such as the Jal Shakti Abhiyan and the National Water Policy.
Despite their potential, water credit systems face several challenges. A lack of awareness and adoption means that many stakeholders, particularly smallholder farmers, remain unaware of the benefits and mechanisms of water credits. Data and monitoring constraints pose logistical challenges in collecting accurate data on water usage, conservation measures, and credit transactions. Regulatory ambiguity, due to the absence of clear legal and institutional frameworks, could hinder market development. Addressing these challenges requires targeted policy interventions, capacity-building programs, and investment in digital technologies for real-time monitoring and verification.
Speaking on the significance of the book, Mr. Angelo George, Chief Executive Officer of Bisleri International, said, “At Bisleri, we take pride in being a water-positive company, replenishing more water than we extract. Building on the foundation of water credits we introduced through our study with TERI last year, this book aims to inspire industries beyond the beverage sector to embrace responsible water stewardship. Through this valuable collaboration, we hope to empower businesses to measure, manage, and offset their water footprint, fostering a sustainable and water-resilient future.”
Water credits represent a transformative shift in water governance, offering a market-driven solution to India’s growing water crisis. By integrating economic incentives with conservation efforts, they provide a scalable and sustainable model for optimising water use across agriculture, industry, and urban sectors.
However, realising their full potential demands coordinated efforts from policymakers, industries, and communities to establish a robust, transparent, and equitable water credit market. With the right regulatory support and stakeholder engagement, India can pioneer a water credit framework that not only enhances water security but also ensures long-term environmental sustainability and economic resilience.