Impact of Water Shortage on the Economy and the Environment

It is common knowledge that there is a lack of water in many places of the world today, and this has had a significant impact on humanity.

Life needs water to exist. For drinking and sanitation, for our food, cattle, and industry, as well as for the development and maintenance of the ecosystems that support all life, clean freshwater is a must.

Less than 1% of the world’s water is readily available freshwater, which can be found in rivers, lakes, wetlands, and aquifers.

The need for water increases along with the growth of the human population worldwide.

The impact of water shortage on the economy and the environment is our bone of contention in this article and this cuts across various facets of life as whatever affects our health and environment also affects our economy.

Freshwater ecosystems are under stress due to the disruption of natural water cycles brought on by human activity and climate change.

The detrimental effects on our freshwater systems are exacerbated by poor water management, pollution, the construction of infrastructure, and resource extraction. With this important resource, we cannot afford to be irresponsible.

According to a recent World Bank assessment, climate change-related water scarcity might impede economic growth, encourage migration, and lead to violence. However, by adopting steps to allocate and use water resources more effectively, the majority of nations can offset the negative effects of water scarcity.

The poor have a lot more opportunities because of improved access to clean water, sanitary services, and water management, which is also a progressive approach to economic growth.

Through improved health, reduced medical expenses, and time saved, improved access to basic water and sanitation services benefits the underprivileged directly.

A healthy ecosystem benefits from the effective management of water resources because it increases productivity across all economic sectors and increases productivity certainty.

Together, these initiatives improve the lives of billions of people through immediate and long-term economic, social, and environmental advantages.

  • Improving water supply, sanitation, and resource management helps countries prosper economically and makes a significant dent in the fight against poverty.
  • National economies are more resilient to rainfall variability, and economic growth is boosted when water storage capacity is increased.
  • These benefits outweigh the investment costs by a significant margin, which is surprisingly good news for Northern and Southern decision-makers who frequently view investments as mere costs.
  • Investing in water is a smart business since better water resource management, water delivery, and sanitation lead to higher output and productivity across all economic sectors.
  • Improvements in water delivery, sanitation, and water resource management will require significant public and private investment. At the national level, however, most countries can fulfill these investment challenges and do so with relative ease.

By 2030, the UN predicts that 50% of the world’s population will reside in regions with high water stress.

Impact of Water Shortage on the Economy and the Environment

Impact of Water Shortage on the Economy

When fresh water is not readily available for industrial, agricultural, and domestic usage, it is challenging to maintain a healthy economy.

Lack of freshwater resources may restrict the production of items like cars, food, and clothing that require large amounts of water.

Infections brought on by a lack of fresh water can also have an impact on labor productivity, and greater water expenditures for individuals can lower household discretionary income.

Billions of dollars worth of missed economic possibilities are accounted for by time spent fetching water or looking for a safe location to go.

771 million people worldwide lack access to clean water, and among them, women are typically in charge of collecting it.

They go to far-off sources like rivers and ponds or stand in lengthy queues at communal water stations for hours at a time.

Time has been wasted, and money has not been earned. Each year, it is estimated that lack of access to basic water and sanitation costs the world $260 billion.

The following are some of the ways water shortage impact our economy

1. Impact on Businesses Worldwide

The impact of water shortage on enterprises globally, which results in greater operational costs and maintaining competitiveness, is one of the economic effects.

Controlling expenses is challenging for multinational corporations, but the situation gets worse when margins dwindle precariously as the price of water rises dramatically.

As a result, businesses look to migrate whenever it’s feasible and view water access as a competitive advantage.

For instance, a company will favor moving to a city near a lake, river, or river basin because those locations have the lowest water risks.

Without convenient access to healthy, dependable, and viable water resources, many businesses would be unable to grow, hire new employees, or keep their current workforce.

Towns will suffer as a result of the shortage of water: local businesses will suffer, as will earnings and tax revenues; the population will decline owing to a lack of work options, and cities and the surrounding communities will shrink dangerously. Bottom line: Businesses require water since, in high-income countries, the industry can account for up to 59% of all water use.

2. Agriculture

The impact on agriculture is one of the main economic effects of water scarcity. Agriculture uses a lot of water and contributes to the shortage of this resource.

Reduced water availability has led to environmental degradation and an estimated $350 million loss in agricultural land utilization in countries like Morocco.

Due to severe drought conditions, India, China, and the Middle East are affected by water scarcity, which leads to decreased agricultural production on farms and dangerously high food costs.

Drought conditions in China in 2006 affected or threatened 95 million people, 8.7 million cattle, and 182 million hectares of agriculture.

Food price increases and a lack of water fuel regional conflicts and force people to migrate to areas with easy access to water.

Lack of water results in food shortages and higher commodity prices, which impedes commerce with developing economies and, over time, fuels civil unrest.

Water scarcity has a direct influence on livestock, irrigated and rain-fed agriculture, as well as food processing companies.

3. Gross Domestic Product (GDP)

Climate change-induced water scarcity might cost certain regions up to 6% of their GDP, cause migration, and lead to war.

4. Increased Risk of Conflict

Conflict risk could increase as a result of water insecurity. Drought-related increases in food prices can exacerbate simmering disputes and encourage migration.

Periods of drought and flooding have led to waves of migration and increases in violence inside nations where rainfall affects economic growth.

5. Improved Water Stewardship

Improved water stewardship generates significant economic benefits. Governments may reduce losses significantly and in some cases even eliminate them when they increase efficiency and allocate even 25% of water to more valuable uses, like more productive agriculture methods.

  • Better planning for water resource allocation
  • Adoption of incentives to increase water efficiency
  • Investments in infrastructure for more secure water supplies and availability are just a few of the policies and investments that can help countries become more water-secure and climate-resilient economies.

6. Water-borne Diseases

Millions of individuals have died from water-borne diseases, but they also have a long-term harmful impact on families, endangering children’s health and the general economic productivity of a society.

These illnesses have an impact on family finances not only by lowering personal economic production but also by raising the expense of both official and unofficial healthcare.

As a result, lack of access to water lowers earnings and economic contributions.

Impact of Water Shortage on the Environment

Water from healthy rivers is used by houses, farms, businesses, and schools. They support entire ecosystems along the road and offer vital habitats for local flora and animals.

They provide a place to unwind, unwind, and reconnect with nature while improving the quality of life in towns. Healthy rivers are crucial to the spiritual, cultural, and physical well-being of Aboriginal people.

A healthy and productive river system has advantages that go far beyond the river bank. Some of these advantages are obvious, while others are not.

However, every one of them—plants, animals, and people—is vital to the future of our river communities.

Here are a few examples of how water scarcity affects the environment.

1. Decline in Wetlands

Since 1900, wetlands all around the world have been lost by about 50 percent. Wetlands contain dense populations of creatures, including mammals, birds, fish, and invertebrates, and provide breeding grounds for many of these species.

They are among the planet’s most productive environments. The cultivation of rice, a food essential for half the world’s population, is also supported by wetlands.

Additionally, they offer a variety of ecosystem services to humanity, like flood management, storm protection, water filtering, and recreation.

2. Defective Ecosystem

In times of water scarcity, natural landscapes frequently suffer. Formerly the fourth-largest freshwater lake in the world, the Aral sea is located in central Asia.

But the sea has lost an area the size of lake Michigan in just three decades. Due to the increased pollution and water use for farming and power production, it is now as salty as an ocean.

The sea has receded, leaving behind filthy land. Food is in short supply as a result of this ecological catastrophe, which has also increased infant mortality and decreased life expectancy for the local population.

3. Diseases

If you don’t have access to clean water, you run a higher risk of contracting infections from the water you do have. Those infections will enter your body whether you drink the water or use it to bathe.

People are frequently capable of spreading bacteria and infecting others. In extreme situations, these illnesses may result in fatalities and even traverse international borders, which may also produce pandemics.

4. Sanitation Issues

Without access to clean water for drinking, cooking, cleaning, or bathing, which is necessary for several daily functions, people typically find themselves in unclean situations.

Diseases, like the ones we discussed above, become considerably more of a problem when people lack access to good sanitation than they otherwise would.

Additionally, it contributes to mental health problems like despair and anxiety.

5. Migration

Waves of migration could result from a lack of water. Millions of people may lose their means of subsistence if significant tracts of land are rendered unusable for farming or habitation due to water scarcity.

These people might have to migrate to other areas to survive, which would strain the migrating areas.

6. Destruction of Habitats

Water is essential for all life on our planet. A longer-term water shortage could also result in the extinction of entire habitats.

If there isn’t enough water available, animals and plants can either perish or have to relocate.

7. Loss of Biodiversity

Some creatures may go extinct if there is a severe lack of water in a location because they would starve or thirst to death. Serious biodiversity loss could result from many plants no longer being able to grow and reproduce suitably.


We have seen that our economy and environment are adversely affected by water scarcity. We should act now in taking action to reduce the reduction of freshwater resources the way we can. We can still do something about this matter.


A passion-driven environmentalist by heart. Lead content writer at EnvironmentGo.
I strive to educate the public about the environment and its problems.
It has always been about nature, we ought to protect not destroy.

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