Budgets Priorities for the Water Sector, what does it mean for water startups?
Rating agency Moody’s recently indicated that India faces the risk of a rating downgrade due to increasing water scarcity, which could significantly impact agriculture production, industry operations and incomes of affected communities. In this light, understanding the government’s priorities for the water sector is crucial.
In this recent budget for FY 25, around INR 98,000 crores was allocated to the water sector, which is around 5% of the proposed expenditure across all sectors through central and centrally sponsored schemes. The allocation to the water sector remained similar compared to last year but has risen by almost 30% past two years. The water budget is divided into two major categories: demand-side measures, which improve access to drinking water and sanitation, and supply-side measures, which focus on river rejuvenation and improving groundwater supply. The majority of the budget expenditure is directed towards demand-side measures.
Enabling water and sanitation to rural India remains a top priority, implemented through Jal Jeevan Mission (JJM) and Swachh Bharat Mission (Gramin). The second priority is enabling water for agriculture, achieved through the Pradhan Mantri Krishi Sinchai Yojna. Drinking water and sanitation for urban India is the third priority, implemented through Mission AMRUT, for which allocations have increased by almost 50% this year. River rejuvenation is mostly driven by river linking projects, which have yet to take off. Lastly, groundwater management, including monitoring and recharging groundwater, is also prioritized.
What Does This Mean for the Startup Ecosystem?
Water scarcity and a positive policy environment are resulting in a rise in venture capital investor interest in this sector. So far, funding has mostly gone to seed-stage companies in urban/industrial water treatment and water measurement, including Indra Water, Digital Paani, Solinas Integrity, and Fluxgen. In the rural water treatment sector, only one company, Rite Water Solutions, which enables drinking water access, has been funded.
There are undeniable opportunities to solve problems in the rural water supply sector, including water metering, improving water quality, and using wastewater. Additionally, groundwater management, including recharging water sources, and mapping and monitoring them, presents new avenues. While mainstream venture investors remain hesitant as these startups struggle to find customers other than the government, there is hope due to emergence of investors such as Incofin Water Access Acceleration Fund and Nab Samrudhhi who have a mandate to invest in water sector.
As in the past, some of these budgetary resources will flow to water startups through grants and related support. This is definitely positive news for the sector.
