Virtual Water: Exporting Water in Crops

How water is embedded in the crops and goods a country exports, why India's rice exports carry huge amounts of water, and what that means for policy.

Virtual water is the water used to produce goods. When goods are exported, their water goes with them.

The idea

Economist Tony Allan coined the term in the 1990s. A country short of water can import water-intensive goods instead of growing them.

India’s rice exports

India is the world’s largest rice exporter. Growing rice requires large amounts of water, much of it from depleting groundwater in Punjab and Haryana.

In effect, India exports billions of cubic metres of water every year through rice.

The paradox

A water-stressed country exporting water-intensive crops seems odd. It happens because:

Free power and MSP make rice profitable.
Water isn’t priced at its true scarcity value.

Policy ideas

Crop diversification away from rice in water-scarce regions.
Pricing water or power to reflect scarcity.
Considering water footprints in trade policy.

Caveat

Virtual water is one factor; trade also depends on income, jobs and markets.

The shipment

A ship carries basmati rice from India to the Gulf. Hidden inside is water pumped from Punjab's aquifers, now gone to a desert country.

Thinking trade only moves goods

It also moves the water, land and energy used to make them.

Key takeaways

Virtual water is water embedded in goods.
India exports large amounts of water through rice.
Underpriced water and power encourage this.
Crop diversification and pricing could help.