AIIB eyes bigger India water funding push as El Niño threatens dry spell

The Asian Infrastructure Investment Bank (AIIB) is aiming to expand its water sector funding in India as worsening El Niño weather patterns threaten to cause the country's severe dry spell since 2009, according to Bloomberg.

Jang Ping Thia, acting chief economist at the Beijing-headquartered multilateral bank, told Bloomberg News that the lender plans to finance an expanded series of essential water infrastructure developments and provide policy-based loans aimed at driving regulatory reforms.

Speaking from New Delhi during the India International Water Week, Thia highlighted that India—the bank's top borrowing country—can request "policy-based lending to reform the water sector."


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Although the AIIB has allocated $13.8 billion in total funding to India since it began operations, direct loans designated for water-related projects account for less than 7%. The institution is pivoting its focus toward water projects as extreme weather disturbances imperil growth across South Asia’s largest economy. India is currently dealing with a 15% rainfall shortfall this monsoon season. Maharashtra, India's most affluent state which includes the financial hub Mumbai, has reported drought conditions across multiple districts as reservoir levels fall. Meanwhile, Karnataka, home to tech capital Bengaluru, has implemented state-wide drought relief measures.

Additionally, broader infrastructure loans from the AIIB may feature water-conservation mandates, such as automated shut-off mechanisms for solar irrigation pumps under a $1.1 billion project in Maharashtra. The bank also intends to direct capital toward industrial wastewater recycling, water utilities, and groundwater replenishment.

A joint study published Friday by the AIIB and climate think-tank Council on Energy, Environment and Water highlights a $35 billion potential market in treated wastewater reuse and a $118 billion opportunity in micro-irrigation systems.

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However, attracting these investments will require crowding in private sector capital into an area where public tax revenues currently cover 85% of financing, according to the lender.

Commercial private investment has remained subdued because most water developments function as public goods. Thia noted that urban water utilities present the most viable entry point for private enterprises, highlighting smart metering and residential billing as proven frameworks to secure reliable revenue streams.

Even so, that alone will not fully resolve the systemic shortage. The agricultural sector is “decisive,” Thia emphasized, because it consumes as much as 80% of India’s freshwater supplies.

(With inputs from agency)