Virtual Water is the amount of water used for the production of a good, product or service. It is also known as "embedded, embodied or hidden water". 

The Water Footprint is an indicator of water use that looks at both direct and indirect water use of a consumer or producer. The water footprint of an individual, community or business is defined as the total volume of freshwater that is used to produce the goods and services consumed by the individual or community or produced by the business.

Professor John Anthony Allan from King’s College London and the School of Oriental and African Studies was the creator of the virtual water concept, which measures how water is embedded in the production and trade of food and consumer products.

For instance, to produce one kilogram of wheat we need about 1,000 litres of water, i.e. the virtual water of this kilogram of wheat is 1,000 litres. For meat, we need about five to ten times more. The precise volume can be more or less depending on climatic conditions and agricultural practice. The water is said to be virtual because once the wheat is grown, the real water used to grow it is no longer actually contained in the wheat. The concept of virtual water helps us realize how much water is needed to produce different goods and services. In semi-arid and arid areas, knowing the virtual water value of a good or service can be useful towards determining how best to use the scarce water available.

Virtual water trade refers to the idea that when goods and services are exchanged, so is virtual water. When a country imports one kilogram of wheat instead of producing it domestically, it is saving about 1000 liters of real indigenous water. If this country is water scarce, the water that is 'saved' can be used towards other ends. If the exporting country is water scarce, however, it has exported 1000 liters of virtual water since the real water used to grow the wheat will no longer be available for other purposes. This has obvious strategic implications for countries that are water-constrained.

Green, Blue & Grey Components of Virtual Water

The virtual water content of a product consists of three components:

The ‘green’ virtual water content of a product is the volume of rainwater that evaporated during the production process. This is mainly relevant for agricultural products.

The ‘blue’ virtual water content of a product is the volume of surface water or groundwater that evaporated as a result of the production of the product.

The ‘grey’ virtual water content of a product is the volume of water that becomes polluted during its production.