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Dramatic changes should not undermine globally accepted standards.

While the world is preoccupied with the stability of the western banking system, China has been busy overhauling its financial regulatory architecture. The dramatic changes are China’s fourth major reform in the past two decades, bringing the financial regulatory system under the tight, centralised control of the Chinese Communist Party.

China’s financial sector is working to establish itself as a safe and efficient system. The country has been building its supervisory capacity since 2003 to address the fault lines. It has undergone reviews by the International Monetary Fund, the Financial Stability Board and the Basel Committee. In 2017 and 2018, two new state institutions were added to the regulatory architecture to strengthen financial stability coordination and supervision of banks and insurers.

With a major new reform announced on 7 March, this work has gone even further.

Tight grip on policies and governance

China has announced plans to create a new regulatory body – the National Financial Regulatory Administration – to replace the China Banking and Insurance Regulatory Commission. Responsibility for regulating China’s financial sector will move to this new administration and away from the People’s Bank of China, CBIRC and the Financial Stability and Development Committee.

The reform targets four broad areas: the financial stability framework; supervision, consumer and investor protection; functioning of capital markets; and organisation of the central bank.

It aims to oversee money, markets and financing to ensure China becomes a ‘moderately developed state’ by 2035 (an avowed purpose of the National Parliamentary Committee). The party will tightly control the financial sector’s policies and governance, including resources and salaries. In other words, China has made it explicit that the financial system is an arm of the state – more a ‘utility’ as opposed to a commercially orientated, market-based system.

While China has always been a state-dominated economic system, the March 2023 shift is a regime change. It raises uncertainties about vital daily interactions, such as regulatory governance and prompt enforcement of corrective action, financial sector policies, macroeconomics and entry of foreign economic agents into the domestic market, alongside integrating Chinese financial firms into global finance.

China as a global superpower

It is atypical for China to implement such sweeping reforms. It prefers a well-staged approach to win party-level support. While the complexity of the financial sector grows, the financial markets have witnessed several episodes where hidden risks have abruptly amplified. An empowered, centrally controlled architecture may help avoid this in future. The central bank must also rid itself of legacy functions to focus on monetary management, payments, financial technology and internationalisation. Political economy considerations, however, have dominated the push for the new reform.

For a long while, the party’s preoccupation has been with China’s future as a global superpower, with social harmony at home. A view building up within the party since before the 2008 financial crisis is to regard economic (and financial) security as an instrument for national security and China’s global ambitions. Such thinking prompted the setting up of its first sovereign fund, with banks and state-owned enterprises taking on a larger global footprint and China becoming the number one non-traditional sovereign lender to other sovereigns.

The March 2023 economic and financial governance reform aims to ‘modernise’ economic administration in China. The party believes the current architecture is not fully aligned with building China into a modern socialist market economy. Therefore, the party’s leadership will guide and be accountable for the socialist modernisation of the financial regulatory and institutional set-up.

Guard railing the financial structure

The reformed regulatory architecture will depart from the principles outlined in various international financial standards. While it remains China’s prerogative to oversee its financial sector the way it sees best, formal clarifications and communicating the operating details of the new arrangement will help to reassure that, despite a regime shift, the financial industry will retain its strengths and that party politics and non-economic provincial interests will not override the effectiveness of regulation and supervision.

China cannot set aside the practices enshrined in globally accepted standards for effective regulation and supervision. Given that China is seeking the status of a moderately developed state by 2035, using the financial sector for political and social priorities – and national security goals – must not divert attention from continuing to clean up and stabilise the financial system.

The world will watch how the party achieves its broader goals and effectively regulates the financial sector. China knows that prudential rule-making responsibilities will only grow with the rising complexities of climate-related exposures, rapid financial technology developments and artificial intelligence and machine learning use in the financial services industry.

The expectation from the international standard-setting community is for China to continue advancing its participation. Maintaining a transparent, operationally effective and high-quality regulatory regime is the best way for China to attain its broader economic and strategic goals.

Udaibir Das is the former Assistant Director and Adviser of the Monetary and Capital Markets Department at the International Monetary Fund. He is a Non-Resident Fellow at the National Council of Applied Economic Research, a Senior Non-Resident Adviser at the Bank of England, a Distinguished Fellow at the Observer Research Foundation America and a Distinguished Visiting Faculty at Kautilya School for Public Policy.

There is a need for community-based approaches for resolving the water crisis and liberating women from the task of fetching it

India accounts for 18 per cent of the world’s population, but holds only 4 per cent of its water resources, making it one of the most water-deficient regions in the world

As the annual World Water Day was celebrated across the globe on March 22, highlighting the cross-cutting theme of clean water, sanitation and hygiene (WASH) for 2023, the significance of fresh water and, even more so, its rising shortage in most parts of the world has come home to us forcefully. This is also the time when the United Nations World Water Development Report (WWDR), providing a detailed assessment of the world’s freshwater resources and their sustainable management, is released. And the report card for this year is in the red.

This compelled us to sit up and notice the criticality of poor access to water and its cascading adverse impact on gender equality, health, and education. WWDR 2023 finds that around 10 per cent of the world’s population lives in countries experiencing extreme water scarcity. It also finds that 26 per cent and 46 per cent of people globally lack access to safe drinking water and basic sanitation, respectively. What is of increasing concern to us is the revelation that 80 per cent of the people living under persistent water stress reside in Asia, particularly India, Pakistan, and north-east China.

The UN Report’s analysis is corroborated by an erstwhile Niti Aayog report. This pointed out that India accounts for 18 per cent of the world’s population, but holds only 4 per cent of its water resources. This makes it one of the most water-deficient regions in the world. The Central Ground Water Board of the Ministry of Jal Shakti too claims that continuous unregulated ground water extraction has contaminated water resources. This poses a threat to communities depending on these sources.

A recent study on the livelihood and health challenges facing the riverine communities of the river Ganga, jointly conducted by the National Council of Applied Economic Research (NCAER) and the Tata Centre for Development at the University of Chicago, also highlights the mounting levels of pollution in the river and its deteriorating water quality. Using a multi-disciplinary approach, this study encompassed a variety of stakeholders in West Bengal and Uttar Pradesh, the two states where selected river stretches were examined. The study finds that, notwithstanding the flagship Government programmes to clean the Ganga including the Ganga Action Plan and the Namami Gange National Mission, little has been achieved in terms of tackling pollution.

It is also estimated that the Ganga river basin, which is the world’s most populous river basin, receives 2,723.3 million litres of wastewater daily from industrial discharges and effluents, and serves as a site for anthropogenic activities like laundry, washing of farm animals, open defecation, and urination, thereby pushing the pollution levels in the river beyond permissible limits.

Another NCAER project, the India Human Development Survey (IHDS), jointly undertaken with the University of Maryland, US, also documents the challenges in accessing clean water and sanitation across the country, particularly in its villages. The IHDS, a multi-topic panel survey of 41,554 households in 1503 villages and 971 urban neighbourhoods across India, finds that only 13 per cent of rural households receive piped water in their homes. Others have to depend on external sources.

The IHDS also flags the gender element in the water conundrum, as households without access to indoor water have to spend substantial time, estimated at 109 minutes per day in rural areas and 76 minutes per day in urban areas, collecting water from distant sources, and this burden is mostly shouldered by the women in the households, which in turn affects both their productivity and quality of life. As many as 94.8 per cent of households without indoor water report women fetching water. This is compared to only 70 per cent reporting male involvement. In fact, girls in many of these homes drop out of school or neglect their studies to supplement the family’s water collection efforts. This has an impact on both education and labour market participation for women.

How can India overcome these challenges and synchronise its water-related policies with WWDR 2023 to “accelerate the change to solve the water and sanitation crisis”? As pointed out in the WWDR itself, one of the solutions is the implementation of programmes like the Jal Jeevan Mission. This envisions safe and adequate drinking water through individual tap connections by 2024 to all households in rural India.

There is a need for other community-based approaches for not merely resolving the water crisis but also for liberating women from the burden of unpaid care work, and paving the way for better health and education outcomes across rural and urban populations in the country.

(Anupma Mehta is Editor and Sanjib Pohit is Professor at NCAER. Views are personal)

Though the government has been running a Sub-Mission on Agricultural Mechanisation since 2014, a comprehensive database of farmers’ usage of farm machinery isn’t available.

Ownership of power farm equipment in India is low. The recently released NCAER White Paper on ‘Making India a Global Power House in the Farm Machinery Industry’ suggests that there are both demand and supply challenges in this industry. A key challenge is data quality.

On the demand side, for any robust analysis, there’s a need to know: how many farmers are using machinery; what types of machinery they are using; do they own the machinery or are they renting it — and if renting, how much are they paying for it; and what impact the machinery has on agricultural productivity. Also, there’s a need to know if farmers have turned into entrepreneurs by leasing equipment, what kind of equipment they are leasing and whether they are making prohts.

Ownership data are available from the All-India Debt and Investment Survey (AIDIS) published by the Ministry of Statistics and Programme Implementation (MoSPI). The AIDIS Survey 2019 probed farmer households about: (a) ownership of tractors; (b) power tillers/power-driven ploughs; (c) crop harvesters (tractor power-driven)/self-powered combine harvesters; (d) threshers, other power-driven machinery and equipment; and (e) laser land leveller.

It found that, as on June 2018, only 4.4 per cent of agricultural households owned tractors. And cultivator households that owned any one of the non-tractor farm equipment(options b, c, d and e) was 5.3 per cent.

As for rental data, they are taken from ‘Land and Livestock Holding of Households and Situation Assessment of Agricultural Households’, published by the MoSPI. It was found that 63.5 per cent of agricultural households were spending on hiring machinery and equipment for crop production as on June 2018.

Though the government has been running a Sub- Mission on Agricultural Mechanisation (SMAM) since 2014, a comprehensive database of farmers’ usage of farm machinery isn’t available. Also, there are newer types of farm equipment available — planters, seeders, transplanters, fertiliser distributors, manure spreaders, seed cum fertiliser drills, etc — than are being probed in the surveys. The world has moved away to crop-specihc, operation-specihc and region-specihc farm machinery, which are not captured by the surveys.

On the supply-side, since there is no dedicated National Industrial Classihcation code for the industry, the 7- digit product classihcation codes from the Annual Survey of Industries was used, with the relevant codes clubbed together to form the industry. The same is not available for Unincorporated Enterprises covered in the Enterprise Survey.

Size of the sector

One has to use approximations to estimate the size of the sector, including both organised and unorganised. The farm machinery sector is 0.6 per cent of the overall manufacturing sector and tractors form 70 per cent of that share. The challenge of mapping National Industrial Classihcation (NIC) to Harmonised Commodity Description and Coding System (HS) codes remains.

Sometimes the same HS code can be used for two products — for instance, 84328020 is used for both power and rotary tiller. While functionally they both are the same, the former is powered by an engine and the latter can be mounted on a tractor or a power tiller.

Further, the NIC & HS codes need to be updated to re ect the latest farm machineries. Also, estimating demand, domestic supply (from ASI product codes) and external supply (imports) was attempted, but we could not “match” the demand-supply because the disaggregated codes simply did not match. The matching exercise could be done only broadly.

The data quality on both the demand and supply sides needs to improve.

Bhandari is Professor, Joshi is Fellow, and Sahu is Associate Fellow, at NCAER. Bansal was an external consultant to the research project. Views are personal