MARGIN: Volume 18, Issue 1-2

Margin: The Journal of Applied Economic Research is a peer-reviewed bi-annual journal published jointly by NCAER & SAGE International.

Volume 18, Issue 1-2, February–May 2024 includes the following papers-

Editor: Poonam Gupta  Managing Editors: Shashanka Bhide, Anil Kumar Sharma, Ishita Trivedi

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Rethinking African financial stability reports

From risk management to catalysts for growth. Following the Asian and 2008 financial crises, financial stability became the bedrock on which modern market-based financial systems were designed to withstand shocks. This shaped how central banks globally managed systemic risks, with many, especially in advanced economies like the Bank of England and Sveriges Riksbank, beginning to publish financial stability reports. As a policy instrument, the FSR reflected a system’s robustness in managing systemic risks and the needed reforms.

Fast-forward to today: 70 central banks across all income levels release reports primarily detailing macroeconomic conditions, systemic risk threats, stress test results and adherence to international standards.

However, adopting an FSR suited for developed financial systems does not cut it for low-income developing countries where the context could not be more different. These countries, with small and shallow financial markets and highly adverse macroeconomic and balance-of-payment conditions are particularly vulnerable to disruptions and drying up of financing, magnifying endogenous structural weaknesses. Reliance on market mechanisms and private sector agents to adjust to such disruptions or respond to a country’s development financing needs is a tall order.

The state of financial systems and their riskiness vastly differs along income lines (Figure 1). Some countries have elevated risk of  government debt and banking crises, and most of the countries with a high sovereign-bank nexus – a phenomenon prevalent across all LIDCs – tend to be less ready to manage financial stress and make timely policy interventions.

Figure 1. Readiness and risk

Financial sector risk outlook in the next 12 months by income group (% of countries in sample)

Source: World Bank, Finance and Prosperity Report 2024

Note: Panel A: Assessment of domestic financial sector risks over the next 12 months as identified by World Bank regional staff. The sample includes 50 EMDEs. See the report’s Appendix B for specific countries.

The case for rethinking financial stability

The Covid-19 pandemic and the ensuing crises – rising debt, climate change and developmental failures – have pushed LIDC financial systems to their limits. Over 50 conflicts worldwide, many in Africa, have further weakened financial systems by eroding public confidence, disrupting financial flows, diverting money into nonformal channels and uses, and exacerbating fiscal distress.

OMFIF’s 2023 Absa Africa Financial Markets Index offers a detailed assessment of the financial market vulnerabilities highlighted in the FSRs. It underscores significant disparities in financial market development across the continent. In 2023, South Africa and Mauritius led the index in market transparency, liquidity and regulatory frameworks, with scores exceeding 70. These countries benefit from well-developed financial systems that attract foreign investment. However, countries like Ghana, Nigeria and Kenya lag, struggling with limited capital market depth and weak regulatory environments.

Global economic disruptions, including supply chain shocks and exchange rate volatility, have compounded these local vulnerabilities. These pressures prevent LIDC financial systems from facilitating much-needed investment growth and development financing.

Areas for improvement

Unfortunately, as a policy instrument, many African FSRs mirror templates used in advanced economies, focusing on traditional risks – liquidity, credit and market risks – without addressing the role of finance in long-term growth. These LIDCs require a tailored approach towards financial stability policies, aligned with their local market realities and capacity, which goes beyond systemic risk and prudential management to include fostering long-term and sustainable economic growth. Several key areas are underrepresented in African FSRs, limiting their effectiveness to evaluate the tradeoffs between finance for development and finance as a vehicle for wealth management, unhealthy arbitrage and speculative investment.

For LIDCs, FSRs must sharply and analytically reflect local economic realities and the critical role of finance in growth and development. Recent African FSRs highlight risks such as inflation, fiscal dominance and sovereign debt challenges. But they are unable to offer a clear narrative on how the traditional measures of financial soundness and financial stability are impacting development and growth.

Three actions could help address this shortcoming and provide a more country-specific framework for monitoring the role finance is playing in a country’s development.

First, to improve the effectiveness of FSRs, the financial stability construct should be broadened beyond managing risks to include facilitating investment in development infrastructure that supports economic growth and climate resilience. This reorientation would transform FSRs into strategic instruments that guide policy towards ensuring that financial intermediation and risk-taking foster broad-based societal benefits, rather than exacerbating existing income disparities. By expanding their scope, FSRs could play a crucial role in aligning financial stability with sustainable development goals, particularly in emerging and low-income economies.

Second, African FSRs must prioritise financial inclusion. Large segments of the population in LIDCs remain disconnected from formal financial systems, exacerbating economic fragility. Without access to credit, savings and other financial services, marginalised groups – such as microenterprises and rural communities – are excluded, weakening the broader economy. Expanding financial access would not only bolster economic resilience but also cultivate a more robust middle class, which in turn enhances financial stability. To better demonstrate this impact, FSRs should move beyond descriptive statistics on financial inclusion and incorporate impact indicators that capture the transformative role of finance in these communities.

Third, partnerships and collaboration are critical for building financial resilience. While African economies are deeply interconnected, their financial systems remain fragmented. Most FSRs narrowly focus on domestic risks, often overlooking the potential of regional or continental arrangements – including data sharing, statistics and digitalisation – to enhance the role of finance in driving growth. Incorporating regional risk assessments in African FSRs could not only help manage external shocks but also enable coordinated cross-border responses, boosting investor confidence and attracting long-term investments to the region.

As Jay Shambaugh, undersecretary for international affairs at the US Treasury, noted earlier this year, addressing the challenges of debt and development is a ‘generational challenge’ requiring decisive local and global action.

LIDCs can navigate their need for financing by strengthening the FSR as a policy instrument. The next generation of African FSRs should evolve from narrow systemic and prudential risk management tools into strategic financial policy instruments that prioritise sustainable, long-term economic progress. More robust, realistic and forward-looking FSRs will provide a blueprint for navigating Africa’s complexities, meeting its financing needs, reassuring investors and financiers and ensuring a prosperous future for its economies.

Udaibir Das is 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 and a Senior Non-Resident Adviser at the Bank of England.

Shifting Focus: Beyond High-Profile Cases, A Broader Crisis of Abuse

The recent rape and murder of a young doctor in Kolkata has once again ignited national outrage, as protests and demands for justice sweep across India. The brutality of this crime has understandably shaken the country’s conscience, thrusting the issue of sexual violence into the spotlight. However, while it’s necessary to condemn and react to such horrific cases, it’s equally important to widen our focus and confront the pervasive and often overlooked crisis of violence against women in India.
Rape, though one of the most heinous acts of violence, represents only a fraction of the abuse that women in India face daily. Women are subjected to various forms of violence—whether it’s domestic abuse, sexual harassment, molestation, and more. According to 2022 data from the National Crime Records Bureau (NCRB), cruelty by husbands/ relatives accounted for 140,019 reported cases, making it the most common crime against women. Sadly, even after more than 75 years of independence, in 2022, 6,450 women lost their lives to dowry-related violence, and 83,334 women reported assaults intended to outrage their modesty. Yet, there remains a deafening silence from both the public and policymakers regarding these forms of violence, as they often take place within the confines of the “private sphere.”

Rape weighs heavily on India’s conscience because chastity is upheld as a supreme virtue for women. However, not all rape cases evoke the same level of public outrage, and there is widespread societal ignorance regarding the large number of the rape incidents. NCRB categorises rape statistics under several headings, which can broadly be classified into rape and murder with rape/ gang rape. Of the 31,516 rape cases reported in 2022, only 248 involved murders with rape/ gang rape. Despite the severity of these cases, they account for just 0.01% of total reported rapes. Unfortunately, it is often these extreme cases that draw the most public attention and outcry. This bias extends into the justice system as well. While since 2014, conviction rates for murder with rape/ gang rape have nearly doubled, rising from 36.4% to 69.4% in 2022. In contrast, the conviction rate for other rape cases has slightly decreased, from 28.0% to 27.4% over the same period. These numbers reveal a concerning reality: while the most extreme cases are met with a strong legal response, the majority of victims are left waiting for justice, if they receive it at all.

It is worth asking why does the Indian society reserve its loudest outcry for cases of brutal rape and murder, while remaining largely silent on the many other forms of violence that plague women’s lives? Part of the answer lies in our collective discomfort with confronting the fact that violence against women is not an occasional horror, but a systemic issue ingrained in the fabric of our society. When we hear the word “rape,” it often brings to mind the image of a monstrous stranger, but this perception obscures the fact that the majority of the rapist often comes from within our homes, neighbourhoods, and social circles. In 2022, 97% of reported rapes were committed by individuals familiar to the victim but these cases are often shrouded in silence and rarely receive public attention, nor is there any societal pressure to ensure justice or support for the victims. These survivors seldom garner the same public sympathy or media coverage as high-profile cases. Instead, they are often left to endure a slow, biased, and retraumatising legal process, facing stigma and isolation from their communities.

In conclusion, the outcry in Kolkata is both necessary and justified, but it should be the beginning of a larger movement. A movement that doesn’t stop with seeking justice for one victim but aims to build a society where no woman has to live in fear—whether in public or within her own home. It’s high time the country addresses the deeper societal issues that allow such violence to persist. This demands a comprehensive approach: educating communities, reforming the legal system to be more responsive to all victims, empowering women to raise voice, and fostering a culture that condemns all forms of violence against women, regardless of the perpetrator. This effort should be accompanied by well-researched policy reforms that prioritise victim support and prevention rather than focusing solely on punishment. India will truly become a “Viksit Bharat” when every woman can live with dignity, free from violence, and has the opportunity to reach her full potential.

Jyoti Thakur is an associate fellow at NCAER, New Delhi. Views are personal.

Is South Asia staring at a climate migration crisis?

India as a major regional power needs to brace up to the reality of climate refugees.

As temperatures soar and monsoons intensify, South Asia stands at the centre of a brewing climate disaster. Recent floods in West Bengal, where rivers breached embankments and displaced thousands, have submerged vast lands.

In 2023, rainfall surged over 40 per cent above normal across South and North-Eastern India, Bangladesh, and Myanmar, displacing millions. Bangladesh alone saw over seven million people affected, while South-Eastern India was battered by cyclones. Myanmar faced landslides, cutting off entire regions from aid. This relentless destruction is no longer an anomaly — it is the region’s new reality.

Scientists predict that extreme weather events will rise dramatically. Temperatures in the subcontinent are projected to increase by 1°C by 2030, alongside erratic rainfall. Bangladesh’s low-lying coastlines, threatened by rising seas, could lose 17 per cent of its land by 2050 due to climate-induced flooding.

Cities like Chattogram and Kolkata face growing risks of inundation, while fragile ecosystems in Myanmar and North-Eastern India will crumble under recurring floods. The future for this region is increasingly hostile to human habitation. 

Livelihood impact

These climate shifts carry severe consequences for livelihoods, particularly in rural areas where agriculture is the economic backbone. Extreme heatwaves are already educing crop yields, with wheat and rice production projected to drop by up to 30 percent by 2050.

In Bangladesh, saltwater intrusion from rising seas is turning once-fertile land barren, while irregular monsoons in India’s eastern regions disrupt planting cycles. As land-based livelihoods collapse, poverty will deepen, accelerating the crisis and creating a growing tide of landless families with nowhere to turn.

This climate crisis sets the stage for one of the largest waves of climate-induced migration in history. Coastal erosion is swallowing villages in Bangladesh, and flood sare devastating Myanmar, making mass migrations inevitable. Projections show that by 2050, over 20 million Bangladeshis could be displaced due to rising sea levels.

Within India, internal migration is already surging, with the World Bank estimating that 216 million people will move within their countries by 2050 due to climate impacts.

In India alone, millions could be displaced if climate targets remain unmet. As coastal populations move inland, cities already straining under overpopulation will face a monumental challenge in resettling climate refugees.

Migration will bring severe socio-political challenges, especially in India’s politically sensitive north-eastern States. The ongoing Assamese protests against illegal immigration highlight the fragility of the region’s social fabric. A mass influx of migrants from Bangladesh and Myanmar will only exacerbate unrest, as local populations struggle to preserve their resources and identities.

Political instability in Myanmar and economic desperation in Bangladesh create a volatile situation. The demographic pressures on India’s north-eastern borders could soon lead to an untenable security crisis.

 Security issue

Migration is not just a humanitarian issue — it poses a threat to India’s national security. According to NCRB data, in 2020, 7,686 foreign nationals were found violating Indian laws.

Combined with declining agricultural productivity and worsening food security, socio-economic disparities will fuel internal unrest.

Internationally, India must prepare for a future where climate refugees become a central geopolitical issue. Managing this crisis requires deft diplomacy with Bangladesh and Myanmar while ensuring that migration policies remain humane and secure. Striking the right balance between border control and humanitarian responsibility will be crucial.

Policymakers must act swiftly. Comprehensive disaster preparedness systems are essential for coastal areas prone to cyclones and floods. Strengthening early warning systems and refining evacuation protocols can save lives.

India and Bangladesh should collaborate on cross-border water management, particularly for rivers like the Brahmaputra, to mitigate flooding caused by glacial melts. In agriculture, investing in resilient practices, such as drought-resistant crops and updated irrigation systems, will help buffer against erratic rainfall patterns.

Finally, migration policies need an overhaul. Instead of perceiving migrants as a threat, India could integrate displaced populations by focusing on skill development and offering economic opportunities in underpopulated regions.

India, as the region’s largest power, must lead with foresight and empathy. Failing to act will not only accelerate environmental degradation but may destabilise the entire subcontinent, with consequences going beyond South Asia.

The writer is with NCAER in New Delhi. Views expressed are personal.

The trap of global rankings

Instead of focussing excessively on rankings with well-recognised shortcomings, recognising achievements and refining goals consistent with national priorities will be a more fruitful approach.

Developing global indices and rankings has turned into a minor industry. The Global Competitiveness Index, Global Happiness Index, Global Hunger Index, Ease of Doing Business Index, Corruption Perception Index, Global Go-To Think Tanks rankings, you name it. Think tanks specialise in creating these indices; they are good for increased funding and publicity. Some governments boast of improved rankings, while others rant about the methodology. Life goes on until the following year when the cycle begins again.

Every time these indices appear, I wonder why some countries are where they are. Apparently, young people in Lithuania and Israel are the happiest in the world. Why are they happier than the youth in Australia, New Zealand, or Sweden? Is Gallup just counting the Jewish population of Israel, or do Arabs count? Unfortunately, these questions rarely get asked and answered.

Sometimes, we get to see strange anomalies. Take, for example, the Global Gender Gap Index. India ranked 26th on educational attainment in 2023 but mysteriously dropped to 112th rank in 2024. As far as I know, no Taliban-style attacks on Indian girls’ education have taken place. This rapid descent remains inexplicable. Could there be some anomalies in the data?

All global rankings are not equivalent. Some, like the Human Development Index, are well thought out and carefully constructed, although they also face challenges in getting accurate country-level data. Others seem to be hastily put together, often excluding perspectives from the Global South. For example, the now-abandoned World Bank Ease of Doing Business Index focused on limited liability companies, covering only 14 per cent of Indian businesses and excluding sole proprietorships, the mainstay of Indian businesses. The Global Gender Gap Index focusses on the gender gap in earnings but not in poverty — an indicator on which the United States might do poorly due to a large number of mother-only families, but where South Asian countries might fare better.

Nonetheless, given how much international organisations and foundations that fund them love ranking countries and are convinced these are effective tools in holding countries accountable, it is unlikely that any criticism will vanquish this industry. However, it is possible to hold it accountable through simple steps.

First, we must expect that any index will contain a methodological appendix that justifies why specific indicators were chosen to be a part of the index and the rationale underlying the differential weights given to these indicators. The publications must include links to source data. The lazy approach of citing the World Bank indicators or the Food and Agriculture Organisation’s indicators is insufficient. Index authors must cite the original sources for each indicator for each country. As it stands, data errors in index construction are impossible to decipher, even when we see absurd results like India’s descent from rank 26 to 112 in educational attainment in the Gender Gap Index in a year. This does involve a considerable amount of work, but hard work is what research is all about, what the public and policymakers deserve. Where primary data is presented, sample sizes, sampling methodology and confidence intervals must be presented.

Second, those who cover the release of various indices must find a way of fact-checking the results. An editorial moratorium of coverage for 48 hours after the release of the index will give time to critically examine the results and consult experts. The rush to be the first to report that India is below war-torn Sudan on the Global Hunger Index without a critical examination does not serve the public. In particular, the rankings that do not provide citations to source data and methodology should not be covered.

Third, governments must stop taking these results seriously. Countries are well aware of their priorities and hopefully try to ensure that appropriate data are available to monitor their progress. However, these efforts have little to do with how a country is ranked globally. Take, for example, the Global Hunger Index (GHI). India’s child mortality fell from 9.1 at the turn of the century to 3.1 in two decades, and stunting, defined as low height-for-age, fell from 51 per cent to 36 per cent. Where India is lagging is in caloric intake and low weight-for-height resulting in it being ranked at 117 on GHI. Data challenges for these two indicators are well recognised.

Caloric intake is estimated from consumption expenditure data, which is a poor approximation at best. Moreover, the underlying figures for undernourishment, calculated by FAO combine the 2011-12 NSS consumption data and a recent Gallup poll of 3,000 people to estimate undernourishment. These models deserve greater scrutiny for external validity. Similarly, the wasting data for India is affected by most of the fifth National Family Health Survey interviews being conducted during the monsoon due to the pandemic-related delays. Greater intestinal infections during the monsoons are associated with weight loss, which biases wasting estimates. Instead of focussing excessively on rankings with well-recognised shortcomings, recognising achievements and refining goals consistent with national priorities will be a more fruitful approach.

Amartya Sen, one of the originators of the Human Development Index, has suggested it may be time to move beyond rankings. If we can’t get away from these rankings, at a minimum, we should set up parameters under which they are accurate and sensibly used.

The writer is Professor and Centre Director, NCAER National Data Innovation Centre and Professor Emerita, University of Maryland. Views are personal

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