Mutual benefit: Brazil and India can learn from each other in economic reform and multilateralism

Brazil’s President Jair Bolsonaro capped his official visit to India with an address at the India-Brazil Business Forum. Bolsonaro, the third Brazilian president to be chief guest at the Republic Day parade, was accompanied by a large business delegation. This is in sync with his most notable achievement: Economic revival. Brazil and India have in common an economic structure characterised by messy tax laws, government overspending and a large, sluggish bureaucracy. The manner in which Bolsonaro, a social conservative, has handled economic reforms holds a lesson for us.
As an ethnic nationalist leader, Bolsonaro may appear to have many things in common with Prime Minister Narendra Modi. He has, however, been able to draw a clear distinction between his social agenda and the absolute necessity to reform Brazil’s economic structure. In his first year, he managed to cobble together adequate cross-party support to implement critical pension reforms delayed for two decades. This has been followed by steps to clean up the tax system, significant administrative reforms and economic deregulation. The key lesson Brazil’s experience holds is that economic reform needs a capable team with a coherent plan. Bolsonaro put together a team and empowered them. A consequence is that Brazil’s economy has turned a corner, growth prospects have brightened and the country is open to investments and trade pacts.
On the flip side, Bolsonaro is a climate change sceptic. His poor record in dealing with Amazon forest fires drew widespread global criticism. In contrast, Modi has used India’s size and geography to take the lead in creating an institutional mechanism for renewable energy: the International Solar Alliance, a grouping of more than 100 solar resource rich countries located between the Tropics of Cancer and Capricorn. Yet, the government’s economic track record leaves a lot to be desired. Economic growth has slowed for six successive quarters, import substitution is back and unemployment is high.
Bolsonaro’s approach to economic reforms is worth emulating. A part of India’s lacklustre record here can be explained by lack of policy coherence. For instance, structural reforms like the bankruptcy code have not been complemented by governance reforms in the banking sector where government is the dominant owner. If anything, the government is in a strong position to transform the economy on account of the PM’s credibility and BJP’s parliamentary strength. Even as Brazil and India take steps to enhance their meagre bilateral trade, there are lessons the partners can draw from each other.
This piece appeared as an editorial opinion in the print edition of The Times of India.

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