Comparison and Explanation: New Developmental States

A comparison of the performance of Brazil and India under the intensified exposure to economic globalization, which both counties experienced from the early 1990s onwards, reveals both interesting parallels and remarkable differences. Brazil clearly made the most dramatic policy changes with a rapid commercial opening, extensive privatization of state-owned enterprises and an opening up for foreign investors in almost all sectors of the economy. In comparison, the Indian policy of economic liberalization was slower and more careful, while maintaining the overall momentum in the policy reforms despite several changes in political leadership. The commercial opening and the easing of restrictions on foreign investments came only gradually in India, and the privatization of state-owned companies had hardly begun after more than ten years of economic reforms. In the financial sector, the policy changes in India were also much more cautious than in Brazil, with the Indian public sector banks retaining their dominant position and with a limited role for foreign banks. While both countries moved towards convertibility on the foreign accounts, India’s liberalization was again much slower and stopped short of full capital account liberalization allowing its Reserve Bank to continue regulating flows of foreign capital. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.