Opinion BSST in class

For such peer comparisons,we need to identify a set of peer countries. These peer countries should satisfy two requirements. First,they should be large and complex countries. Second,their constitutional,legal and governance frameworks should be similar to that present in India today.

Goldman Sachs made the phrase “BRIC”,for Brazil,Russia,India and China,famous. This could suggest that Indian policy analysis could usefully engage in comparisons and contrasts against Brazil,Russia and China. But when careful analysis of policy questions is undertaken,there are acute disparities between India on one hand and Russia and China on the other. Whether we analyse infrastructure regulation or financial regulation,policies about privatisation,about public-private partnerships,or the institutional environment in which growth takes place,the policy climate in Russia or China is completely different from that seen in India.

In a democratic society,accountability of government agencies,placing the interests of the population above those of the executing agency,and the implementation of a process of transparent rules and laws are of supreme importance. As a consequence,policies that may be acceptable in Russia and China,where the rule of law is not prevalent,are often not acceptable in India. The mechanism through which a highway is built,a public sector enterprise is sold to a private company,or land is acquired for public use in China and Russia is very different from what would work in India — and we in India would not want to go down their route,given our interest in fostering accountability,checks and balances,and protection of the rights of the individual.

If BRIC is not a meaningful club for the purpose of comparative law and policy analysis,then an alternative club needs to be created. We start from the G-20 member countries,so as to focus on large and complex countries. We then turn to a series of indicators which measure the legal and governance environment,including: (i) voice and accountability,(ii) political stability,(iii) government effectiveness,(iv) regulatory quality,(v) rule of law,(vi) control of corruption,(vii) economic freedom,and (viii) political freedom.

On these parameters,China and Russia prove to be highly dissimilar to India,with inferior governance quality. Countries like the UK and the US have very high scores on these issues and are thus also unlike India. Policy proposals that work well in the US and the UK are often not useful in India,given the more fragile governance environment in India.

The four G-20 countries which have values which are the closest to India are: Brazil,South Africa,South Korea and Turkey. There is a striking commonality between

India and the BSST countries when it comes to the above eight measures of the constitutional,legal and governance environment. Brazil and South Africa are complex federal countries much like India,with provinces and diverse ethnic groups. Barring South Africa,which has a GDP of $276 billion,the other three are in the right ballpark when compared with India on nominal GDP,with Korea at $929 billion,Turkey at $735 billion and Brazil at $1.58 trillion.

This reasoning suggests that when faced with a diverse array of issues,Indian policy reform should take an interest in how things are done in the BSST countries. There is much to be learnt by undertaking comparative legal and policy analysis against these four countries. All four countries are ahead of India in terms of per capita GDP. South Korea’s is ten times that of India,and the other three’s are three to four times that of India. South Korea and Turkey are members of the OECD,which exerts a beneficial influence on improving laws and governance. Hence,on many issues,the policy choices of these countries are likely to be superior to what India is doing. In other words,there is a lot to learn.

In terms of legal traditions,none of these countries have the British-style common law with which India started out after independence. In this dimension,these peer comparisons are not useful; India needs to move more towards a UK/US-style common law framework — given the extensive evidence of the superiority of common law as a foundation for liberal democracy and vibrant economic growth. But here also,Russia and China are not better peers because neither of them has a common law system,and their rule of law is much inferior to that seen in the BSST countries.

For a policy analyst,studying the BSST countries is difficult given the language barrier: most people in India do not know Portuguese,Afrikaans,Korean or Turkish. But this is not particularly different from the constraints faced in studying Russia or China; most people in India do not know Russian or Chinese. In practice,examining the BSST countries would be done by looking at cross-country databases and at research materials available in English.

The writer is professor at the National Institute of Public Finance and Policy,Delhi