One is that some of the programmes that have taken a high profile view of the issue and taken on loans that are meant to address corruption have not produced the expected results. Some of the loans that have gone to particular sectors and addressed corruption in that process, on the other hand, have been more successful. For example, in the case of energy reforms, when as a by-product, you bring buyers and sellers of energy into the same market with less of government role and opportunity for corruption, there can be greater transparency, and also a bigger impact. Based on our evaluation, Turkey is a good example; with an effective lending for energy (reform), and with a valuable side effect of less corruption. We have a series of examples like that from Uganda, Bulgaria and so on. So, the importance of corruption in governance will continue.
One of the concerns that is cropping up across countries is the issue of income inequality. While poverty is coming down, even in countries such as India, inequalities are widening. Do the experiences of the middle income countries (such as China, Brazil and Russia) in this respect hold lessons for countries such as India?
Absolutely yes; and I would say it is a two-way link. I say that because India’s income inequality is far lower than that of China. But the trend in India (as with China) is worrisome. And, there are at least two aspects of learning. One, in India, the regional differences are a big factor. You would expect that states which are poorer or lagging, have a much better chance to grow faster; because you are so far inside the so-called production possibility frontier, and there is so much scope to grow faster. But this has not applied to regional differences in India and China at the moment, although it is changing in India.
In China though, the richer states have grown faster than the average, and poorer states have grown slower than the average. Conclusion: inequality widens. In India, there are some qualifications now. But over the last 10 years, without doubt, states such as Gujarat, Andhra Pradesh and so on have grown much faster, while Bihar, Uttar Pradesh and a couple of other states have grown much slower.
Brazil has been different. In that it has had worse inequality than India and China. But over the last five years, inequality has been coming down.
For countries like China, the experience of India with employment guarantee scheme should not be ignored. It targets those who are working. But Brazil has an experience which targets those about to work. They have what you call conditional cash transfers, a successful programme initiated earlier in Mexico. Under this, you transfer cash to those below the poverty line on condition that their children go to school and get vaccination. The cost (of the programme) is reasonable considering that you only target the lowest income strata. Its benefits are different from a simple transfer in the sense that it is an investment into the future; you have to show educational and health investments. So poverty in the next generation is likely to be lower.
Are there lessons for India?
Yes. Employment guarantee schemes with conditional cash transfers can be a quick win-win; the downside (avoiding poor targeting and leakages for example) needs to be addressed. Politically it is great. (Luiz Inacio) Lula (da Silva) won his second term (as President of Brazil) partly on the basis of the conditional cash transfer programmes. It also can be good economics.
Furthermore, neither India, China nor Brazil have begun to seriously tackle income inequality among the older generation. So, how does one provide effective social safety nets, which have not yet been built into any schemes. So, these are the lessons that can be learnt by each of these countries from each other.