Brazil is in trouble. A million people were out on the streets on Sunday to demand the resignation of President Dilma Rousseff. The immediate reason for the wave of public anger is a corruption scandal at Petrobras, the government oil company. But the deeper cause is the implosion of the Brazilian economy. Output is contracting. The central bank has been forced to increase interest rates because inflation is very high despite the recession. The current account deficit has soared. The currency is at half its peak value against the dollar in 2011. Public finances are in a mess. There has been a wave of corporate bankruptcies.

The crisis that is slowly unfolding in Brazil right now is a reminder of what could have happened in India if the right lessons had not been learnt during the run on the rupee in August 2013. P. Chidambaram deserves credit for beginning the course correction after several years of drift under his predecessor as finance minister. The Reserve Bank of India did well to increase interest rates to bring down inflation. India is no longer considered a fragile economy. International Monetary Fund managing director Christine Lagarde this week merely echoed what many others have already said: India is one of the few bright spots in the global economy.

The current economic woes in Brazil should not be a cue for schadenfreude. There are two significant lessons to be learnt from the economic implosion in that country.

First, commodity cycles can mask deeper fissures in an emerging economy. Brazil rode the global commodity boom that was sparked off by Chinese hunger for everything from energy to metals to food. The sharp decline in Chinese growth is one important reason why global commodity prices have fallen off a cliff. Brazil has been particularly hurt by the drop in the prices of coffee, sugar and soybeans. The failure to diversify the economy is now hurting.

India is a mirror image of Brazil in that sense. It is a major commodity importer. The massive commodity deflation since the last months of 2014 has been an unexpected bonus for the Indian economy. It has helped bring down the import bill as well as domestic inflation. These mask three structural challenges: the inability to grow exports of manufactured goods, weak energy security because of a high dependence on imported crude oil and high food inflation. The current commodity price declines should be seen as an opportunity for India to address these hard issues rather than just cashing the cheque.

Second, Brazil has shown more enthusiasm for lavish public spending programmes rather than difficult structural reforms that consolidate economic gains during boom times. It went through a similar cycle in earlier decades. Brazil was one of the stars of the development economics world in the 1950s and 1960s. Its governments front-loaded all sorts of spending commitments in the mistaken belief that the good times would last in perpetuity. The economy tumbled into a crisis in the mid-1970s, and the next two decades are now seen as lost decades for that country.

Such hubris is not uncommon in India as well. We saw it in abundance in the first term of the Manmohan Singh government, when policymakers believed that double-digit economic growth was inevitable. The quick recovery from the global financial crisis further fanned hubris. Economic reforms were put in cold storage because of the mistaken belief that rapid growth was inevitable.

The Narendra Modi government would do well to remember these lessons from history. There is no doubt that India is in a sweet spot right now: growth is picking up, inflation is down, the current account is almost in balance, public finances are being repaired and the currency is stable despite the dollar rally. There are two options now: either passively enjoy the good times or pursue overdue structural reforms that put the Indian economy on a stronger footing in the coming decades.

That is the real lesson from the economic crisis in Brazil several thousand miles away from New Delhi.

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