Corruption

Biz@India

November 2015

Corruption

With India’s role having grown larger than ever in the world economy, its focus on tackling graft needs priority. Undertaking anti-corruption measures is a must if the government wants its reforms agenda to have the desired impact. Neglecting it further will be disastrous – for the economy and the Indian society.

Corruption in India is not a newfound phenomenon. Neither is the realisation that corruption is hurting its economy; that it is the biggest threat to the well-being of any society or that India is one of the countries highly affected by this threat. The list of scandals to have hit India and its image globally seems to be endless (see Box 1). What is frustrating though is that despite the recognition that corruption is a social evil that needs to be nipped in the bud, there seems to be no end to these disturbing instances.

On the campaign trail, before Narendra Modi took oath as the Prime Minister of India in May 2014 and attained the so-called ‘rockstar image’, he touted a catchy slogan: “Na khaunga na khane dunga” (Neither I will eat nor I will let eat). What he meant was that if India brings Bharatiya Janata Party (BJP) to power, Modi would neither indulge in corruption, nor tolerate it in his government. It was partly riding on these pledges that BJP stormed to power in the 2014 general election with a decisive mandate.

Just over 15 months into the government – in what is a reminiscent of a trend that had caught up during the second term of the erstwhile United Progressive Alliance (UPA) government’s tenure – corruption allegations dominate newspaper headlines yet again. The recent monsoon session of Parliament was a washout as opposition protested over the Vyapam scandal haunting the BJP government in Madhya Pradesh and allegations that two party officials improperly used their influence to assist fugitive cricket magnate Lalit Modi. The BJP responded to the barrage of allegations by releasing a laundry list of scandals in seven grafttainted states under the Congress party’s rule.

Political Corruption

Usual bickering aside, political corruption and the criminalisation of politics has been the biggest contributor to corruption in India. An analysis of the 543 Members of Parliament (MPs) shows that 186 (about 34 pc) of the newly elected MPs have revealed in sworn election affidavits that they have pending criminal cases against them. In the 2009 Lok Sabha, the figure was 158 (about 30 pc) of the total MPs.

A total of 63 newly elected BJP MPs in the Lower House have serious criminal charges pending against them, while Congress has three candidates with criminal charges out of a total of 44. Similarly, AIADMK (All India Anna Dravida Munnetra Kazhagam) from Tamil Nadu has three out of 37 winners facing criminal charges. Proportionately, eight out of 18 Shiv Sena (an Indian far-right regional political party ) MPs and four out of 34 winners fielded by AITC (All India Trinamool Congress), a regional party from West Bengal, have serious pending criminal charges. Among the newly elected MPs, 112 have pending criminal charges against them, including murder, attempt to murder, communal disharmony, kidnapping and crimes against women. According to the Association of Democratic Reforms (ADR), nine MPs have murder cases against them, while another 17 face attempted murder cases. Similarly, there are two MPs who have cases related to crimes against women. “It has been found that the 2014 general election has seen the highest number of politicians with criminal records being elected to the Lok Sabha. Every third newly elected MP has a criminal record,” says ADR founding member Jagdeep S Chhokar. As is evident, the tie-up between politically heavyweight criminals and political parties is unprecedented. What it translates into and what examples it sets for people to follow is anybody’s guess.

The Right To Information Act (RTI) brought by the previous government has proven to be the biggest tool in the fight against corruption. While the government machinery has been brought under its fold, political parties, however, remain opposed to falling under its purview. The underlying cause behind the fear of national parties is that ‘unknown sources’ constitute over 75 pc of their funding. While civil society contests that political parties are accountable to the people, politicians say it would be difficult for parties to function if they were brought under RTI as people would then ask details on the process of giving tickets and seek confidential decisions. The irony couldn’t be more obvious.

The Ecosystem

For an ordinary Indian, a regular interaction with the state machinery over basic services explains how deep the rot has actually set in. Getting officials to issue a ration card, passport or driver’s license without asking for a bribe is almost unheard of, for the common man. This, despite several states in India having institutionalised a Right to Public Service Act as a basic right of every citizen. Why doesn’t it work? Perhaps because of the fear of consequences amongst the ordinary citizen to approach the government to complain over a wrongdoing. Lack of monitoring and enforcement, thus, is a deeper malaise corrupting Indian institutions than corruption itself.

“Lack of enforcement capacity and regulatory complexity are deep causes or foundational characteristics of India’s institutions. The other two – inadequate regulation of political finance and shortcomings in public sector recruitment and postings are more proximate offshoots of India’s institutional infirmities,” argues Sandip Sukhtankar, assistant professor of economics at Dartmouth College, New Hampshire, in a paper published by the National Council for Applied Economic Research.

One argument is that corruption is the legacy of the License Raj (elaborate system of licenses controlled by the Indian states), which ended in the early 1990s with the liberalization of India’s economy. The system created bureaucracies that were all but self-perpetuating. In a context where government workers were routinely underpaid, graft became an industry all its own. Civil servants were and remain, anything but disinterested administrators.

This, in many ways, resulted in the emergence of corruption and bribery as a legitimate tool to take decisions. This subsequently translated into an inequitable system of economic incentives that has now existed for years.

Bearing the Brunt

Take the case of food distribution as an example. Engulfed in corruption, leakages and inefficiency, India’s public food distribution system (PDS) – a network of about 60,000 fair price shops around this country of more than 1.2 billion people – is depriving millions of poor people of the food grain they are entitled to under the National Food Security Act (NFSA), thus leaving millions starving. All this while tonnes of grain rot in storage.

Chotey Lal is a daily wage labourer at a construction site in Noida, a New Delhi suburb. He not only faces financial difficulties to feed his family of five, he has never even had the good chance to get his legally entitled share of food grains from the local kirana (grocery) shop. “Whenever we go to the outlet, we are shooed away by the grocer saying stocks have run out. We end up buying expensive food from the market, which isn’t enough to feed the entire family. Everybody knows the shopkeeper is profiteering from selling grain in the black market. But what can we, the poor, do? We’ve complained at the local police station also but no action has been taken against the vendor,” he says.

Essential commodities like rice, wheat, sugar, and kerosene are supposed to be supplied to the public through this network at a fraction of the market rates. The NFSA (National Food Security Act) aims to sustain two-thirds of the country’s population by providing 35 kgs of subsidised food grains per person per month at INR 1-2 (less than 50 cents) per kilograms. However, only 11 states and Union Territories (UTs) have so far implemented the law, which was passed by Parliament in September 2013. The rest of the 25 states or UTs have not implemented it yet.

Breeding Corruption

Adding insult to injury, successive national surveys have highlighted how millions of tonnes of grain are siphoned off from the distribution system by unscrupulous merchants who sell it in the open market at high profits. Much of the food from the PDS (Public Distribution System) is also diverted to neighbouring countries in obvious collusion with officials of the state-run Food Corporation of India.

Corruption and the lack of monitoring have clearly crippled the efforts to eradicate poverty in India and improve the life of those who need the maximum help. The NFSA, for instance, provides for cheap food grains to those identified as Below Poverty Line (BPL) families as per a standard devised by the government. However, there have been huge discrepancies in the identification of the poor. West Bengal’s (an eastern Indian state) Food minister Jyotipriyo Mullick claimed in late 2014 that he had eliminated 19 million bogus ration cards – in a state that according to the 2011 Census, had all of 20 million households.

Bogus cards don’t get created by accident and leakages are usually designed to feed the bottom rungs of the corrupt political machinery. Kerosene leakage and its diversion to adulterate petrol and diesel cannot really be an ‘unorganised’ business – it needs political protection. While economists and intellectuals debate methods of calculating the number of poor in the country, the needy continue to starve.

So where does this leave India – the burgeoning superpower? Solutions may not be easy to find, given the current political mix where every party vows in the name of upliftment of the poor but squirms at the idea of delivering its promises. “Poverty is a state of mind,” Congress Vice- President Rahul Gandhi was once quoted infamously. Ironically, his late father, former Prime Minister Rajiv Gandhi, had noted in 1985 that out of every rupee that the government spends on the common man, only 17 paise (100 paise make for one Indian rupee) reach the intended beneficiary. Former Deputy Chairman of the erstwhile Planning Commission Montek Singh Ahluwalia said in 2009 that a plan panel study had found the extent of pilferage to be 16 paise out of every rupee spent.

While the common man bears the brunt of corrupt practices in his struggle for existence, the idea of corruption in India continues to amplify. Contrary to earlier times where small bribes dominated the narrative on corruption, corruption in the common man’s parley today means huge scams of figures unimaginable to many. Not only are such acts giving India a bad name, they are also hurting the national economy. Though unmeasured, the economic costs of corruption can be huge, especially as India undertakes its growth agenda.

The Silver Lining

Finding solutions to corruption that is so deeply rooted and imbibed in society is a difficult task – one that the government cannot undertake alone. However, some promised measures by the government could help address the deep malaise. Technology, for instance, is definitely one short-term answer to corruption. The influx of technology in government-citizen interface could prove very effective in bringing about transparency in dealings related to public service. IT-enabled solutions for delivering ration cards, driving licences and passports, paying taxes and getting easy access to property records are making processes simpler, quicker, making a noticeable difference to the government–citizen interface. The computerisation of railway reservations made a dramatic difference to the ease of booking a seat or berth for a journey and also cut out rampant corruption involving touts.

Moving towards a regime where judicial processes are quick, deterrence well-established and laws stringent could be another solution. Political reform is perhaps the most obvious anti-corruption measure needed in this country. While a wide-ranging and sensible legislative agenda to reduce corruption already exists, Parliament needs to pursue it with greater vigour. Implementation of pending measures such as the Right to Services and Public Procurement bills can surely empower ordinary citizens. All these ideas are not new and have always featured in general discourse. What remains elusive is the political will to effect these changes on ground.

Much ado about nothing

India’s improved rankings

There has been a media frenzy over India’s improved rankings at the recently released Ease of Doing Business survey conducted by the World Bank. Commendably, India moved up 12 places and now ranks 130 out of 189 countries. In 2014, India was at the spot 142. Union Finance Minister Arun Jaitley, the driving force behind the Modi government’s push for economic reforms, wasn’t visibly amused by the development. Jaitley asserted that the World Bank had not factored in all steps taken by the government to improve business environment and that the ranking should have been “significantly higher”. Point taken, Mr. Jaitley, but there are bigger issues at hand that perhaps deserve equal attention. The point to ponder is whether these rankings reflect ground realities. Not really, when one considers World Bank’s ongoing Enterprise Survey, India finds itself placed among the top 10 pc of the world’s most corrupt countries. This data is compiled from 135 countries, through firm-level surveys across 130,000 plus private sector companies. Across India, 23 pc of the firms experience at least one bribe request across six regulatory and utility transactions. The World Bank survey states, “The difficulties in dealing with corruption and with inadequate provision of electricity are consistent with firms’ perceptions of the business environment. Among the list of 15 potential business environment obstacles, where respondents are asked to choose the biggest obstacle in their dayto- day operations, 20 pc of firms chose corruption. “ Electricity comes at second place with 15 pc followed by tax rates of 13 pc. While procedures for allowing foreign companies to operate in India may be getting smoother, the ground realities need to act as a wake-up call for India’s policy makers and not just irrelevant or ‘flawed’ rankings.