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CORRUPTION IN INDIA

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CORRUPTION IN INDIA
cultural degradation in tamilnadu - south india

HOW CORRUPT IS MY COUNTRY?

CORRUPTION IN INDIA

Wednesday, February 09, 2005

 
The size of India’s parallel economy at 40% of GDP does provide fertile ground for corruption. Lack of deterrence against corruption and importance to wealth begotten by whatever means enormously promoted corruption in India. More important, corruption in India flows from above from the political class under covers like party and election funds, and senior bureaucrats who are seld investigated or punished, either through conspiratorial silence or through conspiratorial legislative manipulations. Further, political patronage gave an aura of invincibility and respectability to corruption and deprived it of all moral and legal fears. The Central Bureau of Investigation in the Centre and Criminal Investigation Departments in the states and Union Territories have become political tools in the hands of the ruling party and grossly politicised the criminal investigation process in the country. What is worse, the conviction rate is hardly 6% in criminal cases.

India was placed 73rd in corruption among the 99 countries rated In the Transparency International rankings for 1999. Corruption flourishes in India because it is perceived to be a low risk and high profit business. Lack of transparency in administration provides an opportunity for public servants to mislead citizens and extract bribes.

The Central Vigilance Commission which was set up in the Centre in 1964 and Vigilance Commissions and institutions like Lok Ayukta which were set up in some states as Government agencies and headed by retired public servants or High Court or Supreme Court judges are proved too inadequate to meet the challenges in hand because of again the conspiratorial refusal of the political and bureaucratic leaderships to invest them with necessary powers and organizational strength.

It is only the Supreme Court in India seems waging a war against corruption. The Government of India converted the Central Vigilance Commission into a statutory body through an executive order in 1998 on the directive of the Supreme Court. It rendered the CVC at least statutorily independent of the political and bureaucratic set-ups. Although everybody in every nook and corner of the country knows who are corrupt in the Government set-up and knows every details of their mode of operations, India’s administrative machinery is so devised to ensure that corruption never comes to its official cognisance even while taking place en plein jour in its own corridors and antechambers to the benefits of the key politicians and senior bureaucrats. Power corridors and ministerial antechambers are rendered protected places from anti-corruption moves and converted to safe havens for corruption at high places.

Ill-gotten wealth is generally stashed away in the form of black money in foreign accounts and benami bank accounts, property, jewellery and other valuables. It is a common principle in government world-over that if a person is facing a vigilance inquiry, he should not be placed in a sensitive post. However, this practice was not being followed in India. Actually, exactly the opposite is true in India. Only those politicians and bureaucrats who have disposable black money a gogo can afford to buy high public positions in India. Others are mercilessly sidelined as nonconformists or even discredited or destroyed as dangerous outsiders in the big business of bribery. Media and its lack of depth and insight add to the maelstrom while it presumes and glorifies those in key posts as the rare personification of noble virtues and merit while truth is that those posts are invariably cornered these days by those who can afford to illegally pay for that either by kind or other means and therefore grossly corrupt in the world of transfer business. It is not uncommon to media to add its mite to the charges of the vested interests against and question appointment of the senior most officer to the top post of a Government department on the ground that the officer never held charge of a key executive post till then. Media in India is yet to grow to appreciate the point that the denial of venal key posts in spite of seniority in the extant milieu of transfer business per se vouches to the probity and noncorruptibility of the concerned officer. That is how corruption has flourished in the system.

Endless delays common in India in the conduct of departmental inquiry, investigation and prosecution help corruption to flourish. Delay provides a cover of respectability for the guilty.
The significance of corruption as a factor that adversely affects the growth of a country is being increasingly recognized. Corruption, in the words of Indira Gandhi, is a world phenomenon. It exists in developed countries too. Corruption is institutionalised as a part of the democratic process in the USA as lobbying and public relations activities and the country prides in its mushrooming lobbying and public relations firms with major foreign governments inter alios as its clients. The firms are nothing but mammoth business houses indulging in legal corruption. This nohow justifies corruption otherwhere. Indian corruption has special characteristics that make it far more damaging than corruption in other parts of the world.

First, people in India being poor and largely dependent on the Government for decent living and even survival, and limited by its excessive laws, rules, regulations and largess in almost all activities of life with high rates of taxation on every conceivable items and services, corruption literally sucks life out of their existence unlike those in developed countries whose dependence on the Government is relatively not so deep and prolate. This renders corruption in India an extremely dangerous phenomenon with terminal consequences on the culture, value system and the quality and the content of the life of the people.

Second, corruption in India flows down from above. Corruption at the top affects key decisions and policies with sweeping implications while core decisions in developed countries are taken on merit through transparent competition.

Third, the wealth accumulated by corrupt means in India as black money of the parallel economy has the habit of disappearing out to safe havens abroad unlike western countries where capital made out of corruption is generally ploughed back into domestic production and investment. Thus, the proceeds of corruption while help to finance business in developed countries, it just adds to foreign accounts in India.

Fourth, corruption in India as a general rule leads to promotion and not to prison. It is particularly so about powerful officials hand in glove with the ruling party and those who have money and influence to buy justice and ruling party stalwarts in contrast to developed countries where in a system and process of accountability even top leaders are investigated and prosecuted. The most frustrating aspect of corruption in India is that the corrupt are too powerful to go through such an honest process of accountability as causa sine qua non of their ill-gotten wealth and power.

Fifth, corruption in India is a process against some of the poorest in the world and against half a billion poor people who are below the poverty line while that in developed countries it is mostly against people with per capita incomes above twenty thousands dollars. While corruption anywhere is reprehensible, it is a political dynamite when the majority of the population cannot meet their basic needs and a few make fortunes through corruption as in India and other poor countries of Asia, Africa and Latin America. Corruption there leads to massive deprivation of basic needs and extreme income inequalities. Ergo, combating corruption in the milieu of poverty is not only punishing corrupt politicians and bureaucrats, but more important, saving human lives.

Corruption was born with the human being and its history is as long and as varied as the history of the mankind itself. Kautilya refers to the invincibility of corruption in public life and the Government of the time in his magnum opus Arthashaastra. Corruption is a shortcut to wealth and one’s goals and relegation of rightful means to oblivion in preference to ends at the earliest. It is a problem of attitude that highlights selfish ends in preference to higher values and ideals that define noble and dignified life, and pollutes the environment. Corruption is potent of growing exponently by poisoning the environment to the extent of forcing the noncorruptible to fall in line to survive. The milieu compels the society to accept corruption as a means of livelihood imprimis and as a means of accomplishments later. The situation reaches a climacteric while governing system of the country accepts corruption as a way of public life and its leading lights pollute the public life by openly resorting it for short time gains. India has already reached the stage and nothing can save a country from the atrophy save a complete overhaul by the forces of probity, perhaps vi et armis.

Corruption is the product of man’s natural greed and contempt for rightful means and constitutes the bedrock of his natural disposition. Therefore, any dream to wipe off corruption from the face of the Earth is too idealistic to be realistic. Corruption perforce dies only with the humankind. What can be done and attempted to is its suppression and creating an environment wherein it becomes less lucrative and more dangerous than it is now. The deed warrants mobilisation of the increasingly depleting forces of integrity and probity in high places in Government and public life to fight the environment favourable to corruption. It is easier said than done. The temptation of the easy money is too pollent to breakthrough its plexure. Indian political system being what it has grown to be in licentious India of the post-independent vintage does not easily let the easy provenance of ill-gotten wealth to slip from its proprietorial grip. So also is the demoralised and easy-laid bureaucracy of the free India. The evil nexus of the two forces need to be breached to loosen the taut prise of corruption on the public life of India. Till then, meaningful amendments to the Constitution, criminal Acts and Rules to make corruption dangerous and less lucrative like decheance of the wealth gained through corruption, institution of Lok Pal machinery to try corruption at highest levels, making such anti-corruption bodies really powerful bodies with extra-ordinary powers and unperstringed independence to tackle corruption cases of any kind and doing away with notorious provisions like Single Directives to protect higher echelons of the administration from the corruption charges while it is people in those positions itself are the true springboards of corruption in India are bound to remain empty slogans for the public platform to fool the public and resisted by those who count a tout prix while it comes to the crunch. It is left to those outside the circle to mobilise forces and fight the evils that one day definitely destroy India.

If kingship is a single-point exploitation, democracy is a licence for countless exploitations of those who are weaker and more helpless, and corruption is the engine that runs the process of the exploitation. Corruption at all levels in the Government spawns and grows larger than life criminals like poacher and sandalwood smuggler Veerappan and Chambal dacoits and makes governance a laughing stock. The extent of corruption is a clear indicium of the degree of exploitation afoot in a given democracy. A democracy is meaningful only when it is expropriated from the evil of exploitation. In other words, corruption as an indicator of exploitation in a country stands for negation of the democratic values of a democracy. Until corruption is extirpated from the face of the democracy of a country and unless India does it piu mosso, brilliant and enlightened youngsters like Saket Rajan falling out of the mainstream of the national life to join rebellious anti-exploitation organisations like the Naxal Movement and sacrificing their precious life to police bullets as occurred in Chikmagalur district of Karnataka on 6th of February can not be prevented. India can be a true democracy only when it succeeds in bringing corruption in its public life under control.

Praveen Kumar
pryveen@yahoo.com
Bangalore


ROAMING MIND

CORRUPTION IS EATING THE VERY CORE OF THE NATION
(Paper presented at the Rotary District Conference on 05.01.2002, New Delhi)

N. Vittal, Central Vigilance Commissioner

Corruption is use of public office for private gain. Dr. Radhakrishnan used to say that
those who are knowledgeable in Sanskrit are called sakshara. If the knowledge is misused,
they become the reverse of sakshara, namely, rakshasa. Saksharo viparitatve rakshaso
bhavati dhruvam. What we have today is rakshas raj in our country.
2 What is the core of the nation? The core of the nation will mean the basic pillars of
governance in the country. According to the Constitution, the legislature makes the law, the
judiciary interprets the law and the executive, both the permanent bureaucracy and the
political executive, implements the law.
3 If these are considered as a core of the nation then we find corruption pervading in all
the cores. So far as judiciary is concerned, I would not make any specific comment because
under 1971 Contempt of Court Act, the truth is no defence against the judiciary. Any
comment one makes is likely to find oneself held up for contempt of court. The recent
observations made by the Chief Justice of India shows that the judiciary is also aware of the
problem of corruption and is taking perhaps its own action.
4 As regards the other two, definitely we can see how corruption is virtually holding
our country back from progress. Corruption is a fact of life in India. In fact India is one of the
most corrupt countries in the world and ranks 72 out of 91 countries (see table) in the
Corruption Perception Index published by the Transparency International which is
increasingly emerging as one of the reference points on this issue by the international
agencies like World Bank, IMF etc.
CPI 2001 Ranking by Transparency International
1 Finland 24 Belgium 47 Bulgaria 70 Venezuela
2 Denmark 25 Portugal 48 Croatia 71 Houndras
3 New Zealand 26 Botswana 49 Czech Republic 72 India
4 Iceland 27 Taiwan 50 Colombia 73 Kazakhstan
5 Singapore 28 Estonia 51 Mexico 74 Uzbekistan
6 Sweden 29 Italy 52 Panama 75 Vietnam
7 Canada 30 Namibia 53 Slovak Republic 76 Zambia
8 Netherlands 31 Hungary 54 Egypt 77 Cte-d'Ivoire
9 Luxembourg 32 Trinidad & Tobago 55 El Salvador 78 Nicaragua
10 Norway 33 Tunisia 56 Turkey 79 Ecuador
11 Australia 34 Slovenia 57 Argentina 80 Pakistan
12 Switzerland 35 Uruguay 58 China 81 Russia
13 United Kingdom 36 Malaysia 59 Ghana 82 Tanzania
14 Hong Kong 37 Jordan 60 Latvia 83 Ukraine
15 Austria 38 Lithuania 61 Malawi 84 Azerbaijan
16 Israel 39 South Africa 62 Thailand 85 Bolivia
17 USA 40 Costa Rica 63 Dominican Rep. 86 Cameroon
18 Chile 41 Mauritius 64 Moldova 87 Kenya
19 Ireland 42 Greece 65 Guatemala 88 Indonesia
20 Germany 43 South Korea 66 Philippines 89 Uganda
21 Japan 44 Peru 67 Senegal 90 Nigeria
22 Spain 45 Poland 68 Zimbabwe 91 Bangladesh
23 France 46 Brazil 69 Romania
5 Being a corrupt country, corruption also pervades all aspects of our public life. What
do we mean by public life? This would mean especially politics because that affects the
public at large and that too in a country like India, which is a democracy. It also indirectly
affects every other sector of the economy. Economy also affects public life. Going beyond
this, there are other sectors like education and public governance, which affect public life. In
short when we talk about corruption in public life, we refer to practically every sector of life
of an Indian.
6 Corruption means the lack of integrity. This could be lack of financial integrity,
intellectual integrity or moral integrity. As the Central Vigilance Commissioner, I am
concerned more with the financial integrity. The World Bank defines corruption as use of
public office for private gain. How this could be done easily was explained in a shloka which
Dr Radhakrishnan used to quote. Saaksharo vipareetatve rakshaso bhavati dhruvam. Those
who are knowledgeable are called Sasksharas. If they do not use their knowledge properly
then they become the reverse of sakshara, that is rakshasa. India today is a victim of
Rakshasa raj.
7 I have found that while honest people may be fools and not intelligent, no corrupt
person is ever foolish or unintelligent. This is because he needs to know the rules and
procedures and then be clever enough to misuse it for his purpose.
8 How our system itself is corrupted and policies are designed to encourage and protect
corruption would be obvious from the following examples. In 1988, the Government of
India passed Benami Transactions Prohibition Act. Section 5 of the Act provides that the
benami properties can be confiscated and Section 8 says that the government will provide the
rules. You will be surprised to know that even after 13 years, government have not
prescribed the rules. I took up the matter with the government in January 1999 and there was
no reply. There was a news item in The Hindu that the government wants to withdraw the
Act. When I raised the issue that the PM had given a call on 16th October 1999 to the
country to practice zero tolerance of corruption, if the Benami Transactions Prohibition Act
was not implemented, it will amount to zero action to fight corruption. Then I got a standard
government reply that the matter is under consideration. The matter is still under
consideration.
9 Similarly, the VDI Scheme pointed out how while honest people had paid 40%,
corrupt and tax evaders were permitted to convert black money into white by paying mere
30%. If the government used the premium for dishonesty, how can corruption in public life
be eliminated?
10 Yet another example is the SICA. In our country, industry becomes sick but
industrialist does not become sick. He becomes sick only when he raided by the CBI. I
raised this issue with the Reserve Bank Governor that as we are having 58000 nonperforming
assets, why not publish the names of all those who have cheated our banking
system. Incidentally, our banking system is such that if you borrow one lakh of rupee you
are afraid of the bank, if you borrow ten crores of rupees the bank is afraid of you.
11 I got the reply saying that because of the Banking Secrecy Act, the names cannot be
published. You are all aware of the healthy impact the CVC’s initiative in publishing the
names of the charged officers who have been found guilty after due inquiry for major penalty
cases.
12 If CVC can publish in the web site names of such officers, why not Reserve Bank and
other banks publish in their web sites names of wilful defaulters, i.e., those who have cheated
the bank and who are having the money but are not returning the loan. If Banking Secrecy
Act, Chapter 3 of Reserve Bank Manual and Article 14 of the Constitution are impediments,
it is high time we changed our Secrecy Acts and the manual so that at least we will expose
the corrupt persons. Another example is the Prevention of Money Laundering Bill in which
deliberately customs, excise, income tax and sales tax seems to have been omitted in the
schedule to the Bill.
13 Money laundering means handling the proceeds of scheduled crime. The scheduled
crime means a crime under the Act mentioned in the schedule to the Bill. By keeping the
main source of generation of black money in the country, the Bill provides an incentive for
the money launderers. In fact, the FERA has also been given up and the FEMA is toothless
at this stage. We can therefore see how every level of policy there is adequate protection
given for those who indulge in corruption especially in a big way.
14 The reason why India is corrupt can also be traced to our social roots. After all, the
level of corruption in a society depends on three factors.
i. Individual sense of values
ii. The values cherished by society, and
iii. The system
15 The social values cherished by a society depends on the conditions prevailing in a
society at a given point of time. If corruption flourishes in our society today it is because we
are in a system of governance where for majority of the public, corruption is the only way by
which they could make a meaningful living in the country. This can be taken care of by
tackling the issue of changes in the system.
16 India is like a snake whose head is in the 21st century and whose tail is in the 17th
century. We are a billion strong country and we have wide differences in terms of social and
economic development of different parts of the country. From a sociological point of view,
the family is the basis of our society. The joint family and caste are only the extended
versions of the family. The joint family might have been eroded in recent times especially in
the urban area but the kinship in the form of caste still prevails. Casteism gets a continuous
boost because this seems to have become the basis of our entire politics. When I was young I
recall leaders like Jawaharlal Nehru speaking about building India into a casteless classless
society. The classless society never evolved and instead of building a casteless society, we
have today a highly atomised society where caste defines the basis of politics. From casting
our votes in the first election in 1952 we have come to a stage of voting a caste in recent
elections.
17 This organisation of our society based on caste and kinship and the differences in the
state of development between the states provides a very strong rationale for corruption.
Caste and nepotism become the basis for distribution of patronage. One of the Chief
Ministers is reported to have replied when asked why he was favouring his relatives “If I do
not favour my relatives, whose relatives am I supposed to favour?”
18 This concept of standing by one’s caste or family is also reflected in the sense of
tribalism of the corrupt. In addition to the social bond provided by caste and family ties, the
common financial interest is another cementing factor. We are largely an illiterate society
with at least 40% of our people being illiterate. Hence, emotions dictate politics. Politics is
the route for power in a democracy. So when the politics is based on caste and the decisions
are taken by the voter at the emotional level, corruption probably becomes more tolerable.
19 I wonder whether one of the social roots of corruption in India can traced to basic
philosophy of Hinduism and Hindu ethos. Hinduism preaches the concept of tolerance. Any
number of examples are given in the puranas where a sinner having led a life of sin can get
redemption by taking the name of Lord Narayana in his last moments as in the case of
Ajamila. In social terms this has come to be accepted. People who lived a life of sin like the
prodigal sons return to the straight and narrow path at some stage usually late in life. The
sholka Vridha nari pativrata vridha veshya tapaswani probably represents the cynical
acceptance of how people change in life from vice to virtue.
20 This concept of forgiveness and redemption in the evening of life is also reflected in
another social tendency. We find a plethora of sadhus or spiritual leaders who have strated
preaching. Each sadhu has a band of very well to do chelas. An analysis of the chelas and
sadhus may probably prove the well known statement that every sinner has a future and
every saint has a past.
21 At another level, the very basis of Hinduism which believes in rebirth shows that
every soul is given innumerable opportunities to improve itself on its onward path. There
may be set backs for sins committed but then virtue is also earned. This endless cycle of
birth and death leads to the ultimate goal of Moksha. The emphasis of our saints on getting
out of the birth and death cycle also is an attempt to persuade people to come to the right path
as early as possible. Punarapi jananam punarapi maranam punarapi jananai jathare
sayanam iha samsare bahu dustare kripaya pare pahi murare said Adi Shankara in Bhaja
Govindam reflecting the toils of repeated births and death. As we trace the social roots of
corruption in our country, we can identify that this eternal message of tolerance, the sense of
forgiveness, the hope held for sinners to come to the right path, probably have also led to the
tolerance of a sin like corruption.
22 If we examine the root of corruption, we will find that it arises perhaps from the
extreme attachment of people to their families. Nepotism is natural in this situation.
Corruption, as defined by he World Bank, is the use of public office for private profit. A
person in an office feels that he should earn enough not only for himself and his lifetime but
also for his children, grand children and perhaps seven generation. That is probably the basic
motive behind the enormous accumulation of wealth by the corrupt in our country today.
23 Equally important also is another psychological factor. Power is never demonstrated
in a society unless it is misused. In certain communities I understand being as much corrupt
as possible and amassing wealth is seen as a macho demonstration of his “competence”. If
this is the attitude, those sectors of society which did not have an opportunity to share the
power cake in the past may also rationalise that they must be also able to emulate those who
had earlier enjoyed and misused their power and amassed wealth by rampant corruption.
Thus a vicious cycle of corruption is launched where a society tolerates amassing of wealth
and does not question how that wealth is accumulated.
24 This brings us to another important social root for corruption which probably is
getting more accentuated in recent times. This is the spreading cult of consumerism. The
electronic media have had a tremendous impact in creating a desire in the mind of everyone
to have the best of the consumer goods even at the beginning of life. Newspaper report
regularly made out how domestic servants have been the agents of crime in many cases.
Perhaps it is this upstairs downstairs syndrome or the ostentatious consumption of the well to
do and the sense of jealousy created as a result among the deprived which leads to crimes.
Consumerism and desire for an ostentatious life style tempts many to make money by hook
or crook. Corruption is the result.
25 Evil social practices also promote corruption. One major social cause that promotes
corruption is the dowry system. Every public servant wants to see that his daughter is
married off well and there is continuous pressure for having a minimum level of dowry. This
may be one of the reasons why one comes across cases where even public servants who have
had a clean life towards the end of their career become vulnerable to corruption. Dowry
system is definitely one of the social roots of corruption in our country.
26 Equally important is the social pressure in a competitive society for ensuring that the
children get the best possible education. Right from the kindergarten to every educational
institution, there is pressure of competition and education has become commerce. This has
been further accentuated by the government policies about affirmative action resulting in a
great incentive for self financing colleges who charge a lot of donation fee and most of it is
collected in black. Education pressure and corruption in the education sector is another social
factor contributing to corruption in our system.
27 The consequences of corruption are very obvious. It is anti-national, anti-economic
development and anti-poor. So far as anti-national aspect is concerned, the Tehalka.com
expose showed the national security interests can be compromised by corrupt businessmen
and corrupt defence officials. So far as the anti-poor aspect is concerned, this will be obvious
from the fact that out of the every rupee spent for poverty programmes, Rajiv Gandhi
observed that only 15 paise goes to the beneficiary. 31% of the foodgrain and 36% of sugar
meant for the food security of the poor in the public distribution system go to the black
market. Ms. Madhu Kishware recently pointed how in Delhi the five lakh howkers were
paying a monthly bribe of Rs.40 crores to the corrupt policemen and the municipal
authorities.
28 The economic consequences of corruption are obvious. The PHD Chamber has
recently pointed out the dangers of corruption.
According to a study by PHD Chamber of Commerce and Industry, investment would
increase by 2.9 per cent of GDP and GDP growth by 1.3 per cent if corruption index
improves by one standard deviation or around 15 per cent. Implication is that India
is loosing its least Rs.63,800 crore worth of additional investment per annum,
roughly three times the foreign direct investment (FDI) we are attracting now and
Rs.28,600 crore of consequent national income per annum.
The unaccounted money in India is estimated to be in the range of Rs.350 to 700
thousand crore more than the combined revenue of the Centre and the state
government in the last fiscal.
A survey of exporters by Exim Bank found that 64 per cent of interviewed face major
problems with customs clearance processes and with port authorities. Exporters
spend 1-15 per cent of export revenue to grease the corruption machinery. The
international level evidence is stark.
Surprisingly, corruption has not always been perceived to have a negative impact
upon economic development and growth. One view is that corruption acts as an
efficient lubricant for facilitating development in a highly regulated and slow moving
economic environment as it enables actors to cross barriers which hamper economic
decision making.
However, the fact is that the impact of corruption is systematic in nature. It
generates negative economy wide externalities that denigrate the performance of the
system as a whole and compromise the economy’s long-term dynamic efficiency.
Corruption leads to the favouring of inefficient producers, distorts the allocation of
scarce public resources and causes leakage of revenue from government coffers to
private hands. Large scale tax evasion erodes the tax base and in the process helps
generate black money. Corruption in the economy leads to inflated government
expenditures and scarce resources are squandered on uneconomic projects because
of their potential to generate lucrative pay off. Hence it is not uncommon to find
schools without students, teachers without schools, hospitals without doctors or
medicines, and so on, though on paper all expenditures have been accurately
accounted for. The result is the crowding out of investment in priority sectors such as
education or health. Corruption in post independence India is attributed to an overregulated
environment in which the state played a pre-dominant role in economic
decision making providing powerful incentives to bureaucrats and those in power to
indulge in corruption.
The economic liberalization and the associated opening up of the Indian economy has
significantly reduced the structural rigidities in the system.
29 Our public life is corrupt because we are a democracy. Democracy requires political
parties. Our political parties collect funds and these are collected in the form of cash or black
money. Black money is generated through corruption. In a way corruption is the oxygen for
black money; black money is oxygen for corruption. So how can political parties which are
dependent on black money and corruption for their very survival initiate policies to fight
corruption?
30 At the same time, I would like to clarify that there are other democracies in the world
like United States or Britain where the corruption levels are much less than India. You will
find that the corruption perception index of USA is 17 and UK is 13. India is a low 72 in the
CPI.
31 It is not necessary that a democracy by nature has to be corrupt because the political
parties need funds. We have the example of United States and Britain where there is more
transparent fund collection and even though John McCain in the United States may be talking
about electoral fund reforms, the systems there are more transparent than in India. For
example we know that in the last year’s Presidential election, George Bush had a kitty of
US$ 63 million against Al Gore’s US$ 48 million. In our country also we know that crores of
rupees were being spent in election but everything in non transparent and people are prepared
to believe the worst about all public figures because of this prevailing atmosphere of
corruption which has become part of our public life.
32 I am not suggesting that because we have a democracy, we have corruption. In fact,
there are other democracies like the United States and Britain which also have political
parties which, in turn, have to collect funds. But there the system is far more transparent. In
spite of the valiant effort made by the formidable Mr. Seshan when he was Chief Election
Commissioner, still everybody knows that a lot more money is spent in elections than what is
officially declared as per the provisions of the Representation of the People’s Act and Rules.
The basic cause for corruption in our public at the level of political parties is because the
parties are dependent on black money as a source for funds. If we want to eradicate
corruption, we will have to start at the level of the political parties and funding of the
political parties. Whenever it comes to the issue of political parties being funded,
immediately the focus is on elections as if elections alone are the only cause for the funds
required by the political parties. In fact, no political party can function without funds even
for conducting normal meetings or publicising through notices and other media about
meetings being held. Hence, any attempt at linking cleanliness in the political parties by
focussing on electoral funding is a step in the wrong direction.
33 One of the popular ideas floated about is public funding of elections. In our country
where we do not have resources for schools and roads and hospitals, why should the tax
payers money be spent in encouraging those who want to contest elections or run political
parties? After all, even in Germany when political funding was provided, we had cases like
that of Mr. Kohl who united Germany having also collected funds for political purposes.
Hence state funding of elections in our situation should be firstly opposed because we do not
have resources and secondly there is no guarantee that it will bring transparency and
cleanliness in the political system.
34 On the other hand, what he should do is to focus first on eliminating the black money
in the system. In fact, as the first step I had suggested that the present restrictions about
making contribution to the political parties should be removed and there should be any
contribution made to the political parties should be eligible for hundred percent rebate.
Thereafter, I was told that because of the fact that bulk of our economy, nearly 40% is
depending on black money, the contributors to the political funds also do not have white
money or the legitimate currency to pay. Hence, tinkering with the taxation system is not
enough to remove black money from our economy and public life.
35 The black money can be tackled only if the crises of its eradication is handled in an
efficient manner with a sense of strong commitment. The question, of course, is whether
those who are today benefiting from the black economy and who are in positions of power
will ever take the initiative. In fact, when the CVC Bill was diluted, one of the Members of
Parliament commented on the Star TV that MPs may not like to commit hara-kiri “kya ham
apne haath se apni gardan katenge”? This change in political mindset to fight black money
will come only if public opinion is generated through organisations like the Rotary Clubs.
After all, out of the hundred core people of our country, not more than five crore can be
corrupt or afford to be corrupt. If the mobilisation of the 95 crore takes place then the
political will will be exercised. After all, in our country, political will is exercised only under
two conditions. Firstly, when there is no alternative and secondly, when there is a vote bank
advantage. If the 95 crore non-corrupt people of India become a major vote bank, the
politicians will willing be to pamper this vote bank and in the process initiate action to check
corruption.
36 At the same time, it is interesting that even the politicians who are most accused of
corruption are the first to declare their willingness and keenness to fight against corruption.
The reality in the Indian situation today is that every political party wants to fight corruption
for other parties. The other issue is, whether in our given situation, corruption is an issue? In
the 1989 elections, Shri V.P. Singh was able to exploit the corruption issue of Bofors and
come to power.
37 We find that corrupt politicians are being elected. A new theory was being floated
unique to Indian democracy saying that in India the highest court is not the Supreme Court
but the court of the people. So if a corrupt politician is elected in elections, he is deemed to
have been acquitted in the court of the people. Fortunately, the Supreme Court has put an
end to this dubious claim by pointing out that democracy represents the will of the people
and the will of the people is expressed in the Constitution. Therefore in India at least today
the highest court is the Supreme Court. If anybody is held to be a corrupt under our judicial
system then this has to be respected. After all, law breakers cannot become law makers.
Unfortunately, we have seen increasingly the presence of law breakers in the legislature.
This probably is a sad reflection to what extent our public life has been corroded so far
values are concerned.
38 The method of cleaning up the people corruption, which is the root of corruption in
our system, is to begin the attack on the black money. I would suggest the following
strategy.
39 It was Alexis De Toqueville who said that the inevitable became intolerable the
moment it was perceived to be no more inevitable. Today it is possible that people of India
in their different capacities as voters or businessmen or citizens have come to accept
corruption as inevitable. If we could persuade them that corruption is not inevitable, then we
will be able to bring about a change.
40 There are two approaches to the whole issue of corruption. One approach which may
be considered as pragmatic, realistic and worldly wise is to accept that corruption is as
universal as human nature and it is only the degree of corruption that can perhaps be
controlled. The other approach is that corruption can be controlled and countries, which
were once notorious for corruption, have been able to bring in greater probity in public life,
thanks to committed and visionary leadership and changes in rules, systems and procedures.
41 Britain itself was not known as a corruption free country in the 19th century. This is
what Dr C P Srivastava writes in his book CORRUPTION – INDIA’S ENEMY WITHIN
(page 86). The suggestion of Shri Srivastava should be seen in the context of how one Prime
Minister in Britain W E Gladstone was able to bring about probity in public life.
Time for action to arrest and reverse this trend is here and now. What is needed is a new,
well thought out programme for national regeneration on the basis of shared ethical values
and for the reconnection of all the people to the ideal of transparent integrity in
governmental administration as well as in all aspects of political and public life. To fulfil its
rightful destiny in the new millennium, the country will have to find ways to move towards an
honest and ethics-based polity, an efficient, compassionate and corruption free
administration and bureaucracy and a responsible and value based society.
Other democratic countries have come out of a virtually intractable state of corruption by
adopting and implementing, with courage and determination, a carefully conceived
programme involving fundamental changes in the electoral system as well as in
governmental administration, especially in the public services. For example the United
Kingdom whose public notoriously corrupt in the 18th century made a transition across
barely 50 years to a regime of extraordinary public probity. This was achieved primarily
because of the visionary leadership of the liberal party under W E Gladstone who first in his
capacity of Chancellor of the Exchequer in 1850s and later as Prime Minister, four times
during the period 1868 to 1894 initiated a string of reform measures. The purpose of these
measures was to abolish practices with payment of commissions in the army, to define and
outlaw corrupt practices by state officials, to introduce competitive examination for
admission to a non partisan civil service, to replace fees by salaries in public offices, and to
set up systems of financial scrutiny by Parliament.
42 In the twentieth century we have seen how the Independent Commission Against
Corruption (ICAC) set up in 1974 in Hong Kong was able to bring greater cleanliness in
public life at least till 1997 before the handover to China. World Bank quotes Botswana as a
country, which has vastly improved its probity in public life. We have seen the enormous
drive and leadership of Lee Kwan Yew who was Prime Minister for a long time, literally
making Singapore a very clean country over three decades.
43 I therefore subscribe to the view that while it is true that India is a very corrupt
country, it is nevertheless possible that the level of corruption in India can be brought down.
India can also become like post Gladstone Britain or post Lee Kwan Yew Singapore.
Success, it is said, is a self-fulfilling prophecy. So is also failure. In my job as CVC, I take
the stand that corruption can be controlled.
44 Mere desire is not enough. If wishes were horses beggars can ride. The vision of a
corruption free India has to be translated into action. As I see it, corruption in India is the
result of a vicious cycle which involves political corruption, bureaucratic corruption
criminalisation of politics and business corruption. The root cause of corruption in India is
political corruption. Our entire democracy is based on corruption. Every political party
needs funds and they collect funds in the form of black money. Black money is the oxygen
for corruption and corruption is the oxygen for black money.
45 My strategy consists of the following 5 elements:
A Black money, which is at the root of corruption, in politics business and bureaucracy,
should be effectively eliminated. This can be done in a three-phased programme.
Phase I Three months
Implement the Benami Transaction Prohibition Act 1988
Amend the Prevention of Money Laundering Bill to cover Income Tax, Customs, Excise and
Sales Tax
Enact Corrupt Public Servants (Forfeiture of Property) Act as suggested by the Law
Commission and pending with the government from 4.2.1999
Amend the Income Tax Act on the principle of zero exemption. Exempt all incomes upto
Rs.2 lakhs per annum. Levy a flat tax rate of 20% on all incomes above Rs.2 lakhs.
Amend the Customs and Excise Acts on the principle of zero discretion.
Phase II Three months
Introduce an amnesty scheme under which within a period of three months, all those who
have black money can declare the same and regularize the same by paying an income tax of
21%.
Phase III
Effectively implement the laws passed in Phase so that the amount of black money is practically
eliminated.
B Hold the National Convention on Ethics in Government on the lines suggested by Dr
C P Srivastava in his book Corruption – India’s Enemy Within
C Enact the CVC Bill after taking into account the comments of the CVC on the
Parliamentary Committee’s report on the CVC Bill
D Amend the Representation of People’s Act so that the candidates against whom
serious criminal charges have been framed in a court of law are prohibited from contesting the
elections till their name is cleared in the courts of law.
E For all sensitive posts in Government and sensitive organizations like banks, PSEs
etc., introduce the pattern, which is now prevailing for selecting the Director CBI. This will mean
that neutral committees of experts will select the panels for filling up the sensitive posts. The
government will appoint candidates to the sensitive posts from these panels. Once a person is
appointed to a post, he will have a fixed tenure for three years
46 The strategy for removal of black money from the economy needs some elaboration.
Black money in India is like God. It is everywhere. I do not know why black money is also
called the parallel economy because in geometry parallel lines do not meet whereas black
money intersects with practically all sectors of our life.
47 Recently there was great excitement about the Mumbai police's initiative to nab the
underworld and cut its link with film world. Underlying this whole nexus will be the
cementing influence of black money. Black money probably is very dominant in certain
sectors like real estate, politics or the film world. Nevertheless, it is practically present in
every sector of our life. Every corrupt public servant also in some way or the other hoards
black money.
48 Government has made valiant efforts in the past to tackle the problem of black money
mostly in the form of amnesty schemes. The net result of government's effort has been more
like trying to use petrol to put out fire. The latest was the VDIS scheme which added insult to
injury by providing for the black money hoarders, a soft 30% rate of taxation (which in effect
was only 10% according to knowledgeable experts), as against the 40% which honest tax
payers had paid.
49 No wonder black money flourishes in our system. Even when laws are made, they
are not implemented like the little known Benami Transaction Prohibition Act passed in
September 1988. This Act has not been implemented all these twelve years in spite of the
CVC requesting government to empower the CVC under this Act and prescribe the rules for
implementation.
50 The advantages of removal of black money are obvious. The economy will become
cleaner. As corruption goes down, economic development takes place. If India's corruption
level goes down to that of Scandinavian countries, according to the 1999 UNDP report for
South Asia, GDP will go up by 1.5% and FDI by 12%. Now that the budget exercises are on,
here are some ideas which government can consider for getting rid of black money
substantially by an integrated approach. This approach involves three phases. In the first
phase, government empowers itself with legal measures to tackle the problem of black
money and also cut at the root of generation of black money. In the second phase which will
last for three months, an amnesty is provided to all holders of black money to come out into
the open and join the mainstream. The third phase is the stage where after the amnesty period
is over, stringent action is taken to rid the economy of the menace of black money once for
all.
51 The first phase, which can be completed in three months, involves the following:
i. Prescribing rules for implementing Benami Transaction Prohibition Act 1988 which
is already on the statute book
ii. Enacting the Corrupt Public Servants (Forfeiture of Propetry) Act which empowers
CVC to confiscate ill-gotten wealth of corrupt public servants. The Law
Commission's proposal is pending with government from 4.2.1999
iii. Adding Income Tax, Customs and Excise, in the schedule for Prevention of Money
Laundering Bill which is before the Rajya Sabha, so that if the black money
generated by evasion of these taxes is sought to be laundered within the country or
abroad, strict action could be taken.
iv. The main source of black money is evasion of Income Tax, Customs and Excise. So
far as income tax is concerned, we should move over to a zero exemption, simplified
flat tax rate system. Incomes up to Rs.2 lakh per annum should not be taxed. Any
income above this limit should be uniformly taxed at a flat rate of 20% whether
assesses are individuals, HUF, companies, partnership or any other type. This
removal of discretion in one stroke will eliminate the scope of corruption.
Incidentally, this will also enhance the income to the government because at present
government hardly realises 17% as the effective rate for collection of income tax.
v. The Customs and Excise Act provide excellent opportunities for corruption because
of the ambiguity and discretion at different levels to decide what should be the
applicable rate. It will be much simpler if there is an approach of zero discretion by
precisely indicating the rate that is applicable for a particular product or services. In
fact advance ruling must become a regular part of the system so that well before
industrialists import, export or move goods out of the factory, the precise rate is
known. For instance, if we take a product like KitKat, is it a chocolate or a biscuit?
Many would say it is a chocolate. I am told it has been adjudicated to be a biscuit
whereby there is considerable saving for industry and government loses revenue.
52 Once these laws are in place, the government should give a three-month window of
opportunity to all holders of black money to come out into the open and pay a flat rate of
21%. The one percent extra tax is a token levy to show that the government would any day
encourage honest tax payers who have paid 20% and not reward black money hoarders as
was done in the VDIS. This is the second phase
53 In the third phase, once the amnesty period is over, government should systematically
utilise all the laws that are available especially those mentioned above so that black money is
seized and brought into the main stream of the economy.
54 If government were to take the initiative, it will be very difficult for people to oppose.
What we have seen over the last five decades, especially in customs, excise and income tax is
a whole culture built on the pressures, pulls and counter-pulls of vested interests seeking
exemptions and special treatment. Once this culture of evasion of taxes is overcome, we
would have entered a much better era. What better opportunity than the beginning of the real
millennium to place India on the path away from the intersecting parallel economy?
55 The second reason of corruption flourishes in our public life is because the criminals
are today permitted to contest elections. The Delhi High Court has recently said that at least
the candidates in elections should declare their criminal record. Against this, the
Government of India has gone in appeal. After all, at least the Delhi High Court judgement
would have brought a greater transparency in our system and the public would know whom
they are voting. I would go to the extent of saying that in order to check criminalisation of
politics, any candidate against whom criminal charges or charges of moral turpitude which
can be identified by the Election Commission or under the Representation of People’s Act
should not be permitted to contest elections. It is true that framing of charges in a court is not
amounting to punishment but definitely the courts provide a protection against political
parties in power using the police to foist false cases against their political opponents and
write all sorts of crimes in the FIR. What I am suggesting is that it is not the charges or FIRs
that matter but whether the charges framed in the court of law. For example, the CBI went
after Shri V. Krishnamurthy, the former CMD of SAIL, Maruti and BHEL. After 7 years the
court found that there was not sufficient material to frame charges. In the meanwhile, Shri
Krishnamurthy had been harassed and put in jail for sometime. His passport was impounded
and so on.
56 I am mentioning the case of Shri V. Krishnamurthy only to show that if charges have
been framed against a candidate in a court of law in serious criminal matters and moral
turpitude which can be identified then such persons should not be permitted to contest
elections. This is one way of ensuring that the law makers do not become law makers in our
country.
57 Once the politician comes to power as a minister, how does he make money? This
happens by collusion between corrupt politicians and corrupt bureaucrats. There are
sensitive posts where there is scope for corruption. In fact, there are political parties who
demand that they should be given lucrative ministries. What is this lucrative ministry we are
talking of. These are ministries where there is scope for making a lot of money by way of
kickbacks. Recently Shri Reddy in an article in The Hindu pointed out what we have done in
the area of liberalisation is to replace socialism with not capitalism but corrupted capitalism.
58 The nexus between corrupt politicians and corrupt bureaucrats results in sensitive
posts being operated by corrupt bureaucrats. This nexus but be broken. The best course to
achieve this objective is to adopt the practice which is now prevailing for filling the post of
Director, CBI to all sensitive posts. Thanks to the judgement of the Supreme Court in the
Vineet Narain’s case, the Director, CBI today is appointed based on a panel of three names
recommended by the CBI Selection Committee headed by CVC with Home Secretary and
Personnel Secretary as members. The government can appoint only one of these three
persons recommended in the panel and once the person is appointed Director, he gets a
minimum period of two years. He cannot be shifted before the period. If there is a Public
Interest Litigation in the Supreme Court filed by NGOs and the Court is requested to direct
the government that in order to bring cleanliness in the system and check corruption, all
sensitive posts must be identified by the government and a system similar to that of filling the
CBI Director’s post today should be introduced, it will break at one stroke the current nexus
between the corrupt politicians and the corrupt bureaucrats. We cannot expect the
government to take initiative in this matter.
59 These measures of checking black money, breaking the access between the corrupt
politician and the bureaucrat and preventing criminalisation of politics will go a long way in
reducing the element of corruption in our system.
60 Corruption in our system in a public life is not only in politics. It is the starting point
of a vicious cycle which involves the corrupt bureaucrat, businessmen, NGOs and the
criminal. I always talk about the neta, babu, lala, jhola and dada who are the key players in
our corruption scene in public life of India.
61 The causes of bureaucratic corruption can be traced to five factors. These are:
i. Scarcity of goods and services
ii. Lack of transparency
iii. Red tape
iv. Cushions of safety we have created in the legal system whereby everybody is
innocent till proved guilty. A corrupt person therefore, if he has made sufficient
money, can engage the best lawyers and escape the clutches of law, and
v. Tribalism or brotherhood among the brooked and the corrupt. In English novel
we say, if two people are very close, they are thick as thieves not thick as honest
men.
62 As regards the bureaucrats, the best strategy which CVC has been following in the
last three years:
i. Simplification of rules and procedures so that the scope of corruption is reduced
ii. Transparency and empowering the public, and
iii. Effective punishment
63 So far as empowering the public is concerned, it is a very important factor because as
I mentioned earlier unless the public are sensitised on the issue of corruption, we are not
going to succeed. The CVC has therefore come up with the Citizens’ Guide to Fighting
Corruption which points out that the following four agencies can be used by the citizens to
fight corruption:
i. Judiciary
ii. Agencies like CVC
iii. Media, both electronic and print, and
iv. Direct action
64 So far as corruption in business is concerned, if the demand of bureaucrats and
politicians are tackled, then the supply side cannot be effective. After all, by a miracle our
politicians and bureaucrats refuse to accept bribes, what will the bribe givers do, to whom
will they bribe?
65 It is said that war is too dangerous a matter to be left to the generals, fighting
corruption is too important to be left to the CVC. We must be able to utilise the power of the
civil society to fight corruption.
66 I have placed before you some ideas about the causes and consequences of corruption
in our public life and what measures can be taken to eradicate it. Here is a case where we
will have to practice the advice of the Taitreya Upanishad. Let us come together. Let us
enjoy together. Let our skills strength combine. Let us move from darkness to light. Let us
avoid the poison of misunderstanding or hatred. That way lies progress.
Sahanavavatu sahanaubhunaktu sahaviryam kara va vahai
Tejasvinam aditamastu ma vid visha vahai, om shanti shanti shanti
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