Comment Pieces

DEMONETIZATION EFFECT AS PERCEIVED THROUGH CROWDSOURCED DATA ON BRIBES REPORTED- EXPERT COMMENTS

Posted on March 17, 2017

 

Dr. Malati Das IAS (Retd.), Former Chief Secretary, Karnataka and Advisor- I Paid a Bribe

“On 8 November 2016, the Government of India demonetized all ₹500 and ₹1,000 banknotes with the avowed objectives of curtailing the “black” money economy and effectively shutting down terrorism which flourished on counterfeit currency. Corruption is a part of the black money economy so how did demonetization affect bribe taking as reported on IPAB?

The total number of bribes paid has increased by 37% post demonetization.

However, the quantum of bribe money paid showed a significant decline of 50%.

The number of people who refused to pay a bribe shot up by 74%.

Was this the effect of demonetization? It must be recalled that when the ₹500 and ₹1,000 notes ceased to be legal tender citizens faced many difficulties because the money in circulation dropped precipitately by 86% and the new currency (₹ 2000) as well as ₹ 100 and ₹ 50 notes were in short supply. There was informal rationing. This resulted in a steep fall in the bribe amounts on IPAB. However the number of instances of public servants seeking bribes went up so the harassment did not go down it actually intensified. Perhaps public servants, also short of petty cash, were desperate to replenish their coffers. But citizens were also suffering a cash crunch and could not oblige them with the quantum they wanted. In some cases they just did not pay.

As the availability of currency stabilizes it will be interesting to see if this trend of reducing levels of bribe money continues or will it be business as usual? Demonetization must be supported by other reforms to eliminate corruption.”

 

 

        

Dr. S T Ramesh IPS (Retd.), Former DG & IG, Karnataka and Advisor, I Paid A Bribe

“The most significant observation would be that the bribe amount paid during the 2 month period after demonetization has virtually halved as compared to the period prior to demonetization. This shows that withdrawal of 87% of the currency in circulation had a telling effect on bribes paid and the bribe takers seem to have accepted this reality. Thus bribe money seems to have reduced in the short term and future alone can tell whether demonetization has a long term effect on the quantum of bribe money as per IPAB data. That incidents of bribery registered an increase suggests that it was' business as usual' for the bribe giving public and the bribe takers notwithstanding demonetization. That there has been a dramatic increase in the number of bribe fighters may suggest that demonetization with the avowed objective of rooting out corruption has created a certain measure of hope among citizens providing the impetus to fight corruption. This, if it continues would be a positive outcome of demonetization. The small increase, though not insignificant, in the number of honest officers also augers well if the trend continues and is not merely a flash in the pan. These are the inferences one can draw from the data. We will have to track the trends over a longer period to be able to come to definite conclusions about the effect of demonetization on retail bribes as reflected by I Paid A Bribe”

DATA FOR COMMENTS:-

MONTH

NUMBER OF PAID BRIBES

NUMBER OF BRIBE FIGHTERS

NUMBER OF HONEST OFFICERS

AMOUNT PAID IN RUPEES

8SEPT – 8NOV 2016

136

31

8

90,63,910

9NOV 2016- 9JAN 2017

186

54

11

45,49,540

  • The total number of bribes reported  have increased by about 37% (136 -> 186 Absolute value 50) across the 60 day period pre and post-demonetization as analyzed
  • Interestingly, total amount paid in bribes reported have decreased significantly, almost by 50% (Rs. 90,63,910-> 45,49,540. Absolute value Rs. 45,14,370)
  • A significant increase was noted among the numbers of people reported to refuse paying a bribe (bribe fighters) across the two comparative periods (pre and post-demonetization). 31 people reported fighting bribes, which increased to 54 reports (a 74% increase, absolute value 23!)
  • When the bribes paid pre –demonetization were further analyzed, it was found that 76 bribes reported were less than 1000 rupees (55%); whereas after demonetization there were only 74 such reports , which made up 40% - this may be due to fact that people had lesser amount of smaller denomination cash with them (i.e 50s, 100s and 500s)