Dynamics of Corruption and Economic Progress
Nature of Corruption
Corruption is as old a political system as politics, in the way that the abuse of power is as old as power itself. While mentioning its effects, it was equated to cancer by the judicial body our country.
This cancerous menace emerged during the Licence Raj period because of the procedural opacity and multi-level procedures that existed at the time. It has now spread to all systems of the country, even in the form of retail corruption. Corruption fits any size and shows up in all kinds of situation. Corruption can reveal itself through a bus conductor pocketing small change or an agent waiting outside an office looking to extort from those willing to bribe. Moreover, corruption has made its presence grow through multi-crore scams, threatening our country’s economic stability.
Extortion, money-laundering, distortion, bribery and fraud are some of the variants of corruption rampant enough to tamper the growth of the country. KPMG, one among the world’s largest service auditors made an in-depth study on corruption - Bribery and Corruption Survey on India (2011). This study highlights the observations made in World Bank’s Doing Business Report (2010). This projects that almost 60-80 % of building projects that function as Public-Private Partnerships are corrupt.
‘No Bribe No Work’ is the present day principle that is gripping the people, pervading all levels of the system. A concept that was just an option during the Licence Raj now accounts for big scams amounting to crores of rupees.
Although a clear connection cannot be established between economic prosperity and decline in corruption, there are studies to support the idea that corruption can favour economic growth. Theorists Nathaniel H. Leff (1964) and Samuel P. Huntington (1968) in their models discuss how the concept of “Speed Money” (bribe) would actually overpower weak government institutions that delay the process and instead find a way to scale up the ladder. This, by helping eliminate bureaucratic rigidities and catering to maintain better efficiency in institutions is what Pranab Bardhan, an academician, observes in his extensive analysis on corruption and economic growth.
Major Scams in India
Some major scams of the early 90’s broke out while our economy witnessed a high GDP growth. There were scams such as the Harshad Mehta scam, who was found to have allegedly misappropriated an amount worth Rs.5,000 crores in the Bombay Stock Exchange (BSE) in 1992. This was a year after the Indian economy opened its gates to international markets. In the Telgi scam (2006), duplicate stamp papers were forged and sold to banks and other institutions, in which misappropriation was estimated to be over Rs.20000 crores. Likewise, the Satyam Computer Services scandal was a corporate scam in 2009 in which the company's accounts had been falsified. Embezzlement in the bidding for various franchisees was witnessed in IPL scam in 2010, when IPL had its highest television viewing.
All these establish the fact that more money infused into the economy and capital market would increase the possibility of newer versions of corruption to break out. Telgi scam, Satyam scam and IPL scam stand as cases in point to this fact.
Considering the growth scale of Indian economy, Indian GDP reached 9.2% in 2006. The years following this witnessed major corruption exposés such as the 2G scam (2009), Common Wealth Games scam (2011), Adarsh Society scam (2011) and the Coalgate scam (2012). Apart from this, ‘black money’ that is stashed outside India amounts to almost 40% of our GDP, as per the Swiss Banks’ estimate (according to the Global Financial Integrity report). According to the Finance Ministry’s White Paper issued on black money, black money could stem from bribery by those holding public office – such as by grant of business, leakages from government social spending programmes, speed money to circumvent or fast-track procedures, black marketing of price-controlled services and altering land-use to regularize unauthorized construction.
Corruption Dampening the Indian Image in the Global Market
The integration of Indian economy into the global economy is likely to get arrested if corruption continues to persist rampantly. Corruption plays on the mind of the investor who seeks to have a fair deal with the host country. If the host exhibits signs of uncertainty, lack of transparency and red-tapism, investors may not trust the market. This is likely to dishearten Foreign Direct Investors (FDI) as well as Foreign Institutional Investors (FIIs) that venture into our economy. Hence, there might be meagre chances of expanding our economy and raise the growth bar.
Corruption and its impact undoubtedly surmount every system, affecting the culture, administration, polity and functionaries on a large scale. Going by the tentative growth structure in the country, financial regulators need to formulate vigilant measures to curb any scope of corruption to exist in the country.
By Manisha Yadav