Humongous monster in India's closet: Corruption

Jan 20, 2012, 07:23 IST | Arindam Chaudhuri

Amongst the many critical predicaments that the Indian economy suffers from, corruption has been one of the biggest monsters, and thankfully the most talked about in recent days.

Amongst the many critical predicaments that the Indian economy suffers from, corruption has been one of the biggest monsters, and thankfully the most talked about in recent days. Needless to say, corruption has corroded every delivery system and has made it completely dysfunctional. The entire Indian public life is riddled with overriding rates of corruption --from the Adarsh land scam to Commonwealth Games misappropriations to the 2G spectrum scam -- the list here has been endless, and the magnitude, obscene -- we are one of the most corrupt nations.

Take for instance, Transparency International's Corruption Perception Index (CPI) where India's rank has been slipping consistently -- languishing at the 95th position now with a score of 3.1 (on a scale of 10), a sizable 23 ranks down from 2007! We are far behind China that stands at 75th position with a score of 3.6. CPI score is not only about corruption but is more about the way corruption has got institutionalised in our system. Also, it is a fact that India's score could have been better had it not been battered with the monstrous 2G spectrum scam. 

Interestingly, all the least corrupt countries are not just socially developed but also economically progressive. There is also a direct correlation between CPI rankings and Human Development Index. Most of the African as well as Asian nations have a combination of low CPI and low HDI scores and most of the European and North American countries have the opposite!

India now has an increasing income inequality with a dubious distinction of possessing the highest number of poor in the world. An OECD report reveals that the people belonging to the top 10 per cent of our income group are 12 times richer than the bottom 10 per cent. And this is increasing as the difference 20 years ago was only 6 times, that is, before the beginning of our magic potion of liberalisation!

The Gini Coefficient, another notable measure to evaluate inequality, is on a rise too -- it has increased from 0.32 in 2000 to more than 0.37 now! It's a fact that income inequality assuages the chances of employment to many, lowers purchasing power for consumption expenditure, halts the access to borrowing, and hinders the ability to save and invest! For the uninitiated, CPI also takes into account various parameters that have a higher social impact. India fares badly on almost all parameters considered under CPI -- viz. bribery, extortion, nepotism, patronage, graft, embezzlement.

More alarmingly, as India develops, there is an ascent of illicit money being stashed in foreign shores as well. There is no doubt that due to this corruption plaguing India, the fruits of development are certainly not reaching the desperately poorer sections of the society. World Banks' report on Governance Indicators has got India faring quite poorly on almost all indicators. In the parameter 'Rule of Law and Control of Corruption', which directly addresses corruption related issues like crime, tax evasion, black markets, and judicial independence -- India has scored a lowly 56th percentile! That said, India's low score is quite expected and obvious on this particular scale. India is probably the worst performer globally with respect to tax evasion as a humongous amount of black money gets stashed abroad (we top the global list with more than $1 trillion of black money floating around the world).

One thing that sets Indians apart is their willingness to tolerate such corrupt measures. Almost all the public services like the Public Distribution System (PDS), hospitals, schools, water supply, are corrupt from head to toe. As per the India Corruption Study 2010 by CMS, rural households of 12 surveyed states have paid an amount close to Rs 4,700 million as bribes during the last one year.

Coming back to the topic of black money, it is reported that India has more black money stashed in Swiss banks than all other countries combined! That's a truly mind boggling data! The number eclipses $1,500 billion, a figure that no one else can touch or even come close to. A distant second on this ignominious list is Russia with $470 billion black money, followed by UK with $390 billion and China at $96 billion.

In a country like India, with an increasingly younger demography having their dreams of riding the wave of India's economic growth... recent scams have only sowed seeds of discontent; a disgruntlement with the State and its apparatus. Corruption, perhaps, is fast wearing down the belief in the State. Such a development would not only be dangerous for the society but also threaten the very integrity of the nation at large. Our economic indicators reveal this social malaise more than can mere ranking figures; and even these indicators, I feel, are actually understated, as no index in the world can calculate the actual social loss we incur through our shameless indulgences.

-- The writer is a Management Guru and the Hony Director of IIPM Think Tank.

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