Corruption Erodes The Govt’s Credibility, Exploits The Poor

high volume corruption, particularly in ‘outsized’ profits associated sectors such as natural resources, infrastructure financing etc. Administrative and judicial reforms didn’t keep pace with the 1991 reforms. 

A Crux study across 17,000 citizens, 400 small business owners and 35 policy makers highlights the depreciating impact that corruption can have on the economic ecosystem, and society as a whole. 

Corruption causes significant distortions and inefficiencies and diminishes growth. It is detrimental to a free, fair, competitive, and efficient market. It creates an uneven playing field for businesses. It affects both private and foreign investment. 

*Corruption Undermines Social Trust; Gnaws Away at the Democratic Process 

The social fallout is staggering. The Crux study highlights that intangible and long-term cost is acute and entrenched. Corruption erodes the credibility of the government, the very legitimacy of state institutions. It degrades the social and moral fabric of society. It undermines social trust and gnaws away at the democratic process. Petty corruption raises the cost of engaging in productive activities, and disproportionately affects, even exploits the poor and the marginalised. It promotes lopsided development, perpetuates inequality.

There are several other intangibles, namely diversion of resources and talent towards “lucrative” rent-seeking activities. Over 65 per cent of the young respondents believe corruption is the pivotal reason for brain drain.

People take ‘comfort’ in the belief that corruption demolishes bureaucratic barriers. Insights from the Crux study show that the ‘non-enabling’ ecosystem (as a result of excessive and archaic regulations) can, and often is, counteracted by ‘lubricating the wheels’, but it does not necessarily increase economic growth. Not even in the short run. The study has a strong message, ie. corruption is an ‘inefficient’ tax that increases costs, reduces the return on investment (ROI). Even ‘good, well intended’ corruption has a long-term detrimental effect on the economy. 

*Corruption Affects Targeting, Quantity, Quality, and Outcomes of Welfare Spending 

Eradicating (even curbing) corruption can yield enormous fiscal benefits. The Crux research suggests that the government can potentially ‘collect’ 20 per cent more in taxes if people perceive it to be ‘less’ corrupt. Graft hampers the Ease of Doing Business, discourages private investments, robbing about a sixth of private investment, as per the study. Corruption can have a telling impact, devouring about 10 per cent of the GDP, hurting the growth rate by 15 per cent.

Corruption diverts public resources from high multipliers such as education, health, and infrastructure; and drains it into capital projects, where bribes and commissions are easier to come by. Globally investment in education and health is one-third lower in ‘more’ corrupt countries. 

But the cost of corruption is greater than the sum of lost money, and is difficult to fathom. Lobbying and interest accentuate bias and prejudices in policy design and delivery. Poorly designed, badly implemented welfare schemes are good examples. Leakages and diversion rob the poor a fifth, widening the inequality gap. Additionally, it undermines the quality of services, as much as its delivery. It shows up as distortions in spending priorities, ultimately hurting sustainable and inclusive growth. 

Public procurement accounts for a third of India’s GDP. Procurement related to public investment is a hot spot, particularly susceptible in large projects. The ‘unique’ features make it harder to compare costs and are easier to inflate costs and conceal bribes.

The criminalisation of politics, coupled with black money in elections is the fountainhead of corruption. Other reasons for the failure of anti-corruption measures include nominal electoral reforms, excessive political control over bureaucracy, colonial administrative structures etc. Under-reporting of crime encourages criminals. Judicial indifference, particularly at the lower echelons, compels people to adopt extra-legal methods. The broken criminal justice system urgently requires repair. Judgment in court cases take years and decades. It encourages impunity and reinforces corrupt behaviour. 

Most accept that bribes are the only way to move ahead in the queue. The study suggests various measures to tackle corruption. India needs radical reforms. Holistic administrative reforms and effective implementation of e-governance initiatives, AI and big data pivoted automation of process and procedures are crucial. Similarly ensuring the integrity of the Right to Information (RTI) process, citizen charters, social audits and public service delivery and the grievance redressal mechanism, will curb corruption. 

India needs electoral reforms such as barring criminals from the political process, banning cash donations, and exploring the idea of state funding. Judicial interventions can help clean up the politics of criminals. 

*Exemplify Action Against the Corrupt 

The study points to several positives. The government is surely and swiftly against the corrupt; importantly exemplifying these actions. Additionally, the judiciary is more proactive, with the Supreme Court ordering trial courts to expedite cases. Similarly, the government has been digitising procurement and tendering and the bidding process for a more transparent and accountable system. The JAM trinity (Jan-Dhan, Aadhar and mobile) has also helped cut red tape in service delivery. However, it’s not sufficient.

It is not an easy battle. It needs a strong political will, tenacity, and commitment to overcome the corruption trap. But that alone will not do. It is imperative for the political leadership to take bold steps. The legal framework changes and administrative reforms are necessary to develop greater transparency in public dealing. India needs to start with the areas of higher risk – such as procurement, revenue administration, management of natural resources, as well as effective internal controls. It needs to build capacities in ‘mutually’ supporting institutions. Most institutions lack genuine autonomy, many the capacity, and a serious sense of purpose. 

Eradicating corruption and promoting transparency and accountability is crucial for an equitable and prosperous future.

*Holistic Reforms Needed. Corruption is Curable 

A professional and ethical civil service is the fulcrum of good governance. Similarly, the Press and the media can play an even bigger role in the fight against a corrupt system. A focus on anti-corruption efforts in the private sector (which actually pays the bribes), has largely been ignored and needs to be ‘fused’ in. Civil society must play a more profound role. Citizens must both ‘voice and vote’ against the corrupt.

The author is an economist and columnist