Powerful nexus

Tackling corruption

The spread of corruption in all political parties, its blatancy and shamelessness, and the participation by bureaucrats in assisting and benefiting from it are the feature of governance in the 21st century. Weakness of our governance --its institutions, systems and rules is reflected in the way in which services meant for the poor, martyrs, infrastructure, etc, receive vast government funds that are looted by our representatives. ‘Global Financial Integrity’ finds that since 1948, private companies and individuals  illegally siphoned out a gross of $462 billion by 2008. These funds were gained from drug and human trafficking, corruption, fraud and currency counterfeiting. 

The spread of corruption is because the rule of law in India is slow and weak. Every Central government has created the environment for black money. Regulatory institutions are staffed by retired government officers with habits of quiet acquiescence. Penal powers are rarely exercised. The media is hyperactive. Their competition for television viewers leads to incessant repetition of crimes. Media is investigator and judge while sections also get paid for the ‘news’. 

The saying, “Behind every scam is a bureaucrat” unfortunately  appears to be true. Complicated government procedures and extortionate personal and corporate income tax rates were the bedrock for government corruption under licence-permit raaj.

Skimpy foreign exchange allowances for foreign travel made all travellers buy foreign currency on the havala.

The rich and the corporate, as well as politicians and bureaucrats kept illegal foreign accounts overseas. Under-invoicing of exports and over-invoicing imports, and other ways of accumulating funds abroad, were common even among virtuous companies that normally frowned on illegalities.

Even after the economic liberalisation by Rajiv Gandhi in 1986 and systematic liberalisation and opening up of the economy under Narasimha Rao and his successors from1991, the practices of over 30 years continued. The thriving havala markets ensure rupees would be deposited overseas in foreign exchange.  Large rupee and foreign currency holdings in India, illegal accounts abroad, cheating on invoices, expense statements, etc, were and are the norm. Everyone knows, as they did in the days of the closed economy. 

The practices continue despite de-licensing, lower tax rates, easier access to foreign exchange, and the use of information technology making minor violations difficult. They have actually increased because the pickings in a growing economy, with huge government expenditures on social and infrastructure projects, large purchases for defence and the public sector. Politicians and the bureaucracy have created a further enabler by emphasising foreign institutional investment over direct investment.

The continuation over many years of anonymous investments in the stock market through ‘participatory notes,’ and exempting FII investments from short-term capital gains tax, are government enablers for money to leave India by havala, be invested, make a profit and go back overseas as ‘clean’ money. No wonder that Indians are believed to hold over $ 400 billion overseas.

Opportunities for corruption

Government is owner of many scarce resources like land, mineral resources, and air waves and spectrum. These are now worth huge amounts. Acquisition and allocation of resources, price determination of valuable resources like oil and gas, allocation of scarce resources for exploitation of valuable minerals in forest and tribal lands, allocation of spectrum, are new and massive opportunities for corruption.

So are procurement of defence equipment, railway engines, aeroplane, etc. Government spends on physical and social infrastructure, social welfare schemes, etc are new sources for politicians and bureaucrats to divert funds for personal use.     

These thefts occur despite the many investigatory agencies --the police, Central Vigilance Commission, Comptroller and Auditor General, Central Bureau of Investigation, Serious Frauds Office, Enforcement Directorate, Lokayuktas in some states, apart from the judiciary and the media. They have not halted or rolled back this flood of corruption and theft.

There are many reasons: lack of talent for investigation, poor follow-up after initial investigatory enthusiasm, a slow and cumbersome process of framing charges, getting government permission to prosecute bureaucrats and ministers, bringing people to trial, the slow judicial process, with time consuming appellate processes, and the absence of severe punishment for anyone found guilty. Only the media remains as intrepid but soon diverted, investigators.

Penalties must be made much more stringent and rigid as in the USA. An independent tribunal must examine evidence and if satisfied sanction within a time-frame, the prosecution of bureaucrats and ministers. Concurrently, bureaucrats must have guaranteed minimum tenures to prevent their compliance to ministerial corruption because of transfer threats.  An Independent authority (not of ministers or bureaucrats) must examine and sanction transfers before the end of tenure.

 Ministerial discretion must be replaced by independent regulatory commissions, on licences, tariffs, etc. The Public Enterprises Selection Board must be made independent with outside experts, and their choices respected. All independent regulators and selecting authorities must be transparently appointed.

Rules must ensure that all government decisions are attributable to one person. An independent authority must weigh charges against officers and sanction their suspension till trial. Participatory Notes and exemptions from capital gains tax for investments from Mauritius and others must be phased out. Judiciary must come under a National Judicial Commission both for selection and accountability. Media content especially television, must be overseen by a Content Authority as in the United Kingdom.