Help India Grow... Stop Corruption...: 01/01/2008

2 Corruption is harmful in three different ways. Corruption is anti-national. The Hawala
scam showed how the anti-national Kashmiri militants were getting money from abroad
through hawala, the same route through which other sections of the society like politics,
business and bureaucracy were also receiving money. The Tehelka.com expose on 13.3.2001
also dramatically highlighted the extent of corruption in politics and defence deals. From
these experiences, it will be obvious that corruption threatens national security and is antinational.
3 Corruption is anti-poor. 31% of the food grains and 36% of the sugar meant for the
Public Distribution System (PDS), which is designed to provide food security to the people
below the poverty line, gets diverted to the black market. The government of India (GOI)
spends Rs.15,000 crores every year by way of subsidy to the PDS. This means that Rs.5000
crores are not used for giving relief to the poor but land in the pockets of the corrupt
shopkeepers and their Godfathers in politics and bureaucracy. Rajiv Gandhi once observed
that out of every rupee meant for the anti- poverty programmes only 15 paise reached the
beneficiary. Out of the 85 paise may be 40 paise can be accounted for as administrative
overheads. The leakage of the remaining 45 paise is definitely due to corruption. Corruption
is, therefore, anti-poor.
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4 Corruption is also anti-economic development. The collapse of the South East Asian
economies in mid-1997 showed how even the so-called miraculously growing tiger
economies of South-East Asia were not immune from the disastrous consequences of
corruption and crony capitalism. The 1999 Human Development Report for South Asia,
published by the Mahbub Ul Huq Centre in Islamabad, says that if India’s corruption level
comes down to that of Scandinavian countries India’s GDP will grow by 1.5% and the FDI
will grow by 12%.
5 Corruption, many a time, can be a matter of life and death. For example, corruption in
the pharmaceutical industry, resulting in spurious drugs flooding the market, may mean the
death of many innocent people. The Mumbai blast of 1993, which resulted in the death of
300 people was the result of RDX being smuggled in with the help of corrupt people in the
government. Illicit liquor tragedies are another example of how corruption leads to death.
6 If we want to de-corrupt India then we will have to understand the dynamics of the
corruption in India. The corruption temperature depends on the three factors namely, (i) the
individual sense of values, (ii) social values, and (iii) the system of governance.
7 So far as individual sense of values are concerned, this depends on the person’s
education, family background, teaching of parents, religion and so on. The process of
globalisation has perhaps created a culture in which consumerism is a dominant culture.
Hence, the greed probably has given a greater legitimacy in our system. It is worth looking
at the overall social roots of corruption.
8 Basically the five causes for corruption in our system are the following:
Ø Scarcity of goods and services
Ø Bureaucracy leading to delay and red tape
Ø Lack of transparency
Ø Judicial cushions of safety we have created for the corrupt
Ø Tribalism among the corrupt who protect each other
9 The social values cherished by a society depends on the conditions prevailing in a
society at a given point of time. If corruption flourishes in our society today it is because we
are in a system of governance where for majority of the public, corruption is the only way by
which they could make a meaningful living in the country. This can be taken care of by
tackling the issue of changes in the system which have been discussed in the Annexure.
10 We will be looking today at the social aspect of corruption. This means that we will
have to look at the individual’s sense of values and the social values, which determine the
corruption temperature of any organisation or a country. India is like a snake whose head is
in the 21st century and whose tail is in the 17th century. We are a billion strong country and
we have wide differences in terms of social and economic development of different parts of
the country. From a sociological point of view, the family is the basis of our society. The
joint family and caste are only the extended versions of the family. The joint family might
have been eroded in recent times especially in the urban area but the kinship in the form of
caste still prevails. Casteism gets a continuous boost because this seems to have become the
basis of our entire politics. When I was young I recall leaders like Jawaharlal Nehru
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speaking about building India into a casteless classless society. The classless society never
evolved and instead of building a casteless society, we have today a highly atomised society
where caste defines the basis of politics. From casting our votes in the first election in 1952
we have come to a stage of voting a caste in recent elections.
11 This organisation of our society based on caste and kinship and the differences in the
state of development between the states provides a very strong rationale for corruption.
Caste and nepotism become the basis for distribution of patronage. One of the Chief
Ministers is reported to have replied when asked why he was favouring his relatives “If I do
not favour my relatives, whose relatives am I supposed to favour?”
12 This concept of standing by one’s caste or family is also reflected in the sense of
tribalism of the corrupt. In addition to the social bond provided by caste and family ties, the
common financial interest is another cementing factor. We are largely an illiterate society
with at least 40% of our people being illiterate. Hence, emotions dictate politics. Politics is
the route for power in a democracy. So when the politics is based on caste and the decisions
are taken by the voter at the emotional level, corruption probably becomes more tolerable.
13 I wonder whether one of the social roots of corruption in India can traced to basic
philosophy of Hinduism and Hindu ethos. Hinduism preaches the concept of tolerance. Any
number of examples are given in the puranas where a sinner having led a life of sin can get
redemption by taking the name of Lord Narayana in his last moments as in the case of
Ajamila. In social terms this has come to be accepted. People who lived a life of sin like the
prodigal sons return to the straight and narrow path at some stage usually late in life. The
sholka Vridha nari pativrata vridha veshya tapaswani probably represents the cynical
acceptance of how people change in life from vice to virtue.
14 This concept of forgiveness and redemption in the evening of life is also reflected in
another social tendency. We find a plethora of sadhus or spiritual leaders who have strated
preaching. Each sadhu has a band of very well to do chelas. An analysis of the chelas and
sadhus may probably prove the well known statement that every sinner has a future and
every saint has a past.
15 At another level, the very basis of Hinduism which believes in rebirth shows that
every soul is given innumerable opportunities to improve itself on its onward path. There
may be set backs for sins committed but then virtue is also earned. This endless cycle of
birth and death leads to the ultimate goal of Moksha. The emphasis of our saints on getting
out of the birth and death cycle also is an attempt to persuade people to come to the right path
as early as possible. Punarapi jananam punarapi maranam punarapi jananai jathare
sayanam iha samsare bahu dustare kripaya pare pahi murare said Adi Shankara in Bhaja
Govindam reflecting the toils of repeated births and death. As we trace the social roots of
corruption in our country, we can identify that this eternal message of tolerance, the sense of
forgiveness, the hope held for sinners to come to the right path, probably have also led to the
tolerance of a sin like corruption.
16 If we examine the root of corruption, we will find that it arises perhaps from the
extreme attachment of people to their families. Nepotism is natural in this situation.
Corruption, as defined by he World Bank, is the use of public office for private profit. A
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person in an office feels that he should earn enough not only for himself and his lifetime but
also for his children, grand children and perhaps seven generation. That is probably the basic
motive behind the enormous accumulation of wealth by the corrupt in our country today.
17 Equally important also is another psychological factor. Power is never demonstrated
in a society unless it is misused. In certain communities I understand being as much corrupt
as possible and amassing wealth is seen as a macho demonstration of his “competence”. If
this is the attitude, those sectors of society which did not have an opportunity to share the
power cake in the past may also rationalise that they must be also able to emulate those who
had earlier enjoyed and misused their power and amassed wealth by rampant corruption.
Thus a vicious cycle of corruption is launched where a society tolerates amassing of wealth
and does not question how that wealth is accumulated.
18 This brings us to another important social root for corruption which probably is
getting more accentuated in recent times. This is the spreading cult of consumerism. The
electronic media have had a tremendous impact in creating a desire in the mind of everyone
to have the best of the consumer goods even at the beginning of life. Newspaper report
regularly made out how domestic servants have been the agents of crime inmany cases.
Perhaps it is this upstairs downstairs syndrome or the ostentatious consumption of the well to
do and the sense of jealousy created as a result among the deprived which leads to crimes.
Consumerism and desire for an ostentatious life style tempts many to make money by hook
or crook. Corruption is the result.
19 Evil social practices also promote corruption. One major social cause that promotes
corruption is the dowry system. Every public servant wants to see that his daughter is
married off well and there is continuous pressure for having a minimum level of dowry. This
may be one of the reasons why one comes across cases where even public servants who have
had a clean life towards the end of their career become vulnerable to corruption. Dowry
system is definitely one of the social roots of corruption in our country.
20 Equally important is the social pressure in a competitive society for ensuring that the
children get the best possible education. Right from the kindergarten to every educational
institution, there is pressure of competition and education has become commerce. This has
been further accentuated by the government policies about affirmative action resulting in a
great incentive for self financing colleges who charge a lot of donation fee and most of it is
collected in black. Education pressure and corruption in the education sector is another social
factor contributing to corruption in our system.
21 The recent elections have raised a debate whether corruption is no longer an issue.
In other words, is probity in public life relevant in India today? As I see it, the position is as
follows. Probity can be looked at at two levels. One is the corruption or lack of probity
which the common man meets at every stage in his day to day life. This is petty corruption
and is more widespread. The impact in financial terms of this type of petty corruption may
not be as high compared to the corruption at higher levels where massive deals and kickbacks
take place or even policies are modified to suit certain vested interests. Nevertheless, the
poor man is not bothered about grand corruption at high levels of society.
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22 One feature of the developed countries is that at least the type of petty corruption
which the common man experiences in India is absent in those countries. Corruption may
exist at higher levels but the standards are apparently strict. For example, Vir Sanghvi in a
recent article in Hindustan Times dated 13th May 2001 dramatically brought the difference in
perception between when the lack of propriety takes place in Britain and India taking the
case of the passport of Hindujas. This is what Vir Sanghvi said:
As the British example demonstrates, the only way to stamp out corruption is to begin
with impropriety. Don’t wait for the CBI to try and prove that a bribe has been paidthey
will never get the proof and the case will take 20 years to come to trial. Start
with impropriety-that is much easier to establish. The moment you see a minister
hanging out with dodgy businessmen, assume that he is a crook. This may be unfairperhaps
he is only a native fool-but it is the only way to stop corruption at the root.
Follow a policy of zero tolerance, insist on the highest standards of propriety in
public life and only then do we have any chance of preventing impropriety from
becoming corruption. One instance should prove my point. If we had followed the
British example with regard to the Hindujas, would we be in this mess today with the
Bofors charge-sheet? The answer is self-evident.
23 Vir Sanghvi has raised this issue about focussing on propriety as against the legality
aspect of corruption. In Britain, there was also corruption and, thanks to William
Gladstone’s four innings as the Prime Minister of the country when he brought the structural
changes relating to recruitment in civil services, army etc., that country became a cleaner
country. After all, education is also an important factor. According to India Today study
made in 1997, Kerala emerged as the least corrupt state. Probably this can be directly related
to the increased literacy in that state and also the corresponding awareness of exercising their
rights in Kerala.
24 Is probity in public life a middle class virtue? It is true that it is the middleclass that
is the base of democracy. In Banana Republics we have two classes, only the super rich and
abominable poor. Democracy in real sense does not exist. In totalitarian systems, of course,
there will be no democracy and there could be total exploitation. If democracy has to
survive, the middleclass value of probity in public life will also have to be sustained. We
have to find practical methods of introducing and maintaining probity in public life. It has
been said that the India is a feudal democracy. It is quite possible therefore that we take a
tolerant view of the misbehaviour of the leaders because the king can do no wrong.
25 The corruption debate in Indian politics is viewed as only an attempt at oneupmanship.
Even though it has affected some elections, by and large public memory seems
to be short. For example, in 1973 in Gujarat, Shri Chimanbhai Patel was thrown out of
power based on the Nav Nirman agitation started by the students on the issue of corruption.
But the same Chimanbhai Patel came to power and died in office 16 years later. The total
revolution started by Jayaprakash Narain in Bihar seem to had minimum inpact. Although
Bofors became very decisive issue in 1989 election, subsequently whenever the issues of
corruption were raised by any party, it is seen more as an act of political vendetta. In the
process, even government agencies like CBI are seen to be used by the powers that be to
meet their political agenda. The initiation of a process of transparency in the selection of the
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Director, CBI was an attempt made by the Supreme Court in the Vineet Narain case to
insulate the sensitive investigative agencies from outside influence.
26 The issue of corruption has also figured prominently in the recent elections where
some of the candidates were either denied permission to contest election or were permitted to
contest election even though they have been convicted in a court of law. In spite the legal
position, such candidates have been elected by the voters. Does it mean that for the common
voter in India, probity in public life is not important? While one set of commentators have
said that corruption and probity in public life does not matter in the view of the voters,
opposite view has also been advanced by some like Mani Shankar Iyer. According to him
the Tehalka tapes were an issue in the recent elections.
27 If probity in public life does not bother the public, what are the issues that distrust and
concern them? In some of the opinion polls conducted, issues like price of foodgrains,
drinking water, employment, shelter etc. come higher as voters’ priority than corruption.
28 From this development one can perhaps draw two conclusions. The first is that so far
as Indian politics is concerned, the voter knows that our entire political system is based on
corruption. Every political party needs funds for running its activities and this is collected in
cash. This cash is basically black money. Black money is the oxygen for corruption,
corruption is the oxygen for black money. In this situation, therefore, the voter considers that
all parties are equally corrupt. The only difference may that some are more than others or
some have been found out and exposed and others have not yet been exposed.
29 There seems to be a total lack of awareness about the damages of corruption or lack
of probity in public life in the well being of the people. The voter who considers drinking
water or shelter or schools or employment opportunities as higher priorities is perhaps not
aware that if there was no corruption these issues can be tackled more effectively and the
benefits would be much more than what they have got. Rajiv Gandhi indicated at one stage
that only 15 paise out of every rupee reaches the beneficiary in the anti-poverty programmes.
If corruption was checked, perhaps another 40 paise worth of benefits will flow even
assuming 45 paise may be the overhead connected with administration and delivery
mechanism.
30 The second conclusion from the election results could be that the voters are not
bothered much about the high level corruption but they are more directly and visibly affected
by the corruption at the cutting edge level of administration which they experience every day.
Probably this discontent frustration and anger gets transmitted to the ruling party and gets
translated as the anti-incumbency factor. It is possibly corruption at the higher levels
involving large funds either not known to them or even if they are known they discount it. In
fact, one of journalists close to a leader, who was very popular among the poor, told me once
that when the issue of bribe came up, the leader told the hesitant parties who had come with
money to bribe him that they need not worry. If they went outside and said that they have
bribed the leader, nobody would believe them for the simple reason that the public knew that
the leader was rich enough and was not dependent on the bribes from the parties concerned.
Secondly, even if they gave proof that the bribe was paid, the poor will rationalise the act of
the leader by saying the money was taken for doing some benefit for the poor. Such is the
impact of the charisma that the public condone corruption at higher levels in our democracy.
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31 Another reason for tolerance of corruption by our public can be traced to the Hindu
concept of prayashchita. If a person at a higher level is caught accepting bribes and even if a
small punishment is imposed, the public seems to think that he has atoned for his sins and he
should be given another chance. This is also reflected in Vir Sanghvi’s observation above
about our being too tolerant of impropriety.
32 We have evolved in our country red tape ridden elaborate systems leading to
enormous delays in many public offices. This probably makes the common man consider
paying a bribe as speed money is a part of the system. So long as he gets his rightful dues, he
considers the bribe given as speed money as an additional tax which is inevitable.
Particularly in the business community I find that there is a perception that one has to take a
long term view of the business. If one starts fighting the bureaucracy at the lower levels, the
cost for fighting for probity in public offices or fighting against corruption leads to more loss
in business. In fact, we find a very peculiar equation in India. With 6% as the conviction
rate in our criminal courts, corruption is a low risk, high profit business for those who can
afford to be corrupt. At the same time, with the enormous clout of the bureaucracy, people
outside the system, be they NGOs or businessmen, find that if they want to take on the
system, the risks in terms of loss of profit is much more than the gain, which may be mostly
in terms of psychological satisfaction.
33 I think, basically most of us are selfish. When we face a problem, we are interested in
finding immediate solutions. It may sometimes involve breaking the queue or breaking the
rules or sometimes it may involve a financial advantage. How many of us insist on a regular
receipt when we buy things with the sales tax duly added? In order to save on sales tax, cash
transactions have become more the rule than the exception. Perhaps, the scope of corruption
also in such departments is also correspondingly higher.
34 What do we do in such a situation? The easiest option is not to do anything, accept
the reality and take a cynical view to live with corruption. It will be like that situation where
an astrologer advised a worried client that he was having all the problems because in his
horoscope Saturn, Jupiter and Mangal were in very harmful places and this might continue
for the next three years. Hopefully, the client asked: “What will happen after three years?”
The astrologer told him that he would get accustomed to it! Perhaps the majority of the
people in the country are adopting this advice.
35 When I suggest that out of the hundred crore people in the country may be five crore
are corrupt and 95 are not, I have heard cynical people say that the 95 crore people may not
have got an opportunity to be corrupt! Once you give them an opportunity, they will also
become corrupt. The question therefore to ask ourselves is, are we so bad?
36 The response of the public to the CVCs initiative in displaying the names of the
charged officers on the CVC’s web site showed that even now, in these cynical times, there is
a sense of shame. The Newsweek which carried a story on this called it “e-shame”. Perhaps
even today public opinion can be mobilised. We must be able to make the best use of the
media, both print and electronic, to convey the message about the need for checking
corruption.
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37 It is a good thing that the issue of corruption is becoming a global issue. I attended the
Global Forum Against Corruption held at the Hague, Netherlands from 28-31st May 2001.
The comment made by Shri T N Ninan, the Editor of Business Standard who also attended
the programme is worth noting in this context.
The wisecrack goes that everyone complains about the weather but no one does anything
about it. I suppose the same thing could be said about corruption, on which Indira Gandhi
famously explained away her own inaction: it was a global phenomenon, she said. Well that
turns out to be true. Except that something is in fact being done about it – on a global scale.
Conferences are being held in quick succession to discuss the issue: one at the Hague earlier
this week, which 1800 people attended; another soon in Prague, and then two more in South
Korea before the end of the year. After working up remarkable steam on the environment
and human rights, the global conferencing community has discovered corruption as an issue
on which corrective action is urgently required.
Don’t laugh and turn the page. This is serious business. It may take a while before the
conferences leads to measurable action, but it seems pretty clear that we’ll get there.
Remember that that the first major international conference on environment was held in
Stockholm in 1972. From there to Kyoto was just over a quarter century. The human rights
movement has gone from agenda item to action item in a much shorter period, and I suspect
that this will be true of corruption as well. Though what kind of action, and how effective it
will be, remain unclear.
38 Educational system can be another major area where values can be inculcated and the
need for integrity ingrained. I had taken up the matter with the Ministry of the HRD in the
context of the revision of the syllabus. Perhaps an open discussion especially about the nexus
between corruption and its negative impact on social development has to be ingrained in the
public. Once this value gets institutionalised, perhaps we would have made some progress.
39 In the Indian context, I would suggest the following course of action. We must focus
on the vicious cycle of political corruption, bureaucratic corruption, criminalisation of
politics and business corruption. From a long term point of view, unless this holistic
approach is adopted, we may end up with sub-optimal solutions. However, looking to the
situation that the corruption is accepted cynically and is not considered a negative factor in
Indian politics, can we think of alternative strategies to improve the situation of probity in
public life? The following elements of strategy may be considered:
i. The first step needed is creating widespread and continuous awareness among the
public signal about the dangers of corruption. It is necessary to highlight the fact that
how corruption, in fact, is at the root of the many issues that worry and cause
dissatisfaction among the public. This could be in the form of inadequate availability
of employment opportunities, drinking water, schools, roads and so on.
ii. If the common man is more bothered about the corruption at the cutting edge rather
than at the higher level, can there be a systemic focus on eliminating corruption at the
cutting edge? This initiative will have to come from the people at the top. Any
government, from a political point of view, may not mind focussing on the cutting
edge level corruption as this may win them some popularity. So far as the higher level
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corruption is concerned, perhaps the common man gets a sadistic pleasure if some of
the top people are punished.
iii. The Benami Black Money Scheme initiated by the CVC can result in cases where the
common man can find that on his complaint against some of the top guilty public
servants leads to their being brought to book. This may have a deterrent effect on of
corruption at the higher levels. At the same time this may help in developing a sense
of empowerment to the common citizen who can use institutions like the CVC to
tackle the issue of corruption.
iv. Access to information and speedy working at the cutting edge of administration
should therefore be a complementary step taken to attack on corruption at the cutting
edge. If the concept of e-governance which the Government of India has embraced is
effectively implemented, it should be possible to in fact overcome the antiincumbency
factor which seem to affect practically all the governments in the country
today with some exceptions.
v. Another approach which is of a long-term nature is to see how some of the
institutions of governance can be strengthened. This will be not only institutions
fighting against corruption but also institutions meant for providing the welfare of the
people or even maintenance of law and order. It is because of the failure of
governance which creates an atmosphere and corruption flourishes. This is an
approach that has to be thought of and any government which tries this probably will
be able to overcome the anti-incumbency factor.
40 Finally the values a person imbibes depends on his family circumstances, the society
in which he lives, peer pressure and religion. No religion recommends that one should be
corrupt but religions also have recognised the weakness of human beings and tried to regulate
their conduct like the Ten Commandments. They have also come up with concepts like the
Prayaschitta so that there is a hope for the sinners also. In taking into account the experience
of countries like Britain, Singapore or Botswana which have been able to bring greater
probity in public life, perhaps we may also hope for a social transformation by adopting a
multi pronged strategy. One important element of this strategy must be system changes.
Another element must be the shaping of the minds of people through education. A third of
course would be the efforts of religious and public opinion leaders as well as by media in
continuously shaping public opinion and re-inculcating the values of integrity and honesty.
41 So far as the system is concerned, our system is corrupt because our entire democracy
is based on corruption. Democracy calls for the existence of political parties. Political parties
need funds. Our political parties collect funds in cash. It means, in other words, our political
parties are depended on black money. Black money is the oxygen for corruption and
corruption is the oxygen for black money. Hence, we cannot expect the political parties to
fight corruption.
42 This does not mean that there are other democracies which are also corrupt because of
the black money syndrome. This is peculiar to India. Again the political corruption leads to
the vicious cycle of bureaucratic corruption, business corruption and criminalisation of
politics.
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43 We have also seen in the decade from 1991 the liberalisation process. It was felt that
one of the causes of corruption was the permit licence raj. What has happened is, new areas
of corruption have evolved.
44 Market dynamics is supposed to be the decisive factor in the post liberalisation era.
As our markets are not properly governed and perhaps as our regulators are still learning
their ropes, we have seen the entire decade of liberalisation marked systematically by
repeated scams. Starting with the Harshad Mehta Scam, the Vanishing Company Scam, the
Bhansali Scam, the Ketan Parikh Scam and finally UTI Scam. The second area for
corruption relates to foreign direct investment. FDI has become the most important sacred
cow after controlling the fiscal deficit in the post-liberalisation period. While successive
Finance Ministers are struggling to pay homage to the controlling the fiscal deficit and in the
process systematically reduce whatever funds are available for development.
45 Another sacred cow in the post-liberalisation era is infrastructure. As we do not have
money for the infrastructure, we are depending on the foreign direct investment. In order to
attract foreign direct investment, the policies are so designed as to make it virtually an
invitation for fraud. On the foreign direct investment front policy makers have been lending
over backwards to provide opportunity for investment. What has happened in the power
sector, resulting in the well-known instance of Enron is an exercise of this type. In fact, the
incentives were such, I was told that a new type of industry grew in the post liberalisation
period. This is getting clearances for mega projects. Again in the power sector, so many
projects were cleared by different states also for fast track. Many MOUs were signed.
Ultimately what happened is crooks made a fast buck and the public of the country and the
investors were left high and dry.
46 Another area of the post-liberalisation corruption is in the area of policy making.
What Ram Manohar Reddy said in an article in The Hindu is worth noting. Economic
reforms represent a conscious shift from socialism to capitalism. Nevertheless, what we
have, as C Ram Manohar Reddy pointed out in a recent article in HINDU, is corrupted
capitalism. According to him, in the aftermath of the East Asian Crisis of 1997, crony
capitalism was blamed for the failure. What is beginning to mature in India is a different and
a larger phenomenon that lends to another but less attractive alternative term, corrupted
capitalism. In this uniquely Indian phenomenon which unlike in China, Indonesia and Russia
is blessed here by the established democratic process, political corruption and market
capitalism thrive by feeding each other. Capitalism grows by not through competition in the
market but by excluding competition through large scale corruption of the policy maker and
administrator in high places. This is what changing the rules of the game in the new sector
means. Likewise the stunting of the public sector, the sale of state assets to preferred buyers
and the provision of subsidized finance to favoured enterprises all for a price have been
giving a new meaning to capitalism, Indian style in the 21st century”.
47 Here we should also note that one honest minister, Shri Arun Shourie has been able to
bring because of his enormous dedication to work a great degree of transparency for the
whole disinvestment process. Otherwise, we have seen in the past policies being made, for
example, in Civil Aviation, by which any foreign company which had experience in aviation
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was barred from investing in India. Perhaps this policy has now been changed. At the time
the policy was announced, it was obvious that it was being fine tuned to meet some interest.
48 The action and success of Shri Arun Shourie in bringing transparency in the present
system shows that we could look to a new strategy for fighting corruption. Honest ministers,
even in the present system, may be able to bring transparency, at least, so far as their areas
are concerned. Such initiatives must be recognised and welcome.
49 It is said that war is too dangerous a matter to be left to the generals, fighting
corruption or de-corrupting India is too important to be left only to the agencies like the
CVC. What is therefore obvious is that our strategy should involve not only the people in
power like the ministers and CVC but also the civil society.
50 We have so far analysed the damaging consequences of corruption and the social
roots of corruption. The challenge before us is, can India become corruption free. Is it
possible to tackle the issue of corruption in society? As the Central Vigilance Commissioner,
I believe that it is possible. My belief is based on the experience of other countries like
Britain, Botswana and Singapore, which have been able to effectively tackle the issue of
corruption. In the Indian context, I think such a change is possible. My confidence is based
on the following five principles observed by five eminent men:
51 Bertrand Russell, the eminent British philosopher observed that “every opinion
becomes respectable if you hold it for a sufficiently long time.” Today it may not be
respectable to think that India can become corruption free. But similar was the situation, at
the height of British imperialism, when it was unthinkable that the sun would ever set on the
British Empire. Nevertheless, the leaders of our freedom struggle led by Mahatma Gandhi
made the idea, that India can become free of colonialism, a reality. Their opinion about a free
India, which at one time might have been considered as a dream or impossibility, became a
reality.
52 This goes to prove the truth of the statement made a French writer Victor Hugo who
said “There is nothing more powerful than an idea whose time has come.” Perhaps looking
to the extensive corruption in every walk of life that we see in India today, the idea that India
must improve and become a less corrupt country is an idea whose time has come.
53 The third observation was made by another French thinker Alexis de Tocqueville. He
said that “The inevitable becomes intolerable the moment it is perceived to be no more
inevitable.” Today the citizens of India may view corruption as inevitable. The purpose of
this Guide is to make every Indian citizen realise that corruption is not inevitable. The
moment the citizens of the country realise that corruption is not inevitable, then it will
become intolerable and we can see a dramatic change coming up in the country for the better.
54 The fourth observation is attributed to the British writer George Bernard Shaw. He
said: “An ordinary person accepts the limitations of life in the society in which he lives and
leads a peaceful life. The unreasonable man wants the society to change to his way of
thinking and in the process achieves success.” Today, reasonable citizens in India may come
to terms with the prevailing corruption and try to lead a peaceful life. The morally aware and
activist citizens of the country would be following the footsteps of Mahatma Gandhi and in
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trying to bring about a change in the system. It may be recalled that when Gandhiji was in
South Africa, he was thrown out in the middle of the night from the first class compartment
of the train in which he was travelling, even though he had a valid first class ticket, because
he was black. Many other Indians in his position would have accepted the injustice of the
system and led a peaceful life. But Gandhiji who was a great moral leader thought this to be
an unfair system and rebelled against it. Satyagraha was born in the mind of Gandhiji on that
railway platform that night in South Africa. The citizens who read and take an activist
approach to fighting corruption in our country by reading this guide will be following the
footsteps of Mahatma Gandhi.
55 Unless there is a plan of action, mere sentiment or unguided action will not bring
results. There is a story about a rat, a cat and an owl. The rat was being harassed by the cat.
It went to the owl for the advice. The owl said that the rat could face the cat if it also became
a cat. When on the next day the rat went and inquired from the owl how it, a rat, could
become a cat, the owl said that he was there to give policy directions but implementation was
the rat’s problem! The very purpose of this Guide is to empower every Indian citizen who
wants to fight corruption and from being weak like the rat to become strong like the cat. For
this, the strategy to be followed is the advice given by Michelangelo Bunoretti, the
immensely talented Italian sculptor of the fifteenth century. Michelangelo was asked how he
made beautiful statues out of marble that had no shape. He replied that the statue was in his
mind and he went on removing from the marble whatever was not part of the statue and the
statue emerged. Today every patriotic citizen desires that India must become a corruption
free country. How to go about it and ensure that the prevailing corruption is tackled is the
main theme of this guide. Specific actions have been indicated so that vision of a corruption
free India can be realised.
56 How do we translate these principles into action? So far as the last principle of
Michelangelo is concerned, that has the starting point for fighting corruption. If political
corruption leads to business corruption, criminalisation of politics and bureaucratic
corruption, we must tackle political corruption. The following may be considered for
tackling political corruption.
57 The allegations of corruption in policy making are so easily believed. When an
allegation was made in the case of BALCO disinvestment which was up held by the Supreme
Court itself, by the Chief Minister of Chattisgarh that Rs.100 crores bribe was given, it
caught the headlines for some time. I had asked the Chief Minister of Chattisgarh to give
information so that if there were any public servants involved, the CVC could initiate action.
There has been no response from the Chief Minister so far. The allegations of corruption
especially running into crores are easily believed today. Because perhaps of the high stakes
involved, people readily believe them. In this context, we must place on record the point that
present Minister for Disinvestment Shri Arun Shourie is setting an excellent example by
making the process as transparent as possible.
58 Sometimes the suspicion for scope of corruption exists because of the nature of
government procurement process. For example when it comes to airlines there have been
helplessness expressed by the Civil Aviation authorities saying that there are only two major
suppliers of aircraft – the Airbus and Boeing. So the best strategy is to play one against the
other and get the best deal. While nobody can quarrel with the fact that the government or
13
any agency which is the buyer in such a system should be able to play one against the other,
the basic issue is what is the level of transparency maintained in this playing one against the
other game? The CVC has therefore suggested to ministries like Civil Aviation and Defence
that they can try to use the reverse auction route to overcome this problem.
One of the peculiar problems faced by the Ministry of Civil Aviation and organisations like
Indian Airlines / Air India is that there are only a limited number of suppliers whether it is
aircraft or components like engines and avionics etc. In defence procurements also similar
situations may arise.
The then Secretary, Civil Aviation, Shri Ravindra Gupta had met me a more than a year ago
and said that because of this they have to play one against the other to get the best deals.
While playing one against the other may be the best purchase strategy, it can also give
convenient cover for corrupt practices. We have, therefore, in the CVC, been urging that
while one can play one against the other, care has to be taken to see that the entire process is
transparent.
Recently, the availability of reverse auction through internet and electronic media has
become an option especially for buyers where they can technically play one bidder against
the other and get the best price. In fact, companies like GE are adopting reverse auction and
in India companies like Tata have also gone for it. Our own public sector enterprises like
BHEL and SAIL are also considering this option.
In the interest of checking possibilities of corruption in the purchase of aircraft or
components like engines, avionics etc., you may consider adopting the strategy of reverse
auction with the following precautions:
i. The specifications will have to be frozen before the auction process starts.
ii. The suppliers will have to be critically examined and short-listed. Once these two
steps have been taken, there should be a limited reasonable window for reverse
auction which may maximum go up to 15 days
iii. The technology of reverse auction involves masking the name of the bidders and
therefore while the process is transparent so far as the prices and offers of the
bidders are concerned, the parties making the bid are not known and the whole
process of reverse auction also provides for a perfect audit trail so that later on if
there is any complaint about corruption, verification of the facts becomes easier.
iv. The reverse auction process must be stored in the computer memory and properly
archived so that inquiries will be possible even years later.
Subject to these conditions, I would suggest you may seriously consider going in for reverse
auction to ensure that there is no scope of corruption in the purchase of aircraft and
equipments and at the same time our processes, at least, so far as Civil Aviation sector and
defence are concerned, are also in tune with the latest developments in information
technology.
59 The point I would like to make is that the post reform scenario has been accompanied
by a series of allegations of corruption about major policy reforms. It may be recalled that in
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1995 for example the entire Winter Session of Rajya Sabha was stymied because of the so
called telecom scam.
60 The globalisation process itself has led to a focus on corruption. Globalisation means
that four elements of the economy move across the borders very fast. These are physical
capital in terms of plant and machinery, financial capital in terms of money invested in the
capital markets and FDI, labour and technology. The South East Asian countries which
benefited form the pace of globalisation unfortunately did not have proper corporate
governance in the financial sector. They collapsed by mid 1997. The World Bank therefore
has now realised that there was direct correlation between corporate governance and
economic development. The focus therefore is on fighting corruption. This is what is the
perception of the World Bank on fighting corruption.
For operational purposes, the World Bank defines corruption as the abuse of public office
for private gain. While this definition does not include wholly private sector corruption, it
does include the interface between private and public sectors without which much private
sector corruption could not occur. Some of the examples are Bribery in purchasing
government contracts, benefits, licenses, judicial decisions, evading customs duties, taxes
and other regulations; theft or misappropriating budgetary funds and public assets;
patronage, nepotism and cronyism; influence peddling like election or party financing in
exchange for influence.
Corruption is not likely ever to be fully eliminated but the objective is to minimise it so that it
becomes and exception and not the rule, by turning it from a low risk and high return activity
into a high risk and low return activity. The World Bank's approach therefore focuses on an
economic analysis of the conditions conducive to corruption based on rents, discretion and
accountability. Corruption is a function of all three. Corruption has the potential to flourish
where rents are high, discretion extensive, and reporting and monitoring are poor.
In combating corruption, it is useful to focus on minimising the extent to which these factors
can influence behaviour, rather than relying solely on prosecution of corrupt individuals.
Prosecuting the guilty is important but can do little to reduce the opportunities and
incentives for corruption "upstream". To do this, it will be necessary to focus on rents,
discretion and the efficiency of monitoring and accountability mechanisms in the political,
administrative and other structures of the state. At the same time, it is important to ask why
there have not been more successful prosecutions of corruption. This highlights the
importance of including judicial, prosecutorial and police bodies among the state
organisations to be scrutinised. The analysis based on high potential rents, extensive
discretion and low transparency is also relevant to them.
Corruption undercuts the macroeconomic, efficiency, equity and institutional functions of
government. It is helpful to distinguish these four types of costs imposed by corruption:
Ø Macro-fiscal: lost revenues (from tax, customs duty and privatisation) and excessively
high expenditure (through corruption loadings on state contract);
Ø Reduction in productive investment and growth: through abuse of regulatory powers,
misprocurements and other costs imposed by corruption. International evidence indicates
15
that countries with higher incidence of corruption systematically have lower investment
and growth rates and that public safety can be compromised by unsafe infrastructure.
Ø Costs to the public and to the poor in particular: via higher taxes than necessary, bribe
extraction in delivery of services and poor quality of and access to services. Bribe are
frequently a higher proportion of income of the poor even though they do not pay the
highest bribes
Ø Loss of confidence in public institutions: corruption can undermine the rule of law, tax
compliance, respect for contracts, civil order and safety, and ultimately the legitimacy of
the state itself.
61 The end of the cold war in 1990 has made many governments come over to the
conventional wisdom of today that in economic matters government should not intervene.
This in turn has led to a greater focus on the investors in the emerging markets. As the South
East Asian experience showed, if countries were corrupt, then investments were going to be
threatened. So far as aid is concerned, probably taxpayers in developed countries are asking
that their money should be invested properly and not wasted in corruption. Hence the
renewed focus on corruption.
62 The American government passed the Foreign Corrupt Practices Act 1977 but the
European countries and Japan were not so much concerned about the corrupt practices
indulged in by their countries for winning contracts in third countries. However thanks to the
US pressure, ultimately by 1997 the 34 OECD countries had agreed for an Anti Bribery
Convention and by 1999 February the convention also has come into force. Al Gore led the
first global conference against fighting corruption in which 90 countries including India
participated. This was followed by the second global forum against fighting corruption held
in The Hague and hosted by Netherlands in which 142 countries participated. Why is
suddenly fighting corruption becoming part of the global agenda? T N Ninan, Editor of the
Business Standard who attended the Hague conference made a telling comment in his
editorial on 2.6.2001.
The wisecrack goes that everyone complains about the weather but no one does anything about it. I
suppose the same thing could be said about corruption, on which Indira Gandhi famously explained
away her own inaction: it was a global phenomenon, she said. Well that turns out to be true. Except
that something is in fact being done about it – on a global scale. Conferences are being held in quick
succession to discuss the issue: one at the Hague earlier this week, which 1800 people attended;
another soon in Prague, and then two more in South Korea before the end of the year. After working
up remarkable steam on the environment and human rights, the global conferencing community has
discovered corruption as an issue on which corrective action is urgently required.
Don’t laugh and turn the page. This is serious business. It may take a while before the conferences
leads to measurable action, but it seems pretty clear that we’ll get there. Remember that that the first
major international conference on environment was held in Stockholm in 1972. From there to Kyoto
was just over a quarter century. The human rights movement has gone from agenda item to action
item in a much shorter period, and I suspect that this will be true of corruption as well. Though what
kind of action, and how effective it will be, remain unclear.
63 Post reform there was perhaps a sense of euphoria in the investing market in India.
Suddenly capital market became attractive and the investing public apparently became a
victim of a lot of scamsters. The whole 90s has been characterised by a series of scams. We
16
had the Harshad Mehta scam followed by the Bhansali scam and then the scams of vanishing
companies, scams of teak equity companies, Ketan Parekh scam and finally the UTI scam.
These scams revealed that perhaps while India was learning to move from control to
regulation, the regulatory instruments were still not effectively in place. In fact liberalisation
has meant not only the abolition of controlling agencies like DGTD and Controller of Capital
Issues but also renaming and hopefully changing the culture of erstwhile control agencies
like CCIE as Director General of Foreign Trade.
64 Apart form the policy changes involving giving up government monopoly another
consequence has been that if government is no longer controlling, it has to regulate and these
regulatory agencies had to be independent. The issue whether the regulatory agency should
be so totally independent because many a time government itself can be a player on the
commercial scene, has not yet been finally resolved. The vicissitudes through which the
TRAI has passed is a case in point. Other regulatory agencies like the Insurance Regulatory
Authority, Tariff Advisory Committee on Major Ports, National and State electricity
Regulatory Commissions have had mixed results. The question of corruption scenario may
arise if the regulatory bodies themselves are considered to be prone to corruption. We will
have to see how independent the regulatory authorities are and how transparent are their
procedures so that the scope of corruption, if any, are eliminated. I think by and large our
regulatory agencies have not faced any serious problem of corruption and if at all their can be
criticism that they are not as independent or effective as the blue blood or dyed in the wool
liberal economists may expect.
65 Another aspect of the corruption is whether the bureaucracy has really gone along
with the spirit of liberalisation. The general perception is that while at the political level there
may be even an informal consensus about the need for liberalisation and may be thanks to the
pressure of international commitments under WTO or the financial imperatives, government
may be liberalising, is the bureaucracy going along? The general feeling is that the
bureaucracy definitely at the cutting level of the inspectors has not reconciled to
liberalisation. For example the experience of the hawkers case in Delhi can be mentioned.
Madhu Kishwar took active interest in highlighting how the five lakh hawkers in Delhi were
paying a bribe of Rs.40 crores per month to the municipal and police officials. The CVC
took up the matter with the CM, Delhi and also attended the Jan Sunwayi organised by
Manushi the NGO headed by Madhu Kishwar. This was reported in the media and drew the
attention of the PMO was drawn to it. PM finally directed on 23.8.2001 that the licensing of
hawkers and cycle rickshaws must be abolished and he suggested a following alternative.
An alternative regulatory regime for street hawkers and cycle rickshaw is outlined as
follows:
i) The existing licensing system with quantitative limits must be scrapped forthwith
ii) The metropolis may be divided into “green”, “amber” and “red” zones, signifying
free access, fee based access, and prohibited access, respectively. The division into green
and amber and red categories may vary with time of day, day of week and day of month, and
may be revised periodically. The division may be made separately for street hawkers and
cycle rickshaw. Such zoning must be both formally notified and prominent street signs put up
to indicate their boundaries and timings. The division may be made by the NDMC/MCD in
17
their jurisdictions but invariable with the formal consultations of residents associations and
the area elected representatives. Other general (i.e., applicable to all) restrictions on street
hawking / cycle rickshaws may be specified in minimal terms and strictly consistent with the
Saudam Singh vs NDMC judgment i.e., in the interest of the general convenience of the
public including health and security considerations, e.g., avoidance between midnight and 5
am, stopping on carriageway, all garbage to be removed and properly disposed off, no
obstructions to traffic lights or bus stops. (Restrictions on adulterated food, narcotics etc.
must flow from the respective legislations, not as further restrictions specific to these
occupations). Conversely there must be an absolute prohibition on municipal and police
authorities from impounding, or destruction, or seizure, of goods and equipment, except
when permitted under other laws (e.g., excise laws).
iii) Any person who wishes to be a street hawker or cycle rickshaw puller may do so by a
simple act of registration involving two steps: (a) reliable identification by any means (e.g.
voters id, ration card, passport, driving license, letter from an elected representative or
citizen in good standing), and (b) payment of nominal fee to cover cost of issue of a photo
identification card. Upon registration, which should be done on the spot, the person would
have unrestricted access to all “green” areas. Penalties for non-registration must be
restricted to a surcharge on the fee, but impounding, destruction, or seizure of the goods and
equipment by any authority must be absolutely prohibited. The registrations may be renewed
(say, once a year) by payment of a modest renewal fee, and affixing the current period’s
sticker on the registration id. The sole purpose of the registration is to provide reliable
identification for the purpose noted above. It is not a permit to ply the trade. No such permit
is needed being a fundamental right (as established in Saudam Singh & ors. Vs NDMC).
Accordingly, there must be no numerical limits on registrations.
iv) A registered street hawker / cycle rickshaw puller who wishes to ply in an “amber”
zone may do so by paying a fee, upon which a sticker to the effect may be affixed on the
registration id. Once again, there must not be any quantity or numerical restrictions on
issue of such stickers. Numbers of street hawkers / cycle rickshaws in the “amber” zones
may instead be regulated by adjustment of the amount of fee periodically (this fee need not be
nominal, but may serve to limit the numbers to a level at which significant congestion does
not occur). Once again, penalties for plying in an “amber” zone without payment of fee may
involve a financial penalty, in addition to the fee, but in any case, there must be an absolute
prohibition on municipal and police authorities from impounding or destruction or seizure of
goods and equipment. The fee may be scaled to different categories of street hawkers, e.g.,
peddlers on foot; or using pedalled vehicles; or using animal drawn vehicles; or using
motorized vehicles below 800 cc engine capacity; or using motorized vehicles above 800 cc
etc.
v) Non government organisations with a record of working for the welfare of street
hawkers and rickshaw pullers may be authorised to interface between them and the
concerned MCD/NDMC authorities in respect of registration and renewals, issuance of
“amber zone” stickers and enforcement measures. Such interfacing by NGOs may provide
employment to unemployed urban youth.
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66 The point is that in spite of the PM’s directive the policy has not been implemented
on the ground. We hear also complaints about inspector raj. There will be need for tackling
this issue.
67 Recently I addressed a meeting of the Builders Association of India (BAI) at Trichy
on 23.1.2002. I told the builders that they were in the supply side of corruption and they
should be able to first stop paying bribers. In fact I had asked CII itself after I took over as
CVC whether they could take a lead in asking their members not to bribe and I am happy to
say that the CII was the first to respond among the three chambers of commerce and Shri
Arun Bharat Ram wrote to me as follows:
Dear Mr Vittal
I am writing to you in regard to your appeal to play an active role in dealing with the issue of
corruption. I do so after consultations within CII at the National and Regional levels.
First we propose to communicate your appeal to all 4000 member companies of CII and to
all 100 affiliated associations and their member companies.
Second we request you to write a special message of 900 words which we would like to
publish in the CII Communique which has very wide circulation
I am pleased to bring to your notice that several companies have confirmed to CII that they
do not "pay" irrespective of the pressures and implications. However many corporates do
face ground-level problems, harassment and delays. There are enormous difficulties on
account of laws and rules which are complex and which provide opportunities to create
difficulties. The SSI sector is a major sufferer. This raises two issues:
a) Simplification of laws and rules
b) Need for accountability of the administration, and of individual officials
We need to set up an institutional mechanism to deal with these issues and we wish to be
proactive, to work with you jointly and to work on a sustained basis. We would like to meet
you in the near future to discuss further action.
With warm regards
(Arun Bharat Ram)
68 In the post reform scenario therefore apart from the corruption at the inspector raj
level which has been also included indirectly in the EXIM bank study about transaction cost
contributing to 5 to 25% of the price of the products exported from India, the role played on
the supply side of corruption by the business community also has to be looked into. If at the
cutting edge level there is no change, the bribes will continue to be paid. A valiant attempt
was made in January 2000 by the custom house agents in Mumbai not to pay bribes but the
movement fizzled out in one month.
69 Recently I was asked by the BAI to suggest how they could fight corruption.
Individually they are not in a position to take on the corrupt bureaucracy because they would
19
be victimised. The best model under the circumstances seems to be to use NGOs which are
active in the consumer movement or fighting corruption and agencies like the vigilance
councils which have come up in Maharastra headed by social leaders and retired honest
officers as the front end and then use the detailed information available with the industry
associations to bring the corrupt to book. Indian Merchants Chamber in Mumbai has taken a
lead in setting up a separate front to fight corruption.
70 I think if in the post reform scenario corruption has to be tackled, business which has
been a part of the corruption scene will have to declare where it stands and think of
innovative strategies to fight corruption. The CVC in this context has come up with a
Citizens Guide To Fighting Corruption. Four agencies can be used and a four point plan has
been suggested. The four agencies are (a) Judiciary, (b) organisations like CVC, (c) print
and electronic media, and (d) direct action through NGOs. Lok Satta in Andhra Pradesh for
example has been able to check corruption in petrol pumps. Four techniques that can be
adopted for fighting corruption are the following:
(a) participate in the vigilance awareness week starting from 31st October every year of
Sardar Patel’s birthday so that people are sensitised about the consequences of
corruption. The PHD Chamber must be congratulated for coming up with a study
about the cost of corruption;
(b) use the Benami Black Money Scheme of the CVC under which any citizen can
inform the CVC about the corrupt public servants so that action can be taken. The
details of the scheme can be seen in the Annexure-1
(c) participate in trapping of corrupt public servants as per the process in Annexure-2
(d) make suggestions about how rules and procedures can be simplified so that CVC can
take up the matter with the concerned authorities and if possible exercise the power of
supervision over the vigilance administration in the Government of India. So far as
the State Government is concerned, the CVC can be a post office, but an effective
post office to take up the matter at the highest level at the states.
71 In short therefore the following issues stand out in the post reform corruption scenario
a) Scope of corruption seemed to have opened up especially in the area of policy
making. Allegations are made and believed because of the prevailing culture of
corruption. It becomes very necessary on the part of those who shape policy to be
sensitive to this issue and ensure maximum transparency on the decision making
process.
b) Capital market which has been thrown open for more dynamic activity seems to have
become a victim of scams. This may probably reflect on lack of adequate effective
regulatory infrastructure. Corporate governance in the Indian financial sector is poor
and needs to be vastly improved.
20
c) At the cutting edge level inspector raj still prevails and definitely while government
of India may talk about liberalisation, the spirit apparently has not percolated to the
state and lower levels of administration.
d) The Indian business community brought up in four decades of permit licence raj had
developed also its own modus vivendi with a culture of corruption. This scene has to
change. Apparently as the CII’s reply to CVC shows, the industry would like to come
out of the corruption trap. The strategy for this could be to utilise the techniques
recommended in the Citizens Guide to fighting corruption and also use NGOs to lead
the fight against corruption and the industry bodies can support them with facts and
figures so that while fighting corruption they do not in the process lose their own
business.
e) In the global scene, fighting corruption has emerged as an agenda item for action as a
direct consequence of the end of the cold war and the anxiety of the tax payers in the
developed countries to ensure that the money that is given as aid is well spent and is
not siphoned away by corrupt elements in the receiving countries.
72 How do we proceed further in this scene? I think we will have to practice the advice
given by the Chandogya Upanishad. We must be able to apply our knowledge with
conviction and faith and also with deep analysis and thinking. Then our action becomes more
powerful. That in turn will lead to success.

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