essay on corruption that destroys the value of indian constitution

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Parthasarathi Loganathan

Corruption - An article omitted in Indian constitution

Coverage of this Article

1. Introduction - Introduction - Corruption is the most significant factor that destroys the Indian democracy, and every politician talks to fight against Corruption.

2. United Nation Convention Against Corruption - In its General Assembly resolution 58/4 of 31 October 2003 United Nations Convention against Corruption adopted

3. The Prevention Of Corruption Act 1988 - This Special law was enacted on 09th September 1988 contains Five Chapters and 31 sections for offences of Corruption relating to Public Servants.

4. Central Vigilance Commission Act, 2003 - The Central Vigilance Commission Act, 2003 was enacted on 11th September 2003 containing Five Chapters and one Schedule with 27 sections.

5. Central Bureau Of Investigation - The Central Bureau of Investigation traces its origin to the Special Police Establishment (SPE) which was set up in 1941 by the Government of India.

6. The Lokpal And Lokayuktas Act, 2013 - It shall make all efforts within its jurisdiction to serve the public interest and shall endeavor to use the powers vested in it to eradicate corruption in public life.

7. Need And Scope For Expansion Of Legal Framework For Corruption - Despite availability of many stringent laws under Indian Penal Code, Criminal Procedure Code, Prevention of Corruption Act, and the Central Vigilance Commission.

Corruption is the biggest factor that destroys the Indian democracy especially and every single politician talks to fight against Corruption. Then who is the giver or who is the taker or who is the beneficiary? This finds no answers when the country experienced major scams involving the names of some members of Parliament and State Legislatures. The Constitution of India under Articles 105 and 194 provides privileges of Members of Parliament and State Legislatures whereas The Prevention of Corruption Act, 1988 is the first and the only composite legislation to book public servants for taking bribe and involved corruption. In order to consolidate and amend the laws relating to prevention of corruption and matters connected thereto, the act came into force and was amended from time to time.  It was originally enacted in 1947 which was amended in 1964 based on the recommendations of the Santhanam Committee . There are provisions in Chapter IX in the Indian Penal Code to deal with public servants and those who abet them by way of criminal misconduct, Criminal Procedure Code, 1974 to enable attachment of ill gotten wealth obtained through corrupt means including from transferees of such wealth. Objective and Scheme of the Act was intended to make more effective provision for the corruption rampant amongst the public servants. It is therefore a social legislation defined to curb illegal activities of the public servants.

Corruption is defined as an act done with an intent to give some advantage inconsistent with official duty and the rights of others. It includes bribery, but is more comprehensive, because an act may be corruptly done, though the advantage to be derived from it be not offered by another. Secondly, Corruption is also understood something against law, as a contract by which the borrower agreed to pay the lender usurious interest.

Webster’s Universal  Dictionary  (1961) provides the  meaning  of the word ' corrupt ' as (1) to make or become evil or morally bad, (2) to take. Or become impure. According to Webster’s the word ' corruption '  means , as the act of corrupting or state of being  corrupt. People often think that they are at the mercy of corruption and that it is just a “way of life”. However, every society, sector and citizen would benefit from saying

It is surprising that one cannot find a single word “Corruption” in the entire length and breadth of our Constitution document though the definition components contain words like Official Duty, Rights of others, bribery, something against law, evil, morally bad, impurity, etc. It therefore vindicates the fact that our sacred book of law is corrupt-free on all respects.

UNITED NATIONS CONVENTION AGAINST CORRUPTION

United Nations office on Drugs and Crime Vienna (UNODC) in its Convention introduced a comprehensive set of standards, measures and rules that all countries can apply in order to strengthen their legal and regulatory regimes to fight corruption. It called for preventive measures and the criminalization of the most prevalent forms of corruption in both public and private sectors. In its General Assembly resolution 58/4 of 31 October 2003 United Nations Convention against Corruption adopted:

(a) To promote and strengthen measures to prevent and combat corruption more efficiently and effectively;

(b) To promote, facilitate and support international cooperation and technical assistance in the prevention of and fight against corruption, including in asset recovery;

(c) To promote integrity, accountability and proper management of public affairs and public property.

Seriousness of problems and threats posed by corruption to the stability and security of societies, undermining the institutions and values of democracy, ethical values and justice and jeopardizing sustainable development and the rule of law. Corruption and other forms of crime, in particular organized crime and economic crime, including money laundering are always interlinked. Technology Optimization can play an important role in enhancing the ability of States, by strengthening capacity and by institution-building, prevent and combat corruption effectively, Illicit acquisition of personal wealth by Corrupt cause immense damages to democratic institutions, national economies and the rule of law. Prevention and eradication of corruption is a responsibility of every citizen and States and that they must cooperate with one another, with the support and involvement of individuals and groups outside the public sector, such as civil society, non-governmental organizations and community-based organizations. If their efforts  are to be effective, Principles of proper management of public affairs and public property, fairness, responsibility and equality before the law and the need to safeguard integrity is absolutely necessary.It is therefore the duty of every citizen to build a new generation that rejects corruption in every form to Safeguard development, strengthen democracy and to promote Justice to our democratic values.

India is a signatory to the United Nations Convention against Corruption .The commitment of the Government to provide clean and responsive governance is reflected in passing of the legislation and creation of the body of Lokpal, to contain and punish acts of corruption. The Secretary General of United Nations said on the adoption of the resolution by the Member States: "Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organized crime, terrorism and other threats to human security to flourish. This evil phenomenon is found in all countries – big and small, rich and poor – but it is in the developing world that its effects are most destructive. Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a Government’s ability to provide basic services, feeding inequality and injustice and discouraging foreign aid and investment. Corruption is a key element in economic underperformance and a major obstacle to poverty alleviation and development."

THE PREVENTION OF CORRUPTION ACT, 1988

This Special law was enacted on 09th September 1988 contains Five Chapters and 31 sections for offences of Corruption relating to Public Servants.  The Law specifically deals with Corruption offences like, Taking undue advantage to influence public servant by corrupt or illegal means or by exercise of personal influence, Offence relating to bribing of a public servant or by a commercial organisation, Person in charge of commercial organisation to be guilty of offence, Public servant obtaining [undue advantage], without consideration from person  concerned in proceeding or business transacted by such public servant, Criminal misconduct by a public servant and the punishments thereof including attachment and forfeiture of property.

CENTRAL VIGILANCE COMMISSION ACT, 2003

Under the  Chairmanship of  Mr. Justice B. P. Jeevan Reddy (1997-2000) 15th Law Commission was constituted and it presented its 161st report recommending the Bill to enact The Central Vigilance Commission Bill, 1998 to confer upon Central Vigilance Commission the statutory status and to give statutory recognition to the functions of Central Vigilance Commission with a view to make it a more effective and efficient institution to undertake, guide and supervise investigations and inquiries into allegations of corruption against public servants and employees of the Public Sector. The Central Vigilance Commission Act, 2003 was enacted on 11th September 2003 containing Five Chapters and one Schedule with 27 sections. 

The genesis of this law lies in the judgement delivered by the Supreme Court of India in what is commonly known as the Havala Case   (Writ Petition (Criminal) Nos. 340-343 of 1993) The Court found that the CBI and other investigating agencies did not investigate cases properly whenever the alleged offenders were powerful persons gave directions to establish institutional and other arrangements aimed at insulating the CBI from outside influences with specific directions. However there were many differences between the Judgement, the Law Commission’s draft of The Central Vigilance Commission Bill, 1998 and the Ordinance of August 25, 1998 in terms of Powers of CVC & CBI and the Appointment

In the Annual Report for the period from 01.01.2018 to 31.12.2018 the Central Vigilance Commission has reported that there were 44 blatant deviations from the Commission’s advice or non-consultation with the Commission vitiates the vigilance process and weakens the impartiality of the vigilance administration. Many Departments/ Ministries like Railways, Banks,  though the Commission’s advised Major Penalty/Prosecution the action initiated by them is reported as “No Action, Minor Penalty, closure, exoneration, counselling, Administrative warning, Govt. Displeasure, charges dropped without Commissioner’s advice, etc. Hence the Law proved to be less effective and authoritative as procedures were laid down to facilitate deviation of recommendations.

CENTRAL BUREAU OF INVESTIGATION

The Central Bureau of Investigation traces its origin to the Special Police Establishment (SPE) which was set up in 1941 by the Government of India. The functions of the SPE then were to investigate cases of bribery and corruption in transactions with the War & Supply Deptt. Of India during World War II. Superintendence of the S.P.E. was vested with the War Department. Even after the end of the War, the need for a Central Government agency to investigate cases of bribery and corruption by Central Government employees was felt. The Delhi Special Police Establishment Act was therefore brought into force in 1946. This Act transferred the superintendence of the SPE to the Home Department and its functions were enlarged to cover all departments of the Govt. of India. The jurisdiction of the SPE extended to all the Union Territories and could be extended also to the States with the consent of the State Government concerned.The DSPE acquired its popular current name, Central Bureau of Investigation (CBI), through a Home Ministry resolution dated 1.4.1963. Initially the offences that were notified by the Central Government related only to corruption by Central Govt. servants. In due course, with the setting up of a large number of public sector undertakings, the employees of these undertakings were also brought under CBI purview. Similarly, with the nationalization of the banks in 1969, the Public Sector Banks and their employees also came within the ambit of the Central Bureau of Investigation.

THE LOKPAL AND LOKAYUKTAS ACT, 2013

This law was enacted on 1st January 2014 containing 15 Chapters and schedule The Lokpal is the first institution of its kind in independent India,  to inquire and investigate into allegations of corruption against public functionaries who fall within the scope and ambit of the Act. The Lokpal of India is committed to address the concerns and aspirations of the citizens of India for clean governance. It shall make all efforts within its jurisdiction to serve the public interest and shall endeavor to use the powers vested in it to eradicate corruption in public life.

NEED AND SCOPE FOR EXPANSION OF LEGAL FRAMEWORK FOR CORRUPTION

Despite availability of many stringent laws under Indian Penal Code, Criminal Procedure Code, Prevention of Corruption Act, and the Central Vigilance Commission, the menace of Corruption is still prevalent in the society which hampers the welfare and growth of our society. Hence the following proposals are putforth to expand the scope of legal framework for elimination of corruption from our system:

• To bring forth an appropriate amendment in the Constitution to address specifically to safeguard the citizens against Corruption and designate as a fundamental duty of State and as a fundamental Right against Corruption.
• Preamble of the Constitution needs to explicitly contain to ensure a Corruption free society under its basic structure and to secure to all its citizens under Social, Economic and Political Justice, and Equality of Status and of opportunity and promotion of dignity of every citizen which is denied when there is rampant corruption in our society.
• To review the recommendations put forth by the 161st Law Commission Report defining the powers of Central Vigilance Commission.
• To take up an extensive study of the landmark verdict delivered by Supreme Court in the Havala Case (Vineet Narain & Others vs Union Of India & Another on 18 December, 1997 in Writ Petition (Criminal) Nos. 340-343 of 1993) and ensure implementation of all the recommendations in toto.
• A specific time-frame should be given to adjudicate all pending corruption related cases against public servants and elected representatives.
• Appointment of Heads for all the major agencies like CBI, CVC, ED, Lokpals, Lok Ayukthas, etc should be done with an enlarged committee comprising of representatives of all registered political parties, retired Judges of High Courts/Supreme Court and Police Chiefs, Civil servants having unblemished track record.
• Police is often used or misused against Corruption as they are under the control of the Executive. A National Police Commission should be constituted under independent powers vested under the Constitution. The Chief of Central Police Commissioner must have an unblemished service track record in the IPS cadre having a minimum of 25 years having no political patronage or connection should be appointed by a Committee comprising of representatives of all registered political parties, retired civil servants and Judges of High Courts and Supreme Court, etc. He should be the Supreme Commander of the Police forces in the country who can be impeached only by the Parliament.  He need not report to any State or Central Executive Authority or any bureaucracy and function independently.  All State Police Commissioners should be appointed under similar committees set up in the respective States who should report only to the Central Police Commissioner. They are equivalent to the rank of Chief Justice. This independence would ensure direct attack for elimination of Corruption in the country.
• All Election laws must be reframed to ensure not a single politician with corrupt track record convicted or under trial is eligible to file nomination for election to State Legislatures or Parliament. Once charges framed and trial underway he loses his eligibility for nomination.
• Special Fast Track Courts exclusively dealing Corruption Cases should be formed and chaired by a Judge not less than a rank of High Court Judge. All cases pending in various other courts should be transferred to this Court and disposed within a specific time frame. This Court must have the jurisdiction to adjudicate criminal offences or defection/disqualification pending against present and former representatives of State Legislatures or Parliament. All cases against sitting members should be listed on priority daily hearing basis and disposed off within a timeframe of maximum period of three months. Final Verdict should not be reserved or kept pending beyond a period of one week.
• Last but not least, once any corruption case is filed against any pubic servant or people’s representative, all salaries and allowances including privileges should be withdrawn till the Court delivers its final verdict.

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Corruption in India

• 06 Oct 2023
• 20 min read
• GS Paper - 4
• GS Paper - 2
• Transparency & Accountability
• Ethics and Human Interface
• Ethics in Human Actions
• Ethics in Private & Public Relationships

For Prelims: Corruption Perception Index , Transparency International , Democracy , Corruption

For Mains:  Transparency & Accountability in Governance,Common Causes of Corruption and its Prevention in India.

What is the Context?

The Prime Minister of India, in his 76 th Independence Day address, targeted the twin challenges of corruption and nepotism and raised the urgent need to curb them . Also, Corruption Perception Index (CPI) 2023 was released by Transparency International.

• Overall, the index shows that control of corruption has stagnated or worsened in most countries over the last decade. India Corruption Perceptions Index was 40 index points in 2023.

What is Corruption?

Corruption is dishonest behaviour by those in positions of power . It starts with the tendency of using public office for some personal benefit.

• Moreover, it is unfortunate that corruption has, for many, become a matter of habit. It is so deeply entrenched that corruption is now considered a social norm. Hence, corruption implies the failure of ethics.

What are the Reasons Behind Corruption in India?

• L ack of Transparency : A lack of transparency in government processes, decision-making, and public administration provides fertile ground for corrupt practices. When actions and decisions are shielded from public scrutiny, officials may engage in corrupt activities with reduced fear of exposure.
• A perception of impunity due to the inadequate punishment of corrupt individuals can encourage further corruption. When individuals believe they can get away with corrupt practices, they are more likely to engage in them.
• Low Salaries and Incentives: Public officials, especially those in lower-ranking positions, are sometimes paid low salaries. This can make them more susceptible to bribery and other corrupt practices, as they may see corruption as a means to supplement their income.
• India's complex economic environment, which involves various licences, permits, and approvals, can create opportunities for corruption. Businesses may resort to bribery to navigate this environment.
• Political Interference: Political interference in administrative matters can compromise the autonomy of government institutions. Political leaders may pressure officials to engage in corrupt activities for personal or party gain.
• Cultural Factors: There can be a cultural acceptance of corrupt behaviour in certain contexts, which perpetuates corruption. The notion that "everyone does it" can lead individuals to engage in corruption without feeling morally compromised.
• Lack of Whistleblower Protection: Inadequate protection for whistleblowers can deter individuals from reporting corruption. The fear of retaliation can silence potential whistleblowers and allow corruption to thrive.
• Social Inequality: Social and economic disparities can contribute to corruption, as individuals with wealth and power may use their influence to secure preferential treatment and engage in corrupt practices without repercussions.

What are the Reasons for the Prevalence of Corruption in Civil Services?

• Politicisation of Civil Services: When civil service positions are used as rewards for political support or swapped for bribes , the opportunities for high levels of corruption increase significantly.
• Lower Wages: Lowering wages for civil servants compared to those in the private sector. Certain employees may resort to taking bribes in order to compensate for the difference in wages.
• Administrative Delays: Delays in the clearance of files are the root cause of corruption as common citizens are coerced to grease the palm of erring officials and authorities for expedited clearance of the files.
• Colonial Legacy of Unchallenged Authority: In a society which worships power, it is easy for public officials to deviate from ethical conduct.
• Weak Enforcement of Law: Various laws have been made to curb the evil of corruption but their weak enforcement has acted as a hindrance in curbing corruption .

What can be the Impact of Corruption?

• To demand quality, one might need to pay for it. This is seen in many areas like municipality, electricity, distribution of relief funds, etc.
• A crime may be proved as a benefit of the doubt due to a lack of evidence or even the evidence erased.
• These low-quality services are all done to save money by the contractors and the officials who are involved.
• These people sanction the funds for research to those investigators who are ready to bribe them.
• Disregard for Officials: People start disregarding the officials involved in corruption and also the administrative set up which creates distrust in the system.
• Lack of Respect for Government: Top brass leaders of the nation like the President or Prime Ministers lose respect among the public. Respect is the main criteria in social life.
• Lack of Faith and Trust in Governments: People vote for a leader based on their faith in him/ her, but if leaders are found to be involved in corruption, people lose faith in them and may not vote next time.
• Aversion for Joining the Posts Linked to Corruption : Sincere, honest, and hardworking people develop an aversion for the particular posts deemed corrupt.
• A Decrease in Foreign Investment : Corruption in government bodies has led to many foreign investments going back from developing countries.
• This leads to delays in investments, the starting of industries, and also growth.
• Due to lack of proper roads, water, and electricity, the companies do not wish to start up there, which hinders the economic progress of that region.

Image: Changes in Levels of Corruption In India and Other Countries as per the Corruption Perceptions Index over the past decade.

What are the Legal and Regulatory Frameworks for Fighting Corruption in India?

• Amendment of 2018 criminalised both bribe-taking by public servants as well as bribe-giving by any person.
• Prevention of Money Laundering Act, 2002 aims to prevent instances of money laundering and prohibits use of the 'proceeds of crime' in India.
• The Companies Act, 2013 provides for corporate governance and prevention of corruption and fraud in the corporate sector. The term 'fraud' has been given a broad definition and is a criminal offence under the Companies Act.
• The Indian Penal Code, 1860 sets out provisions which can be interpreted to cover bribery and fraud matters, including offences relating to criminal breach of trust and cheating.
• The  Benami Transactions (Prohibition) Act, 1988 the Act precludes the person who acquired the property in the name of another person from claiming it as his own.
• They perform the function of an "ombudsman” and inquire into allegations of corruption against certain public functionaries and for related matters.
• Central Vigilance Commission: Its mandate is to oversee the vigilance administration and to advise and assist the executive in matters relating to corruption.
• Amendments in 1964: The definition of ‘Public Servant’ under the IPC was expanded. The definition of ‘criminal misconduct’ was expanded and possession of assets disproportionate to the known sources of income of a public servant was made an offence.

What is the Importance of Ethics in Preventing Corruption?

• Establishing Moral Boundaries: Ethical principles provide a framework for defining what is right and wrong. In the context of corruption, ethics set clear boundaries that distinguish acceptable behaviour from unethical or corrupt conduct.
• Promoting Accountability: Ethics demand that individuals take responsibility for their actions and decisions. When people are guided by ethical principles, they are more likely to be transparent and accountable for their actions, reducing the likelihood of engaging in corrupt behaviour that could harm others.
• Fostering Transparency: Transparency is a core ethical principle. Ethical organisations and individuals are more likely to operate openly and honestly, making it difficult for corruption to thrive in an environment where actions and decisions are subject to scrutiny.
• Building Trust: Trust is a cornerstone of ethical behaviour. When individuals and institutions are perceived as trustworthy, they are less likely to engage in or tolerate corruption. A high level of trust in society reduces the temptation for corruption.
• Encouraging Civic Virtue: Ethical values promote civic virtue, which encourages individuals to act in the best interest of society rather than pursuing personal gain at the expense of others. Civic virtue is a powerful deterrent to corruption.
• Supporting Rule of Law: Ethical behaviour upholds the rule of law and respect for legal and regulatory frameworks. Corrupt practices often involve circumventing or violating the law, and adherence to ethics reinforces respect for legal norms.
• Whistleblower Protection : Ethical organisations and governments prioritise protecting whistleblowers who report corruption. Ethical values encourage reporting unethical behaviour, which is vital for uncovering and addressing corruption.
• Global Reputation: On an international scale, ethical behaviour is essential for a nation's reputation. Countries known for ethical governance and low corruption levels are more attractive to foreign investment and collaboration.
• Long-Term Sustainability : Corrupt practices often provide short-term gains but can lead to long-term harm. Ethical behaviour is essential for the sustainable development and prosperity of societies.

What are Nolan Committee Recommendations on Standards in Public Life and Prevention of Corruption?

Nolan Committee in 1995 in United Kingdom outlined Seven Ethical and Moral values to be incorporated by the Public functionaries, Officials, Civil Servants, Bureaucrats, Civil Society and Citizens in order to weed out corruption:

• Selflessness: Holders of public office should take decisions solely in terms of public interest.
• Integrity: Holders of public office should not place themselves under any financial or other obligation to outside individuals or organizations that might influence them in the performance of their official duties.
• Objectivity: In carrying out public business, including making public appointments, awarding contracts or recommending individuals for rewards and benefits, holders of public office should make choices on merit.
• Accountability: Holders of public office are accountable for their decisions and actions to the public and must submit themselves to whatever scrutiny is appropriate to their office.
• Openness: Holders of public office should be as open as possible about all the decisions and actions they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands.
• Honesty: Holders of public office have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest.
• Leadership: Holders of public office should promote and support these principles by leadership and example.

What are the Recommendations of the Second ARC to Tackle Corruption?

The Second Administrative Reforms Commission (2nd ARC), an advisory body in India, made several comprehensive recommendations to address the issue of corruption and improve the integrity and efficiency of the public administration. These recommendations aim to prevent corruption and enhance transparency and accountability in government operations. Here are some of the key recommendations made by the 2nd ARC:

• Whistleblower Protection Act, 2014: The 2nd ARC recommended amendments to the Whistleblowers Protection Act to enhance protection and incentives for whistleblowers. This includes safeguarding them from harassment and providing financial rewards.
• Central Vigilance Commission (CVC): The 2 nd ARC recommended strengthening the CVC's role in preventing and combating corruption by giving it more independence, resources, and authority.
• Central Bureau of Investigation (CBI): The commission suggested measures to ensure the CBI's autonomy and effectiveness in handling corruption cases.
• Standard Operating Procedures (SOPs): The 2 nd ARC recommended the development of clear SOPs for government processes and services to minimise the discretionary powers of officials. This reduces the scope for corruption and arbitrary decision-making.
• Use of Technology: Leveraging technology and e-governance can reduce human interface and discretion in government transactions. The commission encouraged the adoption of electronic methods to reduce corruption opportunities.
• Police Accountability: The commission highlighted the need for comprehensive police reforms to enhance the integrity and effectiveness of law enforcement agencies. This includes measures to increase transparency, accountability, and professionalism in the police force.
• Community Policing: Promoting community policing can build trust between the police and the public, reducing opportunities for corruption and abuse of power.
• Code of Ethics: The commission recommended the development of a code of ethics for public officials and employees to promote ethical behaviour.
• Citizen Charters: Encouraging government departments to adopt citizen charters can enhance accountability and improve public service delivery.
• Media and Education: The commission suggested using media and educational institutions to create awareness about the detrimental effects of corruption and the importance of ethical conduct.
• Parliamentary Committees: Strengthening the role of parliamentary committees in scrutinising government operations and expenditure can help detect and prevent corruption.
• Digital Transformation: The 2 nd ARC recommended a comprehensive digital transformation of government processes to reduce human intervention and opportunities for corruption.

UPSC Civil Services Examination, Previous Year Questions (PYQs)

Q1. With reference to the ‘Prohibition of Benami Property Transactions Act, 1988 (PBPT Act)’, consider the following statements: (2017)

• A property transaction is not treated as a benami transaction if the owner of the property is not aware of the transaction.
• Properties held benami are liable for confiscation by the Government.
• The Act provides for three authorities for investigations but does not provide for any appellate mechanism.

Which of the statements given above is/are correct?

(a) 1 only (b) 2 only (c) 1 and 3 only (d) 2 and 3 only

Q.2 Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (2021)

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Corruption in India: Understanding the Institutional Context to Counter It

Cite this chapter.

• Abhoy K. Ojha  

Part of the book series: Palgrave Studies in Indian Management ((PAIM))

498 Accesses

Corruption has been an issue of concern for most societies and India is no exception. The earliest references to corruption among government officials in India have been made in Kautilya’s Arthashastra dated to the 4th century BC (Rangarajan, 1987), which contains several prescriptions to stop and reduce it. There is little reason to believe that corruption would ever have been completely eliminated since that time. Corruption was quite widespread in India under Mughal rule and also when it was a British colony. Even Mahatma Gandhi admitted that he had to compromise his principles and pay commissions, which may be termed grease money, when he practiced as a lawyer in the courts of Bombay and Rajkot in the early 1890s after his return from England (Gandhi, 1940).

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Ojha, A.K. (2016). Corruption in India: Understanding the Institutional Context to Counter It. In: Khatri, N., Ojha, A.K. (eds) Crony Capitalism in India. Palgrave Studies in Indian Management. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-137-58287-4_5

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In India, Will Corruption Slow Growth or Will Growth Slow Corruption?

August 8, 2007 • 9 min read.

Now that India is playing an ever larger role in the world economy, the issue of corruption, in both the private and public sectors, is coming into sharper focus. Two scenarios are possible: As India's multinational corporations develop both economic and political muscle, they may act as a broom, sweeping corruption from the economic sphere. On the other hand, entrenched practices may prove the stronger force and corruption could end up being a significant brake on India's economic rise.

• Public Policy

Now that India is playing an ever larger role in the world economy, the issue of corruption, in both the private and public sectors, is coming into sharper focus. Two scenarios are possible: As India’s multinational corporations develop both economic and political muscle, they may act as a broom, sweeping corruption from the economic sphere. On the other hand, entrenched practices may prove the stronger force, and corruption could end up being a significant brake on India’s economic rise.

The License Raj and the Spoils System

One strand in the knot of corruption is the legacy of the License Raj, which ended in the early 1990s. The system created bureaucracies that were all but self-perpetuating. In a context where government workers were routinely underpaid, graft became an industry all its own. Civil servants were, and remain, anything but disinterested administrators.

Wharton management professor Jitendra Singh and Ravi Ramamurti, professor of international business at Northeastern University, have been studying the emergence of multinational corporations in emerging economies such as India. In late June, they organized a conference on this topic in Boston, co-sponsored by the Mack Center for Technological Innovation and the Center for Leadership and Change Management — both at Wharton — and the Center for Emerging Markets at Northeastern University. The conference’s papers will form the core of an edited volume which is planned for publication in 2008.

“In the bad old days,” Singh said in an interview, “particularly pre-1991, when the License Raj held sway, and by design, all kinds of free market mechanisms were hobbled or stymied, and corruption emerged almost as an illegitimate price mechanism, a shadowy quasi-market, such that scarce resources could still be allocated within the economy, and decisions could get made. Of course, this does not in any way condone the occurrence of such corruption. The shameful part of all this was that while value was captured by some people at the expense of others, it did not go to those who created the value, as it should in a fair and equitable system.”

The real failing, he said, “was a distortion of incentives within the economy, such that people began expending efforts toward fundamentally unproductive behaviors because they saw that such behaviors could lead to short-term gains. Thus, cultivating those in positions of power who could bestow favors became more important than coming up with an innovative product design. The latter was not as important, anyway, because most markets were closed to foreign competition — automobiles, for example — and if you had a product, no matter how uncompetitive compared to global peers’, it would sell. These were largely distortions created by the politico-economic regime. While a sea change has occurred in the years following 1991, some of the distorted cultural norms that took hold during the earlier period are slowly being repaired by the sheer forces of competition. The process will be long and slow, however. It will not change overnight.”

The costs of corruption are manifest in various parts of the economy. Inadequate infrastructure, of course, is widely recognized as a serious impediment to India’s advancement. Producing valuable goods is of limited utility if they cannot be transported in a timely fashion, for example. Transparency International estimates that Indian truckers pay something in the neighborhood of $5 billion annually in bribes to keep freight flowing. “Corruption is a large tax on Indian growth,” Ramamurti said in an interview after the conference. “It delays execution, raises costs and destroys the moral fiber.”

Corruption also cripples the effort to ameliorate poverty in India and to improve the country’s stock of “human capital.” The rate at which this happens varies tremendously from region to region. Edward Luce, for example, author of In Spite of the Gods: The Strange Rise of Modern India, notes that “Rates of theft vary widely from state to state in India, with the better states, such as Kerala and Tamil Nadu, getting more than 80% of subsidized government food to their poor. Meanwhile, in the northern state of Bihar, India’s second poorest with a population of 75 million, more than 80% of the food is stolen.”

Indian MNC’s as Change Agents

“A few Indian companies,” Ramamurti said, “such as the Tata group or Wipro, have taken the high road, but most firms find it impossible to get anything done without greasing palms.” Wipro, headed by Azim Premji, is India’s third-biggest global tech services provider (behind Tata Consultancy Services and Infosys). In Bangalore Tiger: How Indian Tech Upstart Wipro Is Rewriting the Rules of Global Competition , business journalist Steve Hamm writes that “Wipro is not just a company, it’s a quest.” That quest, according to some observers, is as much about moral rectitude as it is about business success. For example, according to Hamm, the company pays no bribes and has a zero tolerance policy for corruption.

“The paradox,” Ramamurti said, “is that even though India’s faster growth in recent years is the result of fewer government controls, most Indian managers would tell you that corruption has increased, not decreased, in tandem. How could this be? The explanation is that faster growth has created new choke points at which politicians and bureaucrats can extract payments, such as land regulation, spectrum allocation or college admissions — all of which have become much more valuable in [this century]. Faster growth has also raised the economic cost to firms of delays in public approvals, giving officials that much more ‘hold-up’ leverage over private investors.”

The Benefits of an Open Society

One of the inevitable comparisons in any story on rapidly developing economies is that between India and China. China has endured a spate of bad news in recent months regarding the impact of corruption and shoddy oversight on the quality of exported products — from cold medication that killed dozens of people in Latin America to toxic toothpaste to children’s toys coated in lead-based paint.

If China’s initial response was to attempt to characterize much of this as a Western conspiracy against Chinese products and businesses, officials were rather quickly goaded into taking serious action. In July, the government executed Zheng Xiaoyu, who headed China’s State Food and Drug Administration from 1997 to 2006.

“The good news in India, compared to China,” said Ramamurti, “may be that at least the most egregious forms of corruption are exposed by social activists or the media.” A more open society, by definition, provides more avenues for oversight, more empowered constituencies to ferret out and disseminate the truth when things go wrong.

“One big difference,” Singh added, “comes in the form of the legal system. In India, a firm can sue the government and win, which may not be as easy in China. Also, the public at large is much more vocal and active in India. Any group can file a Public Interest Litigation (PIL) against a firm, which will frequently get heard in court. Also, it is the case that corporate governance is stronger in India, on average, due to better disclosure and Securities and Exchange Board of India regulatory guidelines. This [is true] even though there are some fine Chinese firms, and some quite poorly governed Indian firms.”

Singh ticked off a quick list of additional cultural factors that are to India’s advantage: “A fierce — arguably sometimes to the point of being irresponsible — media, both the press and TV; a legal system descended from British Common Law like the U.S. which, while hardly perfect, does work reasonably well; [the existence of] certain rights … such as freedom of speech; strong links with the global economy through, though not solely due to, the non-resident Indian (NRI) community which provides global exposure; and a facility with English which makes for easier integration into the global economy.”

As in other countries, however, there is the nagging problem of money corrupting the electoral process and thereby short circuiting, or at least slowing, reform. “The business community and the public at large would welcome a reduction in corruption,” Ramamurti said, “but neither believes this will come to pass. Corruption is endemic in daily life, from things minor to major, and it has become the primary means of funding election campaigns.”

“The really serious problem here,” Singh stated, “is that the prevalence of corruption in the Indian economy may well have distorted cultural norms within the society. Yet I am also aware of countervailing forces, so I do not want to overstate the case. But to the extent that change in cultural norms will be needed to root out corruption, it will take a persistent, long, drawn-out effort. While economic change is easier to achieve, cultural change is much slower and more difficult. This is compounded by the rearguard actions of those who are beneficiaries of the status quo.”

Some Improvement; Some Distance Yet to Go

Transparency International monitors corruption globally and puts out an annual report which it refers to as the Global Corruption Barometer. The most recent figures from 2006 provide an interesting perspective on how Indians see progress in the area of corruption.

“Indians report a substantial reduction in the perceived level of corruption in a number of sectors,” according to the most recent report. “Improvements encompass education, the legal system/judiciary, media, parliament/legislature and utilities. It should be noted, however, that Indian respondents still indicate that the majority of sectors highlighted are significantly affected by corruption. These improvements should therefore be understood as a positive sign of progress, but not an indication that the problem of corruption has been solved.”

How much is left to be done? Some three out of four Indian respondents, on the question of the degree to which their government is fighting corruption, answered that the government was either “not effective,” “does not fight at all,” or “actually encourages” corruption.

Where does business fit into this? Asked to rate the impact of corruption on various spheres of their lives — on a scale of one to four, from “not at all” to “to a large extent” — Indians identified “political life” as the sphere most significantly impacted (2.9), and personal and family life as the least impacted (2.3).They put the business environment squarely in the middle (2.6).

What institutions are respected? Rating the impact of corruption on different sectors and institutions (on a scale of one to five, from “not at all corrupt” to “extremely corrupt”), Indians identified “political parties” (4.2) and “police” (4.3) as the most corrupt institutions, with business again near the middle (3.2). The least corrupt institution? The military, at 1.9.

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The book examines how corruption is viewed in theoretical and empirical literature and how various macro- and micro-level approaches have been followed to study the issue. It offers an inter-country comparison of corruption, indicating the role of governance in the context of growth. The volume attempts to work out the extent of understatement of personal income, resulting in the loss of government revenue from personal income tax. It also examines the impact of corruption on performance, and studies determinants of bribery in an attempt to understand why some firms pay bribes while others do not, despite being subject to the same macroeconomic environment, policy and regulations.

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Frontmatter pp i-iv

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Contents pp v-vi

List of tables and figures pp vii-x, preface pp xi-xii.

• By Arup Mitra , Institute of Economic Growth, New Delhi, Chandan Sharma , Indian Institute of Management

1 - Issues in Corruption: Theoretical and Empirical pp 1-18

2 - corruption in india: a comparison with the rest of the world pp 19-38, 3 - estimation of personal income tax evasion in india: evidence from household survey pp 39-61, 4 - effects of corruption on firms' performance: evidence from firm level data pp 62-83, 5 - determinants of bribery in indian firms: who must pay bribes pp 84-101, 6 - labour market flexibility and corruption: issues related to labour contractualization and business subcontracting pp 102-123, 7 - corruption in innovation: effect of innovation on performance pp 124-138, references pp 139-152, index pp 153-158, full text views.

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Mains daily question feb. 14, 2020.

Q. Corruption destroys the moral fabric of society and erodes the faith of the common man in the legitimacy of the politico-administrative set up. What are the reasons behind corruption in India? Also, discuss the reform measures to eliminate corruption.

• Briefly define corruption and discuss the impact of corruption in India.
• Discuss the reasons behind increasing corruption in Indian Administrators.
• Discuss the steps taken by the government to tackle the menace of corruption and restore the legitimacy of the politico-administrative set up.

Corruption refers to the act of misuse and abuse of power especially by those in the government for personal gains either pecuniary or a favor. It promotes illegality, unethicality, subjectivity, inequity, injustice, waste, inefficiency and inconsistency in administrative conduct and behaviour.

Reason for corruption in India:

• Use of black money in elections: In the last 10 year the declared expenditure has increased by more than 400% for the LS elections with 69% of their income coming from unknown sources.
• Criminalization of politics: More than 30% of the legislators in the country have pending criminal cases against them.
• Crony capitalism: The economic reforms of 1991 has led to the growth of unholy nexus between Politicians and businessmen. 

  Economic:

• High inequalities: In India 1% of the rich hold about 60% of the total wealth. People at lower income levels are forced to pay bribes to officials even to get their basic needs fulfilled.
• High share of informal sector: In India more than 80% of the workforce is in the informal sector. Such enterprises usually bribe the officials to keep out of the ambit of laws where compliance is costly and complex.
• Low wages: The remuneration in the public sector remains below par with the private sector along with poor career growth opportunities and harsher working conditions.

Administrative:

• Politicization of bureaucracy: Example of honest officers being witch-hunted like Ashok Khemka and Amitabh Thakur are the indicators of the bigger malaise.
• Colonial bureaucracy:  The bureaucracy essentially remains colonial in nature characterized by 19th century laws e.g. Police Act 1861, complex rules, wide discretion, secrecy, moral responsibility devoid of legal accountability and the ivory tower attitude.
• Judicial failure: The judiciary has failed to bring to book the corrupt officials including politicians.
• Failed reforms: Lack of political will and resistance from within the bureaucracy has led to failure of major reforms like citizen charter, RTI and e-governance.

Social and Ethical:

• Changes in lifestyle: Increasing shift towards individualization and materialism has led to increased penchant for a luxurious lifestyle.
• Social discrimination: The poor and marginalized due to their lack of awareness and high dependence on the state become the easy target of exploitation by corrupt officials
• Failure of education system: The value education has failed miserably in India to inculcate the value of empathy, compassion, integrity, equity etc. in the young generation.

Measures taken by the government to tackle corruption:

Legal Steps:

• Prevention of corruption Act 1988 : Seeks to create a balance between the need to bring the corrupt to the books and protect honest officers. Its main thrust is to prohibit public servants from accepting or soliciting illegal gratification in the discharge of their official functions.
• Prevention of Money Laundering Act 2002: It seeks to prevent money laundering including laundering of property through corruption and provides for confiscation of such a property.
• Right to Information Act 2005: Makes disclosure of information a legal right of the public to promote transparency e.g. Vyapam scam of MP
• Lokpal and Lokayukta Act 2013: Appoints an independent authority Lokpal at center and Lokayukta at states to probe into the complaints of wrongdoing by the public servants.
• Whistleblower protection Act 2014: More than 60 RTI activists have been murdered and many more assaulted due to lack of protection.

Administrative reforms:

• E-governance initiatives: e -gov apart from advancing the good governance objectives of accountability and transparency also seeks to reduce the manual interface between state and citizen thus preventing the incidences of bribery
• Citizen Charters and Public Service delivery and Grievance Redress Acts in states: Many states like Karnataka (SAKLA initiative) and Rajasthan have enacted such acts to make bureaucracy legally accountable for delivering quality service within stipulated time periods. Bihar is the only state to have a Grievance Redress Act covering all departments

Economic Reforms:

• Liberalization and Privatization: License-Permit-Quota proved to be a highly potent tool in the hands of bureaucracy to misuse the power of their offices to amass illegal wealth. The LPG era proved to be a chink in the armor of bureaucratic discretion.

Despite these emerging trends, however, the institutional anti-corruption framework generally suffers from a lack of coordination, and overlapping and conflicting mandates between institutions addressing corruption. Therefore, there is a need for a mechanism that provides for simple, independent, speedy means of delivering justice by redressing the grievances of the people without succumbing to the clutches of the executive.

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