Corruption and the State

By Vittal, Nagarajan | Harvard International Review, Fall 2001 | Go to article overview

Corruption and the State


Vittal, Nagarajan, Harvard International Review


India, Technology, and Transparency

Political corruption, the misuse of public office for private gain, is a global phenomenon capable of paralyzing a country's development and diverting its precious resources from the public needs of the entire nation. Corruption creates a black market immune from formal government control; indeed, it generates the "black dollars" that purchase the decision-making power of public officials. The result can be a criminalization of the entire political and bureaucratic system that further restricts the government's ability to enact well-intentioned and much-needed reform. While every nation tolerates a certain amount of corruption, the level of this abuse varies wildly across the globe. In general, the least corrupt nations are almost always the most developed as well.

India, the second most populous nation in the world, is also one of the most corrupt. According to Transparency International's report for 2000, India is the 69th most corrupt country in the world, out of 90 countries surveyed.

Corruption is anti-poor, anti-national, and anti-economic development. Out of a population of greater than one billion in India, 26 percent live below the poverty line. Any welfare policies addressing the needs of the poor are greatly limited by the corruption that permeates the bureaucratic apparatus involved with such redistribution. Out of the Rs. 150 million (US$3.75 million) spent in the public distribution system to provide food to the poor, 31 percent of the grains and 36 percent of the sugar were leaked into the black market. This means that nearly Rs. 50 million (US$1 million) worth of subsidies are not reaching their intended beneficiaries; in a sense, food is being snatched away from the mouths of the poor.

Corruption is anti-national. In the fighting over Kashmir, the Kashmiri militants have been financed from outside the national borders of India. To get this money, the militants used the Hawala route--a method of transferring money in and out of the country outside of the official banking system. In the early 1990s, police investigating how Kashmiri militants got their funds stumbled onto the Hawala route and the diaries of Hawala operators. In the expose of the Hawala operation, many members of the power elite in India- namely politicians, bureaucrats, and businessmen--were found to be involved with the redistribution of funds into the Kashmiri revolt.

Finally, corruption is anti-development. According to the UN Development Project Report for South Asia in 1999, if the corruption levels in India came down to that of the Scandinavian countries, India's GDP growth would increase by 1.5 percent, and foreign direct investment would grow by 12 percent. In fact, the black market in India, according to some estimates, constitutes 40 percent of India's economic activity. That means that almost half of the wealth produced in India is unaccountable to the state, and hence untaxable; thus, the population is deprived of the revenue necessary for improvements in infrastructure, health, and educanon.

Official Response

The process of combating this epidemic in India has been slow in coming. The Central Vigilance Commission (CVC) is the culmination of half a century of momentum to address the issue of corruption.

The Indian government commissioned the CVC to ensure the effective implementation of the Prevention of Corruption Act, which focuses on the leaking of public funds via India's extensive bureaucratic system. The number of public servants in the central government is four million, but the CVC has jurisdiction only over the highest-ranking officials.

The origin of the CVC can be traced to the Mundhra financial scandal in the late 1950g. In response to this scandal, the government-appointed Santhanam Committee recommended setting up a commission that would have jurisdiction over only Indian government officials. …

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