Wednesday, May 10, 2017


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Corruption  and Economic Growth by B.K.Chaturvedi and Shekhar Chandra ; Published by Academic Foundation ; Pages 196 ; Price Rs 995/-

B.K.Chaturvedi was a distinguished member of the Planning Commission for eight years as also a member of the Thirteenth Finance Commission. He had worked as Cabinet Secretary. His forty years of service with Government has invested him with immense experience. He was awarded the Padma Bhushan. The co-author Shekhar Chandra is an engineer who has tackled domestic energy challenges with an analysis of international negotiations.
The volume is a sober assessment of the harm generated by corruption and its impact on our economy and  polity. This is a significant contribution to the debate on corruption in public life. The authors explore the reasons for large scale corruption as pointed out in the reports of the Comptroller and Auditor General.( CAG).
The writers have identified various factors impacting corruption and economic growth. Their study was done on a cross-country basis. Data has been collected for 160 countries. They have studied how much economic growth would be impacted if  corruption levels were to be reduced to zero or to world average levels.
A distinguished event was the Anna Hazare movement which focused on creation of an independent institution for investigation of cases of corruption against the political executive and civil servants. The Second Administrative Reforms Commission also studied corruption and made several recommendations. There was no political will to pass the "Lokpal Bill.' No strategy to fight corruption could be prepared without including economic growth as a key driver for reducing corruption .The authors have adopted the measurement technology of Transparency  International and the World Bank.
Corruption signifies dishonest or fraudulent conduct by persons in positions of power. Corruption can be of various kinds--political, economic, social or moral. The most widely used and dominant sense of the word "Corruption" remains " misuse of public office for personal gain". Corrupt actions are morally undesirable. In all countries, laws make no distinction between a bribe giver and a person accepting bribe.
Measurement of corruption is a difficult task. The authors list 13 agencies which compile Indices of Corruption. Grand corruption occurs at the highest level of government and involves major government projects and programmes.
More than 70 per cent of the countries of the world have low values of CPI (Corruptions Perception Index).Corruption leads to slowdown of economic growth. It acts as a disincentive for investment in the economy. Bribes create uncertainty in viability of projects. It also leads to poor quality of project execution. The recent defence contacts of Agusta Westland Helicopters bought by India shows that there were no agents initially. Later on it was found that there was an agent and bribes were allegedly paid. The Government cancelled the contract and encashed the Bank Guarantee. The company landed in trouble due to payment of bribe. The U N Convention on Corruption has advised against such corrupt practices.
According to studies the G D P growth goes down by 0/9 % per annum and per capita incomes are lost to a considerable extent .Growth will emerge from increased efficiency of investments and possibly new investments.
What are the factors impacting corruption? These are analysed thoroughly in one chapter. The authors have chosen four variables—Income, Poverty and Income Inequality; Primary and Secondary Education; Investment and Government Expenditure and Governance. As incomes rise, corruption levels go down. The increase in per capita incomes leads to less incentive for cutting orders or undertaking petty corruption to meet the basic requirements of life. There is an analysis of relationship between corruption and poverty ratios.
Investment as a share of GDP is a factor impacting corruption. Rajiv Gandhi declared that leakages result in 85 per cent of Government assistance being siphoned off by government officials and politicians. Political instability breeds corruption. Political institutional building and an independent strong Press is a major bulwark against corruption. Education provides human values and leads to reduction in corruption. The social and economic conditions of the people, nature of society and education provide an eco-system in which forces arise to combat corruption.

Many countries have evolved anti-corruption laws. The  U N Convention against Corruption has been signed by almost 150 countries. The authors analyse the international experience in one chapter. Several countries have institutions and laws to address the problem. There is an in-depth analysis of Finland, USA,Singapore, Hongkong. Corruption fighting strategy must include strategy for rapid economic growth leading to improved standards of living, quick and fair investigation with fast track prosecution of accused. This will call for political  and administrative will and sustained peoples' support.
We are provided a full-fledged discussion of the Indian situation. Beginning with the times of Arthasastra, there is an analysis of developments such as the reports of the Santhanam Committee, the anti-corruption measures such as the setting up of the C V C, legislative enactments, the Lokpal Act have been discussed at length. Also covered are the recommendations of the Administrative Reforms Commission.
Anti-corruption strategy must be so framed as to ensure that by 2030 the level of corruption will go down drastically. We should accelerate economic growth, have a high quality of life and become a transparent and honest society in the next two decades. A distinguished economist wrote recently,  " Corruption is a long-standing sticky issue which needs sustained effort and well-thought out road map with timelines to control. It  is  impossible to have an island of honest financial society in an otherwise corrupt and compromising social framework". 
The book is packed with statistical tables providing a wealth of data. There is also an excellent bibliography.
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A very valuable contribution to a very important subject.

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