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Mammon's cesspool
Corruption in India by N Vittal

Reviewed by Sreeram Chaulia

"In the end, your integrity is all you've got."
- Jack Welch, ex-CEO of General Electric

No Indian was better situated to attempt a holistic and comprehensive swipe at the gangrene of corruption than N Vittal, the enterprising and erudite former central vigilance commissioner. His innovative functioning style and urgency in office won plaudits from concerned citizens and the media.

This volume is a compendium of information on the extent to which India has fallen into mammon's cesspool and the ways out of it. Vittal's reputation as a repository of creative ideas and alternative thinking is fully validated in a short yet significant book addressing a gargantuan problem.

Corruption in India has reached a stage where even for getting legitimate rights satisfied, citizens have to bribe public servants. The culture of graft has become so all-pervasive that Indians accept it as an inevitable fact of life. Resigned cynicism and numbness to corruption are widespread, with issues such as food-grain prices, drinking water, shelter and employment counting higher in voter priorities than the mother of all maladies.

Tracing the social roots of corruption, Vittal observes a strong rationale for dishonesty in the organization of Indian society along caste and kinship lines. Extreme attachment of people to families and extended relatives breeds nepotism. Basic tolerance and individualism of Hinduism allow amassment of wealth without questioning the means of accumulation. The dowry system, donations for school admissions and the spreading cult of consumerism are other social evils that encourage moral turpitude. At the systemic level, Indian democracy itself is "based on corruption because all political parties have to collect funds in cash, which is black money". (p 23) An abysmal 6 percent conviction rate in criminal courts allows corruption to be a low-risk, high-profit business.

Globalization is uncovering the costs of corruption as never before. Southeast Asian tiger economies, which rode the globalization wave, lacked proper corporate governance in the financial sector and collapsed by mid-1997.

Vittal categorizes different types of costs imposed by corruption. First, there are lost revenues from customs, excise, taxation, privatization etc.

Second, corruption reduces productive investment and growth. Multinational corporations are pursuing criminal courses to win contracts in emerging markets. By adding top-ups to the cost of production, "government interaction costs" render exports non-competitive.

Third, corruption costs the public, and the poor in particular, by tearing their small savings to shreds.

Fourth, corruption negates the rule of law, sanctity of contracts and the legitimacy of the state.

A fifth cost is financial terrorism and money laundering by transnational fundamentalist networks. The RDX that killed so many people in the Mumbai serial bomb blasts of 1993 was smuggled into India by bribing customs officials. The same modus operandi was apparently used in the attack of August 25 this year.

Economist Kaushik Basu has shown how "faster economic growth is not just a consequence of appropriate economic policy, savings rate, human capital and fiscal deficits, but the level of honesty in the citizenry". (p 30) In South Asia, where 515 million people are in abject poverty, combating corruption amounts to saving human lives, since corruption "literally snatches food away from the mouth of the poor". (p 45) Anti-poor implementation of pro-poor development policies is a perverse feature of Indian administration.

Post-dirigisme (state control of economic and social affairs) India witnessed the shutdown of many corrupt offices of the "license-permit quota raj". However, disinvestment and divestment of government monopolies in services such as telecommunications have given rise to a series of allegations of corruption. How transparent and independent regulatory bodies are is an open question. Industrialists are also fuming about a new "inspector raj" that enforces side payments to excise, sales and income tax spot-checkers to "keep them happy".

Can the rot be stemmed? Vittal's answer is a resounding yes. Above all, the moral caliber of individuals decides the fate of a nation. Efficiency, truthfulness, purity of mind, community service etc must be revived to change the character of people. So long as greed persists, corruption cannot be eliminated. Those who are in a position to extort citizens will try to maximize their income, irrespective of legal salaries, unless an ethical transformation occurs. "War begins in the minds of people ... corruption also begins in the minds of people." (p 61)

Highly corrupt India is also poorly governed. Corruption and mal-governance go hand in hand. To break this vicious partnership, role clarity of the bureaucracy has to be enhanced. If objectives of government servants are clear and the broad approach is result-oriented, not process-oriented, the administrative juggernaut will start doing the right things rather than getting the thing done rightly. Freedom of information, granting people access to government files, can penalize public servants who hide or distort facts. Extensive application of information technology is also crucial. Computerized banking reduces the chances of fraudulent practices. Vittal's publication of names of senior Indian bureaucrats facing prosecution on his office's website raised a whole new technique of "e-shaming" the avaricious.

Obsolete laws that cushion corrupt officials should be removed from statute books, following the "sunset principle" of the United States. Downsizing the bureaucracy and rationally redeploying manpower can increase the velocity of government transactions. An intense focus on productivity can change the work ethic of Indian "babudom". Consciously promoting a "network of champions" from different sectors of the Indian economy can work miracles, as was proved when the Anand dairy cooperative movement spread to the rest of the country during the "White Revolution".

Indian youth today are in essence consumer-oriented with harmful value systems. They "know the price of everything and the value of nothing". (p 81) Lessons in moral science and fighting corruption must be included in syllabi of high schools and colleges so that the "LUCKI generation" (labeled, urban, cool, knocked-out Indians) grows up to shoulder national responsibilities.

On legal and judicial control of corruption, Vittal advises a new law that will confiscate property and ill-gotten assets of the corrupt. "Merely sending the corrupt holders of public office to jail is no remedy." (p 92) A code of conduct for each government-service cadre is essential. Officers' associations should identify the corrupt among them and socially ostracize the guilty on the lines of the French police service. Internal discipline is also needed in the politicized, plodding and corrupt judiciary. Managements in charge of corporations should also undertake internal monitoring of systems for weaknesses. Whistleblowers in all organizations will be encouraged if a public-disclosures act is promulgated.

Indian administration is suffering from a Sisyphus syndrome, thanks to tremendous cost and time overruns on projects. A "Rubicon point" for each project must be fixed. Once it is crossed, there must be no going back or renegotiation. Sensitive posts such as prosecuting agencies like the Central Bureau of Investigation and the Enforcement Directorate must be immunized from political manipulation by recruiting through objective and independent committees and granting minimum security of tenure to staff.

The Indian judiciary has to speed up the pace of case disposal (at the current rate, it might take 300 years to adjudge the pending caseload!). Vittal proposes radically enhancing the judicial infrastructure from the lowest to the highest court by 150 times to meet the case demand mountain. The entire legal system can be approached from the point of view of a well-run company, the bottom line being achievement of objectives and deadlines, not adjournments or extravagant vacations for benches.

Prioritization of the case backlog and a time-bound program to eliminate the deficit might yield citizen-friendly justice. In order to make explicit what is latent and hidden in other provisions of the Indian constitution, Vittal supports enactment of a fundamental right to corruption-free service. This right will ensure a level playing field when the hapless citizen encounters the mighty state machinery.

In business, accountability should be viewed as a value-added (eg return on investment, quality of goods and services) to stakeholders. To avoid scams like the Enron collapse, auditing firms should be debarred from doing consultancy for the same clients. Ethical check questionnaires for decision-making can awaken "conveniently ignorant" chief executives and managers. Corporate and individual contributions to political parties "must be freely permitted and eligible for tax deduction", provided they are put in the public domain. The fiscal system should be modified into a "zero exemption, simplified, uniform, flat tax rate" to eliminate discretionary practices. Advance rulings on precise customs and excise duties for each product and service will counter rent seeking.

Vittal concludes by asserting that a corruption-free India is possible if the supply side is choked. "We should first decide whether we as a people are prepared to compromise." (p 154) Citizens who give bribes are no less corrupt than recipients of slush money. If it is realized that corruption is not inexorable, intolerance for it will rise. "Every saint has a past and every sinner a future. Dramatic changes in the mindset can be brought about." (p 156)

Other democratic countries have emerged from virtually intractable depths of corruption. The United Kingdom under William Gladstone, Hong Kong under the 1974 Independent Commission Against Corruption, Singapore under Lee Kuan Yew, Botswana etc are examples of ships being steered out of mammon's cesspools. India's self-rescue effort is long due.

Corruption in India, by N Vittal. Academic Foundation, New Delhi, 2003. ISBN: 81-7188-287-0. Price US$10, 188 pages.

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Sep 6, 2003

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