Atanu Dey, a voracious blogger focused on India’s developmental economics, recently wrote a blog on Corruption in India. What he wrote wasnt totally surprising becoz it described something that most Indians are aware of and most likey, experienced first hand. Needless to say corruption is detrimental to any country’s economic and social growth.
The fact that I agree with crowning India as “Largest Kleptocracy” aside, I asked him a question about how corruption really affects economic growth. The shorter version of the question is No matter whether the money is in the hands of one corrupt official or 10 middle-class private employees or 100 poor rural citizens, that money’s got to be doing something isnt it? if so, shouldnt the economy grow inspite of corrupt public sector officials (including those in the higher esteems of “Politics”). The question may seem stupid and answer may seem obvious, but I wanted to know exactly how?
Atanu replied with this post pointing to this World Bank report on Corruption. After carefully digesting the report for little more than an hour, I get the essence of corruption’s economic consequences as follows [There is still some piece of my question left unanswered by the report, but partially answered by a subsequent comment here] :
Corruption…
– distorts the composition of government expenditure [Govt officals allocate more funds into sectors where they can get more bribery as opposed to sectors which may really need funds: Defense spending vs Education or healthcare spending ]
– reduce economic growth by lowering incentives to invest [less new business so less new jobs etc]
– lowering the quality of public infrastructure and services [When part of budgeted money goes into bribery, the other lesser part forces the quality of infrastructure & services to be compromised]
– decreasing tax revenue [more illegal activity, less legal tax to govt]
In India, corruption has already become deeprooted and is accepted as a norm. As the report points out once corruption has become ingrained, it is very difficult to get rid of and the only hope is forceful reforms from top to bottom. A forced reform is something highly difficult to even get accepted at the Indian politics, much less to be implemented consistently nationwide. [It may be possible as chidambara did with VDS the last time around]
On the other hand, for most citizens bribing gives them predictability and in most cases, accountability. After paying Rs.1000 for a passport atleast they know they will get one for sure within the agreed time frame or know who to ask for it, instead of waiting for few months on the Rs.50 regular service where there is nobody to question when no passport arrives.
Eventually, all answers point to only one remedy : Education. That I truly believe is necessary[but not sufficient]. Basic education should(will?) empower our rural masses to escape out of fateful poverty. And it will be decades before we see any results. But the call for action is to act today. Atanu’s answer to this is RISC[A growth model for India’s rural economic development : Read in detail here]. Quiting his day job in California, Atanu is out in India, working with few others[Rajesh Jain, Suhit Anantula, Reuben Abraham, Anand Chandrasekaran and others ] trying to implement his RISC model (addressing the delivery of basic education piece) that could someday rewrite India’s rural mass’s destiny.
