Policy Wise

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In recent weeks, we have written a lot on issues of governance and corruption. An article in India Knowledge@ Wharton raises an important question: Will reforms necessarily decrease 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.”

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This is an important point. In the globalized economy, there is far more inter-dependency. While government’s role has decreased, it still continues to play an role in economic affairs, perhaps, most importantly in acquiring land.

The lesson is clear enough: Till reforms are widespread, the gains would be extremely limited. This a vicious cycle since the lack of results allows the ideological opponents to claim that the reforms are not working which prevents further reforms.

“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.”

This is a point which is frequently ignored. Yes, in many cases, the bribe-givers are unwilling participants but the culture of corruption allows unscrupulous elements to benefit. Take traffic cops as an example. In all my years of driving in Delhi, no cop has ever offered to let me go after a traffic offense for a bribe. Yet, the Delhi traffic cops are as corrupt as any of their counter-parts in the rest of the country. Why? Because traffic violators are willing to pay them bribes. At least in this case, the culpability is entire shared. Unfortunately, while traffic cop is blamed, the bribe-giver is let off lightly. This culture of tolerance for corruption has to change.

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