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CORRUPTION IN ADMINISTRATION
With special reference to India
Dr. Ashok Ranjan Basu1
Introduction
Corruption is generally defined as the exercise of official powers against public interest or
the abuse of public office for private gains. In view of the multitude of approaches and views on
corruption it is not easy to agree on an unanimous definition of the term. However, the shorter
definition includes “abuse of authority,bribery, favouritism, extortion, fraud, patronage, theft,
deceit, to Public sector corruption is a symptom of failed governance. Governance is defined as
the norms, traditions, and institutions by which power and authority in a country are exercised.
These norms, traditions, and institutions include the institutions of participation and
accountability in governance, mechanisms of citizen voice and exit, and norms and networks of
civic engagement; the constitutional-legal framework and the nature of accountability
relationships between citizens and government; the process by which governments are selected,
monitored, held accountable, and renewed or replaced; and the legitimacy, credibility, and
efficacy of the institutions that govern political, economic, cultural, and social interactions
among citizens and between citizens and their governments. It is not easy to define
corruption. But in a narrow sense, corruption is mostly concerned with ˜bribery” and it takes
several forms.
Concern about corruption is as old as the history of government. In350 BCE, Aristotle
suggested in The Politics,i “To protect the treasury from being defrauded, let all money be
issued openly in front of the whole city, and let copies of the accounts be deposited in various
wards.” Corruption is a global phenomenon and it is omnipresent. Corruption today has its roots
deep inside Indian society. It has now become an inseparable part of the country's cultural l
moorings. The general masses routinely fall prey to corruption in different shapes and forms. It
not only hampers economic growth, local and foreign investments are also discouraged in the
process. The availability of resources decrease, poverty rises and efforts for human development
are jeopardized.
Corruption has gradually evolved over time in this part of the world. But the incidence of
corruption has increased with the gradual flourishing of civilization. There was no scope for
corruption in primitive societies due to absence of complexities. The Greek and Roman
civilizations were known to have been afflicted with this malaise in different degrees. Corruption
was then political in nature. Some information on corruption in the Indian subcontinent in
1 Dr.Ashok Ranjan Basu, PhD, D.Litt , FIMA (Delhi) F.R.A.S ( London), is a former Member of
Central Administration Tribunal, Calcutta Bench and Financial Commissioner cum Principal Secretary,
Govt. of H.P. Shimla
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ancient times has also been found. In the 'Artha Shashtra'ii of Kautilya written more than two
millenniums ago, mention has been made of forty techniques of siphoning off money by the
government employees. Some evidences are also there about corruption in administration,
judiciary and commerce of ancient India.
During the Hindu era and later, six hundred years of Muslim rule, no large-scale corruption
was observed. It proliferated in the subcontinent mainly during the rule of the East India
Company. In order to make money through different means, the company at first established
itself as a commercial power, then as a political power. Although employees belonging to the
higher echelons did not indulge in corruption, as their salary was quite high, widespread
corruption was observed among lower level employees.
The economy of India was under socialist-inspired policies for an entire generation from
the 1950s until the late 1980s. The economy was characterized by extensive regulation,
protectionism, and public ownership, policies vulnerable to pervasive corruption and slow
growth. License Raj was often at the core of corruption.
The Vohra Committee Report, submitted by the former Indian Union Home
Secretary, N.N. Vohra, in October 1993, studied the problem of the criminalization of politics
and of the nexus among criminals, politicians and bureaucrats in India. The report contained
several observations made by official agencies on the criminal network which was virtually
running a parallel government. It also discussed criminal gangs who enjoyed the patronage of
politicians — of all political parties — and the protection of government functionaries. It
revealed that political leaders had become the leaders of gangs.iii
They were connected to the
military as well. Over the years criminals had been elected to local bodies, State Assemblies, and
even the Parliament. The unpublished annexure to the Vohra Report are believed to contain
highly explosive material.
Corruption has now become a global phenomenon. Although statistics on corruption are
often questionable, the data suggest that corruption accounts for a significant proportion of
economic activity. In Kenya, for example, “questionable” public expenditures noted by the
controller and auditor general in 1997 amounted to7.6 percent of GDP. In Latvia a recent World
Bank survey found that more than 40 percent of households and enterprises agreed that
“corruption is a natural part of our lives and helps solve many problems”.iv
Tanzania service
delivery survey data suggest that bribes paid to officials in the police, courts, tax services, and
land offices amounted to 62 percent of official public expenditures in these areas. In the
Philippines the Commission on Audit estimates that $4 billion is diverted annually because of
public sector corruption.v
A 2004 World Bank study of the ramifications of corruption for service delivery concludes
that an improvement of one standard deviation in the International Country Risk Guide
corruption index leads to a 29 percent decrease in infant mortality rates, a 52 percent
increase in satisfaction among recipients of public health care, and a 30–60 percent increase in
public satisfaction stemming from improved road conditions. Studies also show that corruption
slows growth, impair capital accumulation, and reduce the effectiveness of
development aid, and increases income inequality and poverty.vi
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Not surprisingly, there has been a growing global movement to condemn
corrupt practices—a movement that has resulted in the removal of some national leaders.
In addition, many governments and development agencies have devoted substantial resources
and energy to fighting corruption in recent years. Despite these efforts, however, it is not clear
that the incidence of corruption has declined perceptibly, especially in highly corrupt countries.
Concerns about corruption have mounted in recent years; in tandem with growing
evidence of its detrimental impact on development). Corruption slows GDP growth and
adversely affects capital accumulation); public infrastructure and health services. It lowers the
quality of education and reduces the effectiveness of development aid and increases income
inequality and poverty.vii
Bribery, often the most visible manifestation of public sector
corruption, harms the reputation of and erodes trust in the state.
Poor governance and corruption make it more difficult for the poor and other disadvantaged
groups, such as women and minorities, to obtain public services. Corruption may also affect
macroeconomic stability, when, for example, the allocation of debt guarantees based on
cronyism or fraud in financial institutions leads to a loss of confidence by savers, investors, and
foreign exchange markets. The Bank of Credit and Commerce
International (BCCI) scandal, uncovered in 1991, for example, led to the financial ruin of
Gabon’s pension system; the corrupt practices at Mehran Bank in the Sind Province of Pakistan
in the mid-1990s led to a loss of confidence in that country’s national banking system.viii
Indian administration also is tainted with scandals. India is among 55 of the 106 countries
where corruption is rampant, according to the Corruption Perception Index 2004 Report released
by Transparency International India. Corruption in India leads to promotion not prison. It is very
difficult to catch ˜big sharks. Corruption in India has wings not wheels. As nation grows, the
corrupt also grow to invent new methods of cheating the government and public. Political,
bureaucratic, corporate and individual corruptions in India are major concerns. A 2005 study
conducted by Transparency International in India found that more than 55% of Indians had first-
hand experience of paying bribes or influence peddling to get jobs done in public offices
successfully. Transparency International estimates that truckers pay US$5 billion in bribes
annually. In 2010 India was ranked 87th
out of 178 countries in Transparency International's
Corruption Perceptions Index.ix
Criminalization is also a serious problem in contemporary Indian
politics. In July 2008 The Washington Post reported that nearly a fourth of the 540 Indian
Parliament members faced criminal charges, "including human trafficking, immigration rackets,
embezzlement, rape and even murder.
India tops the list for black money in the entire world with almost US$1456 billion in Swiss
banks (approximately USD 1.4 trillion) in the form of black money. According to the data
provided by the Swiss Banking Association Report (2006), India has more black money than the
rest of the world combined. Indian-owned Swiss bank account assets are worth 13 times the
country’s national debtx.
“The recent scams involving unimaginably big amounts of money, such as the 2G spectrum
scam, are well known. It is estimated that more than trillion dollars are stashed away in foreign
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havens, while 80% of Indians earn less than 2$ per day and every second child is malnourished.
It seems as if only the honest people are poor in India and want to get rid of their poverty by
education, emigration to cities, and immigration, whereas all the corrupt ones, are getting rich
through scams and crime. It seems as if India is a rich country filled with poor people. Many of
the biggest scandals since 2010 have involved very high levels of government, including Cabinet
Ministers and Chief Ministers, such as in the 2G spectrum scam, the 2010 Commonwealth
Games scam and the Adarsh Housing Society scam, mining scandal in Karnataka and cash for
vote scam etc.
The chief economic consequences of corruption are the loss to the economy, an un healthy
climate for investment and an increase in the cost of government-subsidized services. The
Transparency International India study estimates the monetary value of petty corruption in 11
basic services provided by the government, like education, healthcare, judiciary, police, etc., to
be around 21,068 crore (US$4.7 billion). India still ranks in the bottom quartile of developing
nations in terms of the ease of doing business, and compared to China and other lower developed
Asian nations, the average time taken to secure the clearances for a startup or to invoke
bankruptcy is much greater.xi
The extent of corruption in India is visible in every walk of life.
The corruption is prevalent in politics, bureaucracy, judiciary and in armed forces as well.
Civil Service
Transparency International, a global watchdog body, ranked India at a low 73 out of the
102 countries in its Corruption Perception Index, later in the 2008 survey, it ranked 85th in a 128
country list. The World Economic Forum on the other hand, ranked India 44 among 49 countries
surveyed. A 2009 survey of the leading economies of Asia, revealed Indian bureaucracy to be
not just least efficient out of Singapore, Hong Kong, Thailand, South Korea, Japan, Malaysia,
Taiwan, Vietnam, China, Philippines and Indonesia; further it was also found that working with
the India's civil servants was a "slow and painful" process. This ranking, done by 1,274
expatriates working in 12 North and South Asian nations, ranked Asian bureaucracies in the
following order: Singapore, Hong Kong, Thailand, South Korea, Japan, Malaysia, Taiwan,
Vietnam, China, Philippines, Indonesia and Indiaxii
.
By the 1990s, the economic liberalization of the Indian economy and the end of the license
raj, gradually opened up the economic skies and the end to the regulatory regime which
flourished during previous era, loosened its hold over the resources. Though this brought to
surface the practices of kickbacks, both during disinvestment and offering government contracts,
and while setting up of industries by foreign businesses were soon employing same corrupt
practices used by Indian businesses for decades.
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Over the years, several reasons have been cited by various scholars regarding the sustained
existence of corrupt practices within the Indian bureaucratic system, leading among them is its
nexus with political corruption, lack of accountability and low regulatory controls. Others have
suggested a rigid bureaucracy with an exclusivist process of decision making in an overly-
centralized government as the reason its pervasiveness despite the passing years. In fact surveys
have found it to be most resistant to transformation in its ways of functioning, even after
repeated efforts by successive governments.xiii
Some experts believe that a fall out of the existing
corruption and red tapism can be detrimental to the Indian economy in the long run, as foreign
investors in a rapidly global, economies of the world still view entering into India as a challenge
and plagued as it remains both with political and bureaucratic corruption as well systematic
inefficiency which leads to long turn around period as project delays cause cost escalations in
volatile market economies. Also in the recent years, several corrupt economies of Asia have
faced setbacks, after the wave of economic upturn faded; this makes the urgency of corrective
measures more than evident, they make it an imperative.
Land and property
Government officials often steal state property. In cities and villages throughout India,
consisting of municipal and other government officials, elected politicians, judicial officers,
armed forces officers, real estate developers and law enforcement officials, acquire, develop and
sell land in illegal ways.
Tendering processes and awarding contracts
Government officials having discretionary powers in awarding contracts engage in
preferential treatment for selected bidders and display negligence in quality control processes.
Many state-funded construction activities in India, such as road building, are dominated by
construction mafias, which are groupings of corrupt public works officials, materials suppliers,
politicians and construction contractors. Shoddy construction and material substitution (e.g.
mixing sand in cement while submitting expenses for cement) result in roads and highways being
dangerous, and sometimes simply washed away when India's heavy monsoon season arrives.
Health Services
In Government Hospitals, corruption is associated with non availability of medicines (or
duplicate/fake medicines), getting admission, consultations with doctors and availing diagnostic
services. There have been cases of diversion of medical supplies from government hospitals and
clinics as well as supply and distribution of medicines of inferior quality. Moreover the medical
officers are quite often preoccupied with their private practice at the cost of public service.
Taxation Department
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There have been several cases of collusion of officials of the taxation departments
whether it is income tax department or sales tax department for a favorable tax treatment in
return for bribes.
Preferential award of public resources
The land in areas with short supply is relatively common with government entities
awarding public land to private concerns at negligible rates. Other examples include the award of
mining leases to private companies without a levy of taxes that is proportionate to the market
value of the ore.
Corporate Corruption
Less stressed, but no less important, is the supply side of corruption (in which the payer of
the bribe gets to evade regulation and taxation). Business owners often bribe public officials to
sabotage processes (while keeping most of the proceeds thereof with themselves), and at other
times to evade prosecution for illegal acts. Also noteworthy are stock market scams, fleecing of
consumers, adulterated and sub-standard products by businesses, fake medicines, environmental
damage by industries via evasion of environmental regulation, and so on.
Forged and Fake Papers
There is a widespread use of fake documents for getting privileges which are otherwise
unavailable to an individual or a business. Indian visa applications to foreign embassies are
routinely hauled up for using fake educational degrees, fake financial statements, etc. Indians
routinely lie about their date of birth to comply with school admission guidelines or to evade the
statutory retirement age.
Judiciary
According to Transparency International, judicial corruption in India is attributable to
factors such as "delays in the disposal of cases, shortage of judges and complex procedures, all
of which are exacerbated by a preponderance of new laws”.
Corruption is eating into the vitals of our polity. No institution is free of this menace. The
Supreme Court’s observations on the rot in the Allahabad High Court are disturbing. A Bench
consisting of Justice Markandey Katju and Justice Gyan Sudha Misra said on November 26 that
most judges of this High Court are corrupt and collude with advocates. Sadly, many High Court
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judges are facing charges of corruption. The cases involving Justice Soumitra Sen of the Calcutta
High Court, Chief Justice P.D. Dinakaran of the Sikkim High Court (formerly of the Karnataka
High Court) and Justice Nirmal Yadav of the Uttarakhand High Court (formerly of the Punjab
and Haryana High Court) are all at various stages. The charge that many former Chief Justices of
India were corrupt has given a new twist to judicial corruption. The Supreme Court is seized of
the matter.
There is also the Rs 23-crore Ghaziabad PF scam in which a Supreme Court judge
(since retired), seven Allahabad High Court judges, 12 judges of the subordinate courts and six
retired High Court judges are allegedly involved. The key accused, Ashutosh Asthana, died in
jail mysteriously in October, 2009. He had provided vital documents to the CBI that established
connivance of these judges.xiv
Defence Services
The Indian Armed Forces have frequently witnessed corruption involving senior armed
forces officers from the Indian Army, Indian Navy and Indian Air Force. Many officers have
been caught for allegedly selling defence stores in the black market in the border districts of
Indian states and territories. Recent sukhna land scandal involving four Indian Lieutenant
Generals has shaken public faith in the country's growing military at a time when large sums are
being spent on modernising the armed forces. A string of eye-popping fraud cases has damaged
the institution in recent years. The latest Adarsh land scam is another example of the nexus
between the armed forces, bureaucracy and the politicians in the embezzlement of government
property.
Corruption, however, is not manifested in one single form. It typically takes at least four
broad forms:xv
1. Petty, administrative, or bureaucratic corruption. Many corrupt acts are isolated
transactions by individual public officials who abuse their office by demanding bribes and
kickbacks, diverting public funds, or awarding favours in return for personal considerations.
Such acts are often referred to as petty corruption, even though, in the aggregate, a substantial
amount of public resources may be involved.
2. Grand corruption. The theft or misuse of vast amounts of public resources by state
officials—usually members of, or people associated with, the political or administrative elite—
constitutes grand corruption.
3. State or regulatory capture and influence peddling. State capture is the collusion
by private actors with public officials or politicians for their mutual, private benefit. In this form
of corruption, the private sector “captures” the state legislative, executive, and judicial apparatus
for its own purposes. State capture coexists with the conventional (and opposite)
view of corruption, in which public officials extort or otherwise exploit the private sector for
private ends.
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4. Patronage, paternalism, clientelism, and being a “team player.” Corruption occurs when
officials use their official position to provide assistance to clients or colleagues with the same
geographic, ethnic, or cultural origin so that they receive preferential treatment in their dealings
with the public sector, including public sector employment.
Measures to combat corruption
The factors that cause corruption are country specific. Approaches that apply common policies
and tools (that is, one-size-fits-all approaches) to countries in which acts of corruption and the
quality of governance vary widely are likely to fail. Policy makers need to understand the local
circumstances that encourage or permit public and private actors to be corrupt. Efforts to combat
corruption also demand strong local leadership and ownership if they are to be successful and
sustainable.
Public sector corruption, as a symptom of failed governance, depends on a multitude of
factors, such as the quality of public sector management, the nature of accountability relations
between the government and citizens, the legal framework, and the degree to which public sector
processes are accompanied by transparency and dissemination of information. Efforts to address
corruption that fail to adequately account for these underlying drivers are unlikely to generate
profound and sustainable results.
To understand these drivers, a conceptual and empirical perspective is
needed to understand why corruption persists and what can be done to stop it.
At the conceptual level, a number of interesting ideas have been put
forward. These ideas can be broadly grouped into three categories: (a) Principal Agent models,
(b) New Public Management perspectives, and (c) Neo Institutional economics
frameworks.xvi
Principal-Agent Models
The most widely used modelling strategy is the principal-agent model. A common thread in
these models is that the government is led by a benevolent dictator (the principal), who aims to
motivate government officials (agents) to act with integrity in the use of public resources.
One such view, the “crime and punishment” model of Gary Becker
(1968), states that self-interested public officials seek out or accept bribes as long as the expected
gains from corruption exceed the expected costs (detection and punishment) associated with
corrupt acts. According to this view, corruption could be mitigated by reducing the number of
transactions over which public officials have discretion, reducing the scope of gains from each
transaction, increasing the probability for detection, or increasing the penalty for corrupt
activities.xvii
Klitgaard restates this model to emphasize the unrestrained monopoly power
and discretionary authority of government officials .According to him, corruption equals
monopoly plus discretion minus accountability. Under this framework, corruption is curtailed by
establishing a rules-driven government that includes strong internal controls and leaves little
room for discretion by public officials. Such an approach is not appropriate in highly corrupt
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countries, however, where the rules enforcers themselves add an extra burden of corruption and
lack of discretion is thwarted by collusive behaviour by corruptors.xviii
Another variant of the principal-agent model integrates the role of legislators and elected
officials in the analysis. In these variant, high-level government officials—represented by
legislators or elected public officials—institute or manipulate policy and legislation in favour of
particular interest groups (representing private sector interests and entities or individual units of
public bureaucracy competing for higher budgets) in exchange for rents or side payments.
Legislators weigh the personal monetary gains from corrupt practices and improved chances of
re election against the chance of being caught, punished, and losing an election with a tarnished
reputation.
Factors affecting this decision include campaign financing mechanisms, information access by
voters, the ability of citizens to vote out corrupt legislators, the degree of political contestability,
the type of electoral system, the democratic institutions and traditions in place, and the
institutions of accountability in governance.
This conceptual framework is useful in analyzing political corruption or state capture.
A fine line divides theoretical models that focus on the effects of localization on corruption and
those that analyze the decentralization of corruption within a multitier hierarchy from an
industrial organization of corruption type of framework. In the multitier hierarchy approach, a
distinction is made between top-down corruptions (in which corrupt high-level officials buy
lower-level officials by sharing a portion of their gains) and bottom-up corruption (in which low-
level officials share the bribes they collect with higher-level officials in order to avoid detection
or punishment). Top-down corruption is more likely to exist in a federal system of governance,
where power may be shared by various orders of government. Bottom-up corruption is more
likely to prevail in unitary or centralized forms of governance
or in dictatorial regimes.xix
The impact of governance on corruption networks is an interesting topic that has not been
studied adequately. Tirole analyzes one aspect of this network by means of a three-tier principal-
supervisor-agent model. This extension of a conventional principal-agent model helps draw
inferences about the type of corrupt relations that could evolve under a three-tier unitary
government structure. These inferences are highly sensitive to underlying assumptions about
principal-agent relationships under a multitier system of governance.xx
In Guriev’s three-tier
hierarchy model, the mid-level bureaucrat supervises the agent and reports to the principal.
Gurievxxi
concludes that top-level corruption “is not efficient, as it redistributes rents in favour of
agents, and therefore makes it more attractive for potential entrants,” thereby leading to higher
total corruption. Shleifer and Vishny use a conventional industrial organization model to analyze
corruption. They conclude that decentralization is likely to increase corruption. In their model
government bureaucracies and agencies act as monopolists selling complementary government-
produced goods that are legally required for private sector activity. The main idea behind the
model is that under centralized corruption, bureaucracies act like a joint monopoly, whereas
under decentralized corruption bureaucracies behave as independent monopolies .When
bureaucracies act as independent monopolies, they ignore the effects of higher prices on the
overall demand for a good and hence drive up the cumulative bribe burden.xxii
Waller, Verdier, and Gardner define decentralized corruption as a system in which higher-
level officials collect a fixed amount of bribe income from each bureaucrat who takes bribes,
without mandating the bribe size the bureaucrats charge. In a centralized system, in contrast,
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bribe size is determined by the higher level of government, which collects the bribes from
bureaucrats and redistributes them after keeping a share. Waller, Verdier, and Gardner posit that
decentralized corruption leads to lower levels of total corruption in the economy (lower spread),
higher levels of bribe per entrepreneur (higher depth), and a smaller formal sector than does a
centralized corruption equilibrium. These results vary widely for specific “regimes” in the
model, however: if, for example, wages are high enough and monitoring systems effective
enough, centralized corruption may reduce total corruption and expand the formal economy.xxiii
Ahlin focuses on the effects of different types of decentralization, from a horizontal, as
opposed to a hierarchical, perspective. In his model a country is divided into regions, each with a
given number of independent power groups’ .Bureaucratic decentralization affects the political
organization in a region by increasing the number of power groups or bureaucracies; the number
of jurisdictions captures the degree of regional decentralization.
Ahlin’s theoretical results suggest that corruption is determined by mobility of
economic agents across regions. Under the assumption of no interregional mobility, corruption
increases with the degree of bureaucratic decentralization but is independent of the degree of
regional decentralization. For perfect interregional mobility, corruption decreases with regional
decentralization and is independent of bureaucratic decentralization. A key intuition of the model
is that corrupt bureaucrats fail to internalize the costs of increases in bribes imposed on other
bureaucrats.xxiv
Arikan (2004) uses a tax competition framework to examine localization corruption links. In his
model corruption is measured as the proportion of tax revenue appropriated by bureaucrats;
decentralization is captured by the number of jurisdictions competing for a mobile tax base.
Local governments decide on the levels of tax rates and corrupt earnings in order to maximize a
weighted sum of corrupt earnings and citizens’ utility. A higher degree of decentralization is
expected to lead to lower levels of corruption.xxv
Bardhan and Mookherjee (2005) shed light on the determinants of capture of the
democratic process. They conclude that the extent of capture is ambiguous and context specific:
the extent of capture at the local level depends on the degree of voter awareness, interest group
cohesiveness, electoral uncertainty, electoral competition, and the heterogeneity of interdistrict
income inequality. A key assumption of this model is that the
degree of political awareness is correlated to education and socioeconomic position. In
particular, the model assumes that the fraction of informed voters in the middle income class is
lower than or equal to the fraction of rich voters and higher than the fraction of poor voters.
Uninformed voters are swayed by campaign financing, whereas informed voters favour the party
platform that maximizes the utility of their class. The outcome of local and national elections in
terms of policy platforms will coincide under four assumptions: (a) all districts have the same
socioeconomic composition, and swings among districts (district-specific preferences for one of
two political parties) are perfectly correlated; (b) national elections are majoritarian; (c) there is
an equal proportion of informed voters in local and national elections; and (d) the proportion of
the rich who contribute to their lobby is equal at the national and local levels (that is, the rich are
as well organized nationally as they are locally). Capture will be higher at the local level if the
proportion of informed voters is lower at the national level and the rich are less organized
nationally than they are locally. Greater electoral uncertainty at the local level as a result of
differences in electoral competition implies less capture at the local level. If, for example, swing
voters are not identical but are drawn from the same distribution across districts (assuming this
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distribution satisfies a regularity condition), heterogeneity of swing voters will favour different
parties, implying less capture of the nationally dominant party.xxvi
No definitive conclusions can be drawn about corruption and the centralization-
decentralization nexus from agency-type conceptual models. These models simply reaffirm that
the incidence of corruption is context dependent and therefore cannot be uncovered by
generalized models.
New Public Management Frameworks
The New Public Management (NPM) literature points to a more fundamental
discordance among the public sector mandate, its authorizing environment and the operational
culture and capacity. This discordance contributes to government acting like a runaway train and
government officials indulging in rent-seeking behaviours, with little opportunity for citizens to
constrain government behaviour. This viewpoint calls for fundamental civil service and political
reforms to create a government that is under contract and accountable for results. Under these
reforms, public officials would no longer have permanent rotating appointments but instead
would keep their jobs as long as they fulfilled their contractual obligations (Shah 1999,
2005).xxvii
The NPM paradigm has clear implications for the study of localization and corruption, as it
argues for contractual arrangements in the provision of public services. Such a contractual
framework may encourage competitive service delivery through outsourcing, strengthening the
role of local government as a purchaser but not necessarily a provider of local services.
The NPM goals are harmonious with localization, as greater accountability for results reinforces
government accountability to citizens through voice and exit mechanisms. Conceptually,
therefore, NPM is expected to reduce opportunities for corruption (see Shah 1999, 2005; Von
Maravic, Andrews and Shah (2005a)xxviii
integrate these ideas in a common frame work of
citizen-cantered governance. They argue that citizen empowerment holds the key to enhanced
accountability and reduced opportunities for corruption.
Others disagree with such conclusions and argue that NPM could lead to
higher corruption rather than greater accountability, because the tendering for service delivery
and separation of purchasers from providers may lead to increased rent-seeking behaviours and
enhanced possibilities for corruption .
. Of course, this viewpoint neglects potential gains from greater horizontal accountability.
Neoinstitutional Economics Frameworks
This approach argues that corruption results from the opportunistic behaviour of public
officials, as citizens either are not empowered to hold public officials accountable for their
corrupt acts or face high transaction costs in doing so. Neoinstitutional economics treats citizens
as principals and public officials as agents. Principals have bounded rationality—they act
rationally based on the incomplete information they have. They face high transaction costs in
acquiring and processing more information. In contrast, agents (public officials) are better
informed. This asymmetry of information allows agents to indulge in opportunistic behaviour
that goes unchecked because of the high transaction costs faced by principals and the lack of
adequate countervailing institutions to enforce accountable governance.
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Corrupt countries have inadequate mechanisms for contract enforcement and public
safety and weak judicial systems. These deficits raise the transaction costs in the economy,
increasing the cost of private capital as well as the cost of public service provision. The problem
is compounded by path dependency (the fact that a major break with the past is difficult to
achieve, because major reforms are likely to be blocked by influential interest groups); cultural
and historical factors; and attitudes, in which those who are victimized by corruption feel that
attempts to deal with corruption will lead to further victimization, with little hope of corrupt
actors being brought to justice. These considerations lead principals to the conclusion that any
attempt on their part to constrain corrupt behaviours will invite strong retaliation from powerful
interests. Therefore, citizen empowerment (through devolution, citizens’ charters, bills of rights,
elections, and other forms of civic engagement) assumes critical importance in combating
corruption, because it may have a significant impact on the incentives faced by public officials to
be responsive to public interest.
Lessons from Country Case Studies
The empirical literature on corruption lends support to the neo institutional economics
perspective. It identifies key drivers based on in-depth country studies (including a 2004 World
Bank look at Guatemala, Kenya, Latvia, Pakistan, the Philippines, and Tanzania) and
econometric studies of developing, transition, and industrial countries (see Gurgur and Shah
2002;Huther and Shah 2000; Tomaszewska and Shah 2000).xxix
The six country case studies by the World Bank examined the root causes
of corruption and evaluated the impact of Bank efforts to reduce corruption in each country.
These studies identified the following drivers of corruption:
The legitimacy of the state as the guardian of the “public interest” is contested.
In highly corrupt countries, there is little public acceptance of the notion that the
role of the state is to rise above private interests to protect the broader public interest.
“Clientelism”—public officeholders focusing on serving particular client groups linked to them
by ethnic, geographic, or other ties—shape the public landscape, creating conditions that are ripe
for corruption. The line between what is public and what is private is blurred, so that abuse of
public office for private gain is a routine occurrence.
The rule of law is weakly embedded.
Public sector corruption thrives where laws apply to some but not others and where
enforcement of the law is often used as a device for furthering private interests rather than
protecting the public interest. A common symbol of the breakdown of the rule of law in highly
corrupt countries is the police acting as lawbreakers rather than law enforcers (stopping motorists
for invented traffic violations as an excuse for extracting bribes, for example). The independence
of the judiciary—a pillar of the rule of law—is also usually deeply compromised in highly
corrupt countries.
13
Institutions of participation and accountability are ineffective.
Societies in which the level of public sector corruption is relatively low usually have
strong institutions of participation and accountability that control abuses of power by public
officials. These institutions are either created by the state itself (for example, electoral process,
citizens’ charter, bills of rights, auditors general, the judiciary, the legislature) or arise outside of
formal state structures (for example, the news media and organized civic
groups). In highly corrupt countries, weaknesses in institutions of participation and
accountability are glaring.
The commitment of national leaders to combating corruption is weak.
Widespread corruption endures in the public sector when national
authorities are either unwilling or unable to address it forcefully. In societies in which public
sector corruption is endemic, it is reasonable to suspect that it touches the highest levels of
government and that many senior office holders will not be motivated to work against it.
Indian Context
A number of agencies have been created in India to tackle corruption. It is apparent that
the government has been keen to eradicate this malady. Even before Independence, the colonial
rulers had established the Delhi Special Police Establishment (DSPE) to control corruption
which surged during the Second World War. The Prevention of Corruption Act was passed in
1947, and an Administrative Vigilance Division (AVD) created in the Home ministry in 1955.
Vigilance officers were appointed in each ministry to enquire into charges of corruption against
employees in these organisations. Then, owing to mounting public criticism, a Committee on
Prevention of Corruption was appointed in 1962 under K. Santhanam to examine this issue in
depth and recommend remedial measures. As a result of its recommendations, the Central
Vigilance Commission (CVC), independent of ministerial control was set up in 1964. Another
important measure during the early decades was the creation of the Central Bureau of
Investigation (CBI) in 1963, which incorporated DSPE as the Investigation and Anti-Corruption
Division.
Some of the important anticorruption measures in India are as follows:-
Right to information act
The Right to Information Act (2005) and equivalent acts in the states, that require government
officials to furnish information requested by citizens or face punitive action, computerization of
services and various central and state government acts that established vigilance commissions
have considerably reduced corruption or at least have opened up avenues to redress grievances.
The 2006 report by Transparency International puts India at the 70th place and states that
significant improvements were made by India in reducing corruption.xxx
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Ombudsmen:
The Lokayukta is an anti- corruption organization in the Indian states.[31][32] These institutions
are based on the Ombudsman in Scandinavian countries. An amendment to the Constitution has
been proposed to implement the Lokayukta uniformly across Indian States as a three-member
body, headed by a retired Supreme Court judge or high court chief justice, and comprise of the
state vigilance commissioner and a jurist or an eminent administrator as other members.
However in many states are reluctant to fill up the vacant posts of Lokayukta. At the national
level the Lokpal bill is still pending.
Social welfare worker Anna Hazare has led a movement to compel the Indian
Government to notify the Committee for the implementation of the Lokayukta against corruption
as an independent body and also giving enough powers to the Lokayukta to also receive
corruption complaints against politicians, bureaucrats and even sitting judges. Anna Hazare is
currently pursuing an agenda to pass a bill called Jan Lokpal bill, and he has gathered the support
of many citizens residing in metropolitan cities of India. He was on an indefinite fast at the
Ramlila Grounds, Delhi, in order to campaign for the cause.[34]
Whistleblowers
Whistleblowers play a major role in the fight against corruption. India currently does not have
a law to protect whistleblowers, which was highlighted by the assassination of Satyendra Dubey.
Indian courts are regularly ordering probe in cases of murders or so-called suicide of several
whistle blowers. One of the latest case of such murder is of V Sasindran Company Secretary of
Palakkad based Malabar Cement Limited, a Government company in Kerala and his two minor
children, Kerala High Court ordered CBI probe on 18 February 2011.
Anti-corruption police and courts
The income tax department of India, Central Vigilance Commission and Central Bureau of
Investigation all deal with anti-corruption initiative. There have been calls for the Indian
government to create an anti-theft law enforcement agency that investigates and prosecutes
corruption in government at national, state and local levels. Special courts that are more efficient
than the traditional Indian courts with traveling judges and law enforcement agents are being
proposed. The proposal has not yet been acted upon by the Indian government. Certain states
such as Andhra Pradesh (Andhra Pradesh Anti-corruption Bureau) and Karnataka (Lokayukta)
have similar agencies and courts.
Anti-corruption organizations
A variety of organizations have been created in India to actively fight against corrupt
government and business practices. Notable organizations include:
5th Pillar is most known for the creation of the zero rupee note, a valueless note designed
to be given to corrupt officials when they request bribes.
15
India Against Corruption is a movement created by a citizens from a variety of
professions and statuses to work against corruption in India. It is currently headed by Anna
Hazare.
Jaago Re! One Billion Votes is an organization originally founded by Tata Tea and Jana
agraha to increase youth voter registration. They have since expanded their work to include
other social issues, including corruption.
Association for Social Transparency, Rights and Action (ASTRA) is an NGO focused on
grass-roots work to fight corruption in Karnataka.
One organization, the Lok Satta Movement, has transformed itself from a civil organization to a
full-fledged political party, the Lok Satta Party. The party has fielded candidates in Andhra
Pradesh, Tamil Nadu, and Bangalore. In 2008, it obtained its first elected post, when Jayaprakash
Narayan won the election for the Kukatpally Assembly Constituency in Andrha Pradesh.
Judicial Reform
Corrupt judges in the higher judiciary can be removed only by impeachment. However, this
method is cumbersome. The problem is not just a question of devising proposals for removal.
The Judges (Inquiry) Act, 1968, prefaces impeachment by judicial inquiry. In Supreme Court
Judge Justice V. Ramaswamy’s case, the inquiry indicted him but the impeachment motion fell
through in Parliament in 1992.
The need for an institutional mechanism to deal with cases of misconduct against a High Court
judge as also the question of interim arrangements on whether the judge be assigned work
pending investigation has long been felt. A beleaguered judge continuing in office smacks of
grave impropriety. Remember how Karnataka High Court Chief Justice P.D. Dinakaran
continued to attend court, took decisions on the administrative side and even delayed his
departure for Gangtok?
The government should fast-track all cases of moral turpitude, corruption and nepotism. The
process of impeachment of a judge should be speeded up with a time limit for obtaining the
President’s sanction and impeaching him/her.
The Centre’s decision to set up a National Judicial Oversight Committee (NJOC) to
look into complaints against Supreme Court and High Court judges and impose “minor
penalties” or recommend their removal is welcome. This has been provided for in the Judicial
Standards and Accountability Bill 2010 tabled in the Lok Sabha on December 1. Significantly,
the Bill is aimed at replacing the Judges (Inquiry) Act, 1968. The NJOC will consist of a former
Chief Justice of India, a Supreme Court judge, the High Court Chief Justice, an eminent person
to be nominated by the President and the Attorney-General of India (ex-officio).
Justice Katju and Justice Misra have directed the Chief Justice of the Allahabad High Court
to stem the rot. But can a Chief Justice alone help improve things without the force of law? They
also referred to the syndrome of “uncle judges”. The Union Law Ministry admits that this
menace has spread to many High Courts, including those in Chandigarh, Shimla and Jaipur. In its
16
230th Report (2009), the Law Commission has recommended that in order to eliminate the
practice of “uncle judges”, the judges, whose kith and kin are practicing in a High Court, should
not be posted in the same High Court.
Political Commitment
This elaborate and multi-layered apparatus to control corruption could hardly make a
dent on the situation because of lack of political commitment on the part of political leadership in
the states and at the center. It is more than clear all these institutional arrangements to combat
corruption can be useful only if correctives come from the political class which is the final
legislative and executive authority in a parliamentary democracy. Unless the politicians are made
to differentiate private conscience from public morality, and personal profit from national
interest, the ongoing unrestrained plunder of the exchequer cannot be stopped. The case of Bihar
during the past decade shows that all anti-corruption instruments and strategies come to naught
against a political leadership which has a vested interest in continuing corruption. Similarly, the
spate of criminal cases in which a former Chief Minister of Tamilnadu, Jayalalitha, was herself
involved shows that during her tenure political and administrative corruption could not have
been checked effectively primarily because of the political patronage she had given to corrupt
practices.
Administrative Accountability
Another essential component of anti-corruption strategy is the strict enforcement of
the principle of accountability at all levels. In India the government performs vast functions over
a wide range of areas of public concern. Decisions are taken at various levels of government in
which discretionary power may be involved. The present situation is that there is general lack of
accountability in administration. Almost everyone in the public
services is accountable to no one and is considered above the law. Respect for the rule of law is
woefully uncommon and it is often noticed that those who violate the law in the most blatant
fashion are the ones who get away the easiest.
The cases involving former chief ministers of Tamilnadu and Bihar are illustrative of judicial
activism that has come to the rescue of rule of law against the custodians of law themselves. The
recent action of the Central Vigilance Commissioner of putting the names of administrative and
police service officials on the internet against whom charges of corruption are pending has also
gone a long way in instilling the sense of responsibility and accountability among these officials.
Procedural Simplification
The administrative delay is one of the major causes of corruption. Therefore to reduce
or control corruption it is necessary to eliminate such delays. For that it is essential that office
procedures should be simplified and levels of hierarchy reduced. In the Indian situation the
persistence of archaic structures has played havoc with the developmental initiatives. After
Independence the country framed an entirely new political and economic agenda and this
required new, matching structures for effective implementation, as the old administrative and
17
legal systems clashed with the substance and spirit of the new agenda. And it is this mismatch
between politico-economic agenda on the one hand and the administrative and legal structures on
the other which is
primarily responsible for the poor performance of the government.
Civil Society Participation
Civil society is considered as the realm of association between the household and the state.
Typically this includes professional organizations as well as other formal and informal non-profit
associations. Such associations fulfill certain functions essential for aggregating and expressing
societal interests, including social integration, social participation in state governance, and
promoting the democratic values. Through its many functions, civil society can create pressure
for policy reform and improved governance, as well as explicitly monitor the state’s actions for
fighting corruption and abuse. In other words, the civil society addresses the will of the state to
operate in an accountable, transparent and responsive manner. Civil society organizations have a
key role to play in combating corruption. Countries that are supportive and hospitable to civil
society bodies-through hearing arrangements in their regulatory and legislative procedures,
involving them in oversight institutions, etc,- have in fact enabled the organic and internally
driven evolution of policies and institutions to changes in circumstances. In recent years a
growing number of structures, institutions and associations-outside state apparatus and profit-
making businesses-have evolved in India for the joint pursuit of shared interests. Chambers of
commerce, professional associations, various forms of non-governmental organisations have
become players, shaping opinions, building coalitions, providing testimonies, monitoring
government and enterprises. The Report Card methodology developed by the Public Affairs
Center in Bangalore is an innovative instrument to track down and expose corruption in public
services (Guhan and Paul 1997).xxxi
Similarly, the Common Cause in Delhi has done considerable work in the area of
public interest litigation which has served the purpose of dragging corrupt officials
to the courts. The Mazdoor Kisan Shakti Sangathan in Rajasthan has done
commendable work in making public information regarding development projects
in the state. Such information has served to expose instances of bureaucratic
corruption.
Another notable instance of citizen involvement in combating corruption is
the launching of Satyagrah (non-violent protest) by S.D. Sharma, an octogenarian freedom
fighter and Vice-Chairman of the Transparency International-India, against political corruption
and for honest and efficient governance. Established in 1997, the Transparency International-
India has been playing a significant role in fighting corruption through Gandhian methods of non
violent mass mobilization. It has now undertaken to organize 24 hour relay fast concurrently
with the sessions of the parliament, to remind the government and the parliament that they have
failed in their duty to the country to take effective steps for eliminating corruption from their
ranks (Sharma 2000).xxxii
The causes of corruption are many and complex. Following are some of the causes of
corruption:-
18
There are many myths about corruption, which have to be exploded if we really want
to combat it. Some of these myths are: Corruption is a way of life and nothing can be done about
it. Only people from underdeveloped or developing countries are prone to corruption. We will
have to guard against all these crude fallacies while planning measures to fight corruption.
Some important steps to combat and reduce corruption in administration are as follows:-
(i) Foolproof laws should be made so that there is no room for discretion for politicians and
bureaucrats. The role of the politician should be minimized. Application of the evolved
policies should be left in the hands of independent commission or authority in each area of
public interest. Decision of the commission or authority should be challengeable only in the
courts.
(ii) Cooperation of the people has to be obtained for successfully containing corruption.
People should have a right to recall the elected representatives if they see them becoming
indifferent to the electorate.
(iii)Funding of elections is at the core of political corruption. Electoral reforms are crucial in
this regard. Several reforms like: State funding of election expenses for candidates; strict
enforcement of statutory requirements like holding in-party elections, making political
parties get their accounts audited regularly and filing income-tax returns; denying persons
with criminal records a chance to contest elections, should be brought in.
(iv)Responsiveness, accountability and transparency are a must for a clean system.
Bureaucracy, the backbone of good governance, should be made more citizen friendly,
accountable, ethical and transparent.
(v)More and more courts should be opened for speedy & inexpensive justice so that cases do
not linger in courts for years and justice is delivered on time.
(vi) Local bodies, Independent of the government, like Lokpal, Lokadalats, CVCs and
Vigilance Commissions should be formed to provide speedy justice with low expenses.
(vii) A new Fundamental Right viz. Right to Information should be strengthened, which will
empower the citizens to ask for the information they want. Barring some confidential
information, which concerns national and international security, other information should be
made available to general public as and when required. Stringent actions against corrupt
officials will certainly have a deterrent impact.
Public sector corruption, as a symptom of failed governance, depends on a multitude of
factors, such as the quality of public sector management, the nature of accountability
relations between the government and citizens, the legal framework, and the degree to which
public sector processes are accompanied by transparency and dissemination of information.
Efforts to address corruption that fail to adequately account for these underlying drivers are
unlikely to generate profound and sustainable results. To understand these drivers, a
19
conceptual and empirical perspective is needed to understand why corruption persists and
what can be done to stop it. At the conceptual level, a number of interesting ideas have been
put forward. These ideas can be broadly grouped into three categories: principal agent
models, New Public Management perspectives, and neoinstitutional economics frameworks.
Anti corruption agencies are prone to being misused as tools of political victimization. These
types of interventions are more appropriate in a “low” corruption setting, where governance
fundamentals are reasonably sound and corruption is a relatively marginal phenomenon. The
model also suggests that where corruption is high (and the quality of governance
correspondingly low), it makes more sense to focus on the underlying drivers of
malfeasance in the public sector—by building the rule of law and strengthening institutions
of accountability, for example. Indeed, a lack of democratic institutions (a key component of
accountability) has been shown to be one of the most important determinants of corruption
(Gurgur and Shah 2002).xxxiii
Malaysia’s adoption of a “clients’ charter” in the early 1990s
that specified service standards and citizen recourse in the event of noncompliance by
government agencies helped reorient the public sector toward service delivery and transform
the culture of governance .
In societies in which the level of corruption is moderate, it may be advisable to attempt reforms
that assume a modicum of governance capacity. Such reforms include trying to make civil
servants more accountable for results, bringing government decision making closer to citizens
through decentralization, simplifying administrative procedures, and reducing discretion for
simple government tasks, such as the distribution of licenses and permits.
With this model in mind, it is not hard to understand why so many anticorruption
initiatives have met with so little success. Media awareness campaigns and workshops on
corruption targeted to government officials, parliamentarians, and journalists have almost
universally failed. As the model shows, this outcome would be expected in countries with weak
governance, where corruption is openly practiced but neither the general public nor honest public
officials feel empowered to take a stand against it and even fear being victimized. In contrast,
awareness campaigns would be expected to have a positive impact in countries where
governance is fair or good and the incidence of corruption is low.
Program Empirical evidence
Anticorruption agencies have been successful in Australia, Chile, agencies Hong Kong
(China), New South Wales, and Singapore (Klitgaard1997; Segal 1999)xxxiv
.The effectiveness of
“watchdog” agencies with a mandate to detect and prosecute corrupt acts —which most
developing countries have established—also depend on the governance-corruption nexus.
Watchdog agencies have achieved success only in countries where governance is generally good,
such as Australia and Chile. In weak governance environments, these agencies often lack
credibility and may even extort rents. In Kenya, Malawi, Nigeria, Sierra Leone, Tanzania, and
Uganda, for example, anticorruption agencies have been ineffective. In Tanzania the
government’s Prevention of Corruption Bureau produces only about six convictions a year,
mostly against low-level functionaries, in a public sector environment rife with corruption. In
Pakistan the National Accountability Bureau lacks a mandate to investigate corruption in the
powerful and influential military.
20
The corrupt practices flourish in systems where employees have high job security; where
the level of professionalism in the public service is low; and hence officials rather serve their
own interests than perform their duty to serve the public. However, low salaries are not a valid
reason for and do not justify corruption. A gift culture exists, particularly in Africa, in which it is
tradition that a small reward is paid for services rendered. Such a gratuity or tip becomes part of
the cultural environment and in certain countries the payment of such rewards is so embedded in
tradition that any attempt to rein in the practice would be seen as an attack on treasured cultural
values. In Africa, this was traditionally seen as awarding special honours to the Chief and, in this
light, it often regarded as acceptable and "normal" for politicians to accept such rewards. In some
countries it is common practice in the commercial arena for business transactions to be
accompanied by the giving of personal gifts or benefits. In essence, the root of corruption is
greed rather than culture, public life requires a standard of its own; and those entering public
office must be made aware of this from the outset.
All organisations, whether public or private sector, must have rules, regulations and policies
that guide management and other employees in terms of acceptable behaviour and conduct
within the organization. Rules, regulations and policies are instrumental in organizing people,
steering them towards a common goal and ensuring that everyone is treated fairly and equally. In
order to be effective, such rules and policies must be clearly communicated to all individuals in
order to be understood and applied objectively. Corruption is more likely to flourish in an
organization that does not have a wide range of rules, regulations or policies that guide
employees in their work. Similarly, a country must have clear policies and legislation that guide
the behavior of all citizens and residents within that country.
The factors that cause corruption are country specific. Approaches that apply common
policies and tools (that is, one-size-fits-all approaches) to countries in which acts of
corruption and the quality of governance vary widely are likely to fail. Policy makers need
to understand the local circumstances that encourage or permit public and private actors to
be corrupt .Efforts to combat corruption also demand strong local leadership and ownership
if they are to be successful and sustainable.
The year 2011 has proved to be a watershed in the public tolerance of political corruption in
India, with widespread public protests and movements led by social activists against corruption
and for the return of illegal wealth stashed by politicians and businessmen in foreign banks over
the six decades since independence.
CONCLUSION
There is a much better grasp today of the extent to which corruption is a symptom of
fundamental institutional weaknesses. Instead of tackling such a symptom with narrow
intervention designed to “eliminate” it, increasingly it is understood that the approach ought to
address a broad set of fundamental institutional determinants. However, the challenge of
integrating this understanding with participatory process has barely begun. The implementation
21
of institutional reforms can benefit significantly from the participatory process that is being
developed for anti-corruption activities. Equally important, any participatory process, however
sophisticated, ought to lead to concrete results beyond enhanced participation and heightened
awareness.
Thus, identifying key institutional reforms in India, and mobilizing support for such
reforms, needs to be fully integrated into the participatory process from very early on. Such early
convergence is likely to promote a better balance between prevention and enforcement measures
in addressing corruption. Until recently, the pendulum was firmly in the “enforcement” corner.
The gradual swing towards middle ground has taken place due to recognition of the limitations
of ex post legalistic enforcement measures, since rule of law institutions themselves are currently
part of the corruption problem in India.
Corruption is an intractable problem. Honest and dedicated persons in public life, control over
electoral expenses could be the most important prescriptions to combat corruption. Corruption
has a corrosive impact on our economy. It worsens our image in international market and leads
to loss of overseas opportunities. Corruption is a global problem that all countries of the world
have to confront, solutions, however, can only be home grown.
----------------------------------------------------
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3. Vohra Committee Report
22
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