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CORRUPTION IN PUBLIC LIFE: STEPS TO IMPROVE INDIAS IMAGE

(Talk delivered at the BASF Mumbai on 14.2.2002)

N Vittal, Central Vigilance Commissioner

BASF is a transnational corporation operating in India for the last 58 years with astrong value system which is zealously cared for and practiced. In fact the issue of values

had become increasingly important in the context of globalisation. The collapse of theSouth East Asian economy tigers from middle of 1997 highlighted that if there was lack

of corporate governance, there would be an adverse impact on business and investment.

2 The recent implosion of Enron has brought out in sharp relief how if there is lackof proper corporate governance, a spectacularly successful company like Enron can

also lead to disaster.

3 The issue of good corporate governance has become important so far as global

business is concerned especially when investments may take place across borderswhether in the capital market or in the form of foreign direct investment. The issue ofcorruption which has a direct bearing on the quality of public governance also becomes

important. It may be very difficult to have good corporate governance practices if theoverall environment is one of poor governance and especially high corruption.

4 As the Central Vigilance Commissioner I have been dealing with this issue of

corruption for the last more than three years and I would like to share with you myperceptions about the challenge of good governance in the country. Good governance in

our country is not possible unless we tackle the issue of corruption in public life.

5 Governance is the function performed by the Government. Good governancewould mean that there is equality and equal protection of the law. For all citizens it

would also mean that there is an opportunity for every individual to realise his fullpotential. It will also mean that there is no wastage of resources and productivity is high.

If the Rotary were to focus their attention on these aspects of good governance in turnthey would have lived up to the larger theme of this year - mankind is our business.

6 India today is not governed well at all. This will be obvious from the fact that

there we are one of the most corrupt countries in the world. Indians do better abroad thanwithin the country. There is also tremendous wastage of resources in our country. We

waste 10% of our foodgrains because of poor storage, 22% of vegetables because of poorstorage, 40% of our people are illiterate, in power we lose 22% in transmission. We can

go on listing how our productivity is very low in our economy.

7 The root cause of the very poor governance in India lies in corruption. I havebeen working for more than three years as the Central Vigilance Commissioner. I would

like to dwell on this issue of corruption and what agencies like Rotary can do to fightcorruption.

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8 The progress of any country depends on ultimately the level of the quality of

governance in the society and the productivity of its operations. Corruption affects thequality of governance and definitely corruption is anti-economic development, as we will

see presently. It is therefore proper that we focus our attention today on the issue ofcorruption in our society.

9 Before we proceed further, what do we understand by corruption? Corruption is

lack of integrity. This could be financial integrity, moral integrity and intellectualintegrity. As the Central Vigilance Commissioner, I am mostly concerned with the issue

of financial integrity. But moral integrity and intellectual integrity are equally important.

10 Today perhaps the main cause of corruption in society can be traced to be thefollowing standards in morals. In a way, the corruption temperature of any society

depends on three factors. These are: (i) the individual sense of values, (ii) the valuescherished by society, and (iii) the system of governance. Probably it is worth looking at

the social roots of corruption at this stage.

11 Corruption is harmful in three different ways. Corruption is anti-national. TheHawala scam showed how the anti-national Kashmiri militants were getting money from

abroad through hawala, the same route through which other sections of the society likepolitics, business and bureaucracy were also receiving money. The Tehelka.com expose

on 13.3.2001 also dramatically highlighted the extent of corruption in politics anddefence deals. From these experiences, it will be obvious that corruption threatens

national security and is anti-national.

12 Corruption is anti-poor. 31% of the food grains and 36% of the sugar meant forthe Public Distribution System (PDS), which is designed to provide food security to the

people below the poverty line, gets diverted to the black market. The government of India(GOI) spends Rs.15,000 crores every year by way of subsidy to the PDS. This means that

Rs.5000 crores are not used for giving relief to the poor but land in the pockets of thecorrupt shopkeepers and their Godfathers in politics and bureaucracy. Rajiv Gandhi once

observed that out of every rupee meant for the anti- poverty programmes only 15 paisereached the beneficiary. Out of the 85 paise may be 40 paise can be accounted for as

administrative overheads. The leakage of the remaining 45 paise is definitely due tocorruption. Corruption is, therefore, anti-poor.

13 Corruption is also anti-economic development. The collapse of the South East

Asian economies in mid-1997 showed how even the so-called miraculously growing tigereconomies of South-East Asia were not immune from the disastrous consequences of

corruption and crony capitalism. The 1999 Human Development Report for South Asia,published by the Mahbub Ul Huq Centre in Islamabad, says that if Indias corruption

level comes down to that of Scandinavian countries Indias GDP will grow by 1.5% andthe FDI will grow by 12%.

14 Corruption, many a time, can be a matter of life and death. For example,

corruption in the pharmaceutical industry, resulting in spurious drugs flooding the

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market, may mean the death of many innocent people. The Mumbai blast of 1993 which

resulted in the death of 300 people was the result of RDX being smuggled in with thehelp of corrupt people in the government. Illicit liquor tragedies are another example of

how corruption leads to death.

15 In short, corruption is anti-national, anti-economic development and anti-poor.Nevertheless we have perhaps come to take corruption as a fact and a way of life. This

may be partly due to sociological reasons and partly due to a sense of helplessness anddefeatism.

16 India is like a snake whose head is in the 21st

century and whose tail is in the 17th

century. We are a billion-strong country and we have wide differences in terms of socialand economic development of different parts of the country. From a sociological point of

view, the family is the basis of our society. The joint family and caste are only theextended versions of the family. The joint family might have been eroded in recent

times especially in the urban areas but kinship, in the form of caste, still prevails.

Casteism gets a continuous boost because this seems to have become the basis of ourentire politics. Jawaharlal Nehru used to talk about building India into a castelessclassless society. The classless society never evolved and, instead of building a casteless

society, we have today a highly atomised society where caste defines the basis of politics.From casting our votes in the first election in 1952 we have come to the stage of voting

our caste in recent elections.

17 This organisation of our society based on caste and kinship and the differences inthe stages of development between the states provides a very strong rationale for

corruption. Caste and nepotism become the basis for distribution of patronage. One ofthe Chief Ministers is reported to have replied when asked why he was favouring his

relatives If I do not favour my relatives, whose relatives am I supposed to favour?

18 This concept of standing by ones caste or family is also reflected in the sense oftribalism of the corrupt. In addition to the social bond provided by caste and family ties,

the common financial interest is another cementing factor. We are largely an illiteratesociety with at least 40% of our people being illiterate. Hence, emotions dictate politics.

Politics is the route to power in a democracy. So when the politics is based on caste andthe voter takes decisions at the emotional level, corruption is probably considered more

tolerable.

19 One of the social roots of corruption in India can be traced to our Indian culture oftolerance. Any number of examples are given in the Puranas where the sinner having led

a life of sin can get redemption by taking the name of Lord Narayana in his last momentsas in the case of Ajamila. In social terms this has come to be accepted. People who lived

a life of sin like the prodigal son return to the straight and narrow path at some stage,usually late in life.

20 If we examine the root of corruption, we will find that it arises perhaps from the

extreme attachment of people to their families. Nepotism is natural in this situation.

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Corruption, as defined by the World Bank, is the use of public office for private profit. A

person in office feels that he should earn enough not only for himself and his lifetime butalso for his children, grand children and perhaps seven generations. That is probably the

basic motive behind the enormous accumulation of wealth by the corrupt in our countrytoday.

21 Equally important is another psychological factor. Power is never demonstrated

in a society unless it is misused. In certain communities being as corrupt as possible andamassing as muchwealth as possible is seen as a macho demonstration of competence.

If this is the attitude, those sectors of society that did not have an opportunity to share thepower cake in the past may also rationalise that they must also be able to emulate those

who had earlier enjoyed misuse of their power and amassed wealth by rampantcorruption. Thus a vicious cycle of corruption is launched where a society tolerates

amassing of wealth and does not question how that wealth is accumulated.

22 There was a time when socially a corrupt person was considered not a desirable

person. Such persons were not held in high esteem. But today we have reached such acynical stage that corruption is not only taken for granted but the capacity for makingmoney as much as possible from ones position is welcomed. It is said that in France, in

the police, those who are corrupt are socially ostracized. Small measures like socialboycott or ostracism of corrupt persons, if this could be inculcated, can also go a long

way in creating an appropriate psychological atmosphere for promoting a culture ofintegrity.

23 This brings us to another important social root for corruption that is probably

getting more accentuated in recent times. This is the spreading cult of consumerism. Theelectronic media has had a tremendous impact in creating a desire in the mind of

everyone to have the best of the consumer goods even at the beginning of life.Newspapers regularly report how domestic servants have been the agents of crime in

many cases. Perhaps it is this upstairs-downstairs syndrome or the ostentatiousconsumption of the well to do and the sense of jealousy created as a result among the

deprived which leads to crimes. Consumerism and desire for an ostentatious life styletempts many to make money by hook or crook. Corruption is the result.

24 There was a time when socially a corrupt person was considered not a desirable

person. Such persons were not held in high esteem. But today we have reached such acynical stage that corruption is not only taken for granted but the capacity for making

money as much as possible from ones position is welcomed. It is said that in France, inthe police, those who are corrupt are socially ostracized. Small measures like social

boycott or ostracism of corrupt persons, if this could be inculcated, can also go a longway in creating an appropriate psychological atmosphere for promoting a culture of

integrity.

25 Evil social practices also promote corruption. One major social cause thatpromotes corruption is the dowry system. Every public servant wants to see that his

daughter is married off well and there is continuous pressure for having a minimum level

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of dowry. This may be one of the reasons why one comes across cases where even public

servants who have otherwise led a clean life become vulnerable to corruption towards theend of their career. Dowry system is definitely one of the social roots of corruption in our

country.

26 Equally important is the social pressure in a competitive society for ensuring thatchildren get the best possible education. Right from kindergarten in every educational

institution, there is pressure of competition and education has become commercialised.This has been further accentuated by government policies about affirmative action

resulting in a great incentive for self-financing colleges who charge a lot of donation feeand most of it is collected in black. Education pressure and corruption in the education

sector is another social factor contributing to corruption in our system.

27 India is considered as one of the most corrupt countries today. According to theTransparency International, an NGO based in Berlin which rates countries on the basis of

Corruption Perception Index, India ranks 72 out of 91 countries according to the CPI

2001. The entire list is as follows:

CPI 2001 by Transparency International

1 Finland 24 Belgium 47 Bulgaria 70 Venezuela

2 Denmark 25 Portugal 48 Croatia 71 Honduras3 New Zealand 26 Botswana 49 Czech Republic 72 India4 Iceland 27 Taiwan 50 Colombia 73 Kazakhstan5 Singapore 28 Estonia 51 Mexico 74 Uzbekistan

6 Sweden 29 Italy 52 Panama 75 Vietnam

7 Canada 30 Namibia 53 Slovak Republic 76 Zambia

8 Netherlands 31 Hungary 54 Egypt 77 Cte-d'Ivoire

9 Luxembourg 32 Trinidad & Tobago 55 El Salvador 78 Nicaragua

10 Norway 33 Tunisia 56 Turkey 79 Ecuador

11 Australia 34 Slovenia 57 Argentina 80 Pakistan

12 Switzerland 35 Uruguay 58 China 81 Russia

13 United Kingdom 36 Malaysia 59 Ghana 82 Tanzania14 Hong Kong 37 Jordan 60 Latvia 83 Ukraine

15 Austria 38 Lithuania 61 Malawi 84 Azerbaijan16 Israel 39 South Africa 62 Thailand 85 Bolivia

17 USA 40 Costa Rica 63 Dominican Rep. 86 Cameroon

18 Chile 41 Mauritius 64 Moldova 87 Kenya

19 Ireland 42 Greece 65 Guatemala 88 Indonesia

20 Germany 43 South Korea 66 Philippines 89 Uganda

21 Japan 44 Peru 67 Senegal 90 Nigeria

22 Spain 45 Poland 68 Zimbabwe 91 Bangladesh

23 France 46 Brazil 69 Romania

28 The economic consequence of corruption was recently highlighted by a study madeby the PHD Chambers of Commerce reported in the Economic Times of 4

thSeptember 2001.

This is what the report says:

According to a study by PHD Chamber of Commerce and Industry, investment would

increase by 2.9 per cent of GDP and GDP growth by 1.3 per cent if corruption index

improves by one standard deviation or around 15 per cent. Implication is that India is

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loosing its least Rs.63,800 crore worth of additional investment per annum, roughly three

times the foreign direct investment (FDI) we are attracting now and Rs.28,600 crore of

consequent national income per annum.

29 The unaccounted money in India is estimated to be in the range of Rs.350 to 700

thousand crore more than the combined revenue of the Centre and the state governmentin the last fiscal.

A survey of exporters by Exim Bank found that 64 per cent of interviewed face major

problems with customs clearance processes and with port authorities. Exporters spend

1-15 per cent of export revenue to grease the corruption machinery. The international

level evidence is stark.

Surprisingly, corruption has not always been perceived to have a negative impact upon

economic development and growth. One view is that corruption acts as an efficient

lubricant for facilitating development in a highly regulated and slow moving economic

environment as it enables actors to cross barriers which hamper economic decisionmaking.

However, the fact is that the impact of corruption is systematic in nature. It generates

negative economy wide externalities that denigrate the performance of the system as a

whole and compromise the economys long-term dynamic efficiency.

Corruption leads to the favouring of inefficient producers, distorts the allocation of

scarce public resources and causes leakage of revenue from government coffers to

private hands. Large scale tax evasion erodes the tax base and in the process helps

generate black money. Corruption in the economy leads to inflated government

expenditures and scarce resources are squandered on uneconomic projects because oftheir potential to generate lucrative pay off. Hence it is not uncommon to find schools

without students, teachers without schools, hospitals without doctors or medicines, and

so on, though on paper all expenditures have been accurately accounted for. The result

is the crowding out of investment in priority sectors such as education or health.

Corruption in post independence India is attributed to an over-regulated environment in

which the state played a pre-dominant role in economic decision making providing

powerful incentives to bureaucrats and those in power to indulge in corruption.

The economic liberalization and the associated opening up of the Indian economy has

significantly reduced the structural rigidities in the system.

30 We are still recovering from the shock of the terrorist attacks of September 11,2001 at New York on the World Trade Twin Towers and in Pentagon the same day.

While terrorism of this type catches the attention, we must realise that corruption isnothing sort of financial terrorism.

31 The whole world has been shocked by the terrorist attack on the twin towers of

the World Trade Centre in New York and Pentagon in Washington on 11th

September.

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The United States is talking about a war against terror. While the physical damage

caused by terrorism is grabbing public attention, there is another type of terrorism takingplace in our country and which apparently has not shocked the people to the same extent.

32 Corruption is nothing but financial terrorism. The terrorist attacks in New York

reminded many of us about the Mumbai blasts of 1993 where 300 people died. This wasnot only an act of terrorism but also a case of financial terrorism. The RDX used to kill

the innocent people was smuggled by bribing certain customs officials to the tune ofRs.20 lakhs. Corruption as financial terrorism can have the same disastrous impact on

human lives.

33 Corruption also encourages physical acts of terrorism. The militant activity we arewitnessing in the North East and in Jammu and Kashmir can be directly linked to the

extensive and pervasive corruption in these places. The government of India has beenconsistently throwing a lot of money in an effort to promote development in these states

but thanks to corruption, the legitimacy of the formal state is compromised and the

militants gain greater public sympathy and legitimacy.

34 Death caused by the physical act of terrorist is well known. The starvation deaths

of the poor are due to the financial terrorism of corruption. Everybody has beencommenting about the overflowing granaries of the Food Corporation of India, while

starvation deaths are taking place in Orissa. It is learnt that government of India hasgiven substantial amount of grains free to the states like Orissa but apparently these are

not reaching the starving poor. On the contrary, part of the grains made available toOrissa is being re-circulated and sold back to the Food Corporation of India. It seems that

last year, because of failure of monsoon hardly 30% of the paddy area was planted inOrissa but already the Food Corporation of India has equaled if not exceeded the

procurement target for paddy in that state! This is a clear example of how financialterrorism in the whole public distribution system is playing with the life of the hungry

poor who are dying of starvation. Is not the damage caused to the poor in our country asheinous as the terrorist attack on the twin towers of New York?

35 There is an economic price to be paid for the uncertainty arising from acts of

terrorism. The terrorist attack had an adverse impact on stock exchanges in United Statesand elsewhere. Some industries like travel and airlines were particularly affected by the

terrorist attack. Financial terrorism also has a much wider impact on the economy. ThePHD Chamber of Commerce recently came up with a report about how reduction in

corruption by 15% will increase investment to 2.9% of GDP or Rs.63000 crores, which isthrice the FDI we get. It will increase GDP growth by 1.3%. In the Terror Tuesday

attack about ten thousand people might have lost their lives. But in the UTI scam the twocrores investors who had put their savings in US 64 found that their trust has been

betrayed. The suffering of the victims who have lost their means of financial support,especially in their old age is no less.

36 Corruption can also be seen as a disease of the body politics. This disease is the

disease of AIDS. AIDS flourishes because of uncontrolled sexual behaviour. Corruption

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is financial AIDS and it flourishes because of financial rape and financial adultery.

Financial rape occurs when the public servant forces the helpless citizen to bribe him toget even what the citizen is entitled to get as a matter of his right. Financial adultery

takes place when both the public servant and the citizen or particularly the businesscommunity collude at the cost of the society. The World Bank came up with the

following perception about the economic consequences of corruption. The World Bankviews on the impact of corruption on the economy have been spelt out in the report on

corruption in Poland. The relevant extracts form the report are reproduced below:

For operational purposes, the World Bank defines corruption as the abuse of public

office for private gain. While this definition does not include wholly private sector

corruption, it does include the interface between private and public sectors without which

much private sector corruption could not occur. Some of the examples are Bribery in

purchasing government contracts, benefits, licenses, judicial decisions, evading customs

duties, taxes and other regulations; theft or misappropriating budgetary funds and public

assets; patronage, nepotism and cronyism; influence peddling like election or party

financing in exchange for influence.

Corruption is not likely ever to be fully eliminated but the objective is to minimise it so

that it becomes and exception and not the rule, by turning it from a low risk and high

return activity into a high risk and low return activity. The World Bank's approach

therefore focuses on an economic analysis of the conditions conducive to corruption

based on rents, discretion and accountability. Corruption is a function of all three.

Corruption has the potential to flourish where rents are high, discretion extensive, and

reporting and monitoring are poor.

In combating corruption, it is useful to focus on minimising the extent to which these

factors can influence behaviour, rather than relying solely on prosecution of corruptindividuals. Prosecuting the guilty is important but can do little to reduce the

opportunities and incentives for corruption "upstream". To do this, it will be necessary

to focus on rents, discretion and the efficiency of monitoring and accountability

mechanisms in the political, administrative and other structures of the state. At the same

time, it is important to ask why there have not been more successful prosecutions of

corruption. This highlights the importance of including judicial, prosecutorial and police

bodies among the state organisations to be scrutinised. The analysis based on high

potential rents, extensive discretion and low transparency is also relevant to them.

Corruption undercuts the macroeconomic, efficiency, equity and institutional functions of

government. It is helpful to distinguish these four types of costs imposed by corruption:

Macro-fiscal: lost revenues (from tax, customs duty and privatisation) andexcessively high expenditure (through corruption loadings on state contract);

Reduction in productive investment and growth: through abuse of regulatory powers,misprocurements and other costs imposed by corruption. International evidence

indicates that countries with higher incidence of corruption systematically have lower

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investment and growth rates and that public safety can be compromised by unsafe

infrastructure.

Costs to the public and to the poor in particular: via higher taxes than necessary,bribe extraction in delivery of services and poor quality of and access to services.

Bribe are frequently a higher proportion of income of the poor even though they do

not pay the highest bribes Loss of confidence in public institutions: corruption can undermine the rule of law,

tax compliance, respect for contracts, civil order and safety, and ultimately the

legitimacy of the state itself.

37 We have so far analysed the damaging consequences of corruption and the socialroots of corruption. The challenge before us is, can India become corruption free. Is it

possible to tackle the issue of corruption in society? As the Central VigilanceCommissioner, I believe that it is possible. My belief is based on the experience of other

countries like Britain, Botswana and Singapore which have been able to effectively tacklethe issue of corruption. In the Indian context, I think such a change is possible. My

confidence is based on the following five principles observed by five eminent men:

38 Bertrand Russell, the eminent British philosopher observed that every opinionbecomes respectable if you hold it for a sufficiently long time. Today it may not be

respectable to think that India can become corruption free. But similar was the situation,at the height of British imperialism, when it was unthinkable that the sun would ever set

on the British Empire. Nevertheless, the leaders of our freedom struggle led by MahatmaGandhi made the idea, that India can become free of colonialism, a reality. Their opinion

about a free India, which at one time might have been considered as a dream orimpossibility, became a reality.

39 This goes to prove the truth of the statement made a French writer Victor Hugowho said There is nothing more powerful than an idea whose time has come. Perhapslooking to the extensive corruption in every walk of life that we see in India today, the

idea that India must improve and become a less corrupt country is an idea whose time hascome.

40 The third observation was made by another French thinker Alexis de Toqueville.

He said that The inevitable becomes intolerable the moment it is perceived to be nomore inevitable. Today the citizens of India may view corruption as inevitable. The

purpose of this Guide is to make every Indian citizen realise that corruption is notinevitable. The moment the citizens of the country realise that corruption is not

inevitable, then it will become intolerable and we can see a dramatic change coming up inthe country for the better.

41 The fourth observation is attributed to the British writer George Bernard Shaw.

He said that An ordinary person accepts the limitations of life in the society in which helives and leads a peaceful life. The unreasonable man wants the society to change to his

way of thinking and in the process achieves success. Today, reasonable citizens in Indiamay come to terms with the prevailing corruption and try to lead a peaceful life. The

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morally aware and activist citizens of the country would be following the footsteps of

Mahatma Gandhi and in trying to bring about a change in the system. It may be recalledthat when Gandhiji was in South Africa, he was thrown out in the middle of the night

from the first class compartment of the train in which he was traveling, even though hehad a valid first class ticket, because he was black. Many other Indians in his position

would have accepted the injustice of the system and led a peaceful life. But Gandhijiwho was a great moral leader thought this to be an unfair system and rebelled against it.

Satyagraha was born in the mind of Gandhiji on that railway platform that night in SouthAfrica. The citizens who read and take an activist approach to fighting corruption in our

country by reading this guide will be following the footsteps of Mahatma Gandhi.

42 Unless there is a plan of action, mere sentiment or unguided action will not bringresults. There is a story about a rat, a cat and an owl. The rat was being harassed by the

cat. It went to the owl for the advice. The owl said that the rat could face the cat if it alsobecame a cat. When on the next day the rat went and inquired from the owl how it, a rat,

could become a cat, the owl said that he was there to give policy directions but

implementation was the rats problem! The very purpose of this Guide is to empowerevery Indian citizen who wants to fight corruption and from being weak like the rat tobecome strong like the cat. For this, the strategy to be followed is the advice given by

Michelangelo Buonarotti, the immensely talented Italian sculptor of the fifteenth century.Michelangelo was asked how he made beautiful statues out of marble that had no shape.

He replied that the statue was in his mind and he went on removing from the marblewhatever was not part of the statue and the statue emerged. Today every patriotic citizen

desires that India must become a corruption free country. How to go about it and ensurethat the prevailing corruption is tackled is the main theme of this guide. Specific actions

have been indicated so that vision of a corruption free India can be realised.

43 There are four agencies in our country, which can be approached by the citizen tofight financial terrorism. The first is the judiciary. In its recent judgments the Supreme

Court has enunciated three important principles, which will go a long way to improve theprobity of public life and thereby check financial terrorism originating from the politics

of our country. The first decision is that in the democracy, Constitution is supreme and itexpresses the peoples will. Till now it was very common for the corrupt politicians to

claim that they have been acquitted in the highest court in the democracy, namely thepeoples court in the elections. The second decision is that the special provision in the

constitution to the effect that a person who is not a member of a legislature can still bemade a minister or chief minister or prime minister for 180 days. This provision was

sought to be misused by some to virtually flout the spirit of the constitution. The courthas held that the 180 days limit cannot be invoked more than once. The third decision is

the clear judgment in the case of the chief minister of Tamilnadu pointing out that aperson, who is not eligible to contest elections, cannot be sworn in as a minister or chief

minister. These three judgments will go a long way in improving probity of public life inIndia.

44 The second agency that can be utilized by the citizen to fight financial terrorism

are bodies like the CVC, CBI, anti corruption bureau, vigilance commissioners in the

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state etc. The recent case in Delhi where the issue of corruption to the extent of the Rs.40

crores per month indulged in by the police and the municipal officials by collectingbribes from the hawkers, vendors and rickshaw pullers was resolved is a case in point.

Ms Madhu Kishwar, an activist of the NGO Manushi, collected this data very patientlyand the matter was brought to the notice of the CVC who then took up the matter with the

Chief Minister of Delhi, Delhi Administration as well as Minister for UrbanDevelopment. The matter finally came to the notice of the PMO. Ultimately the PM on

23.8.2001 wrote to the Lt Governor calling for the abolition of licensing of hawkers,vendors and cycle rickshaw pullers, which was the source of massive corruption. The

directive of the PM is being implemented.

45 The third agency available to the citizen is the print and electronic media topublicize cases of corruption and policies that encourage such financial terrorism. In the

case of cycle rickshaw pullers and hawkers, the media played a very important part inhighlighting the issue.

46 The fourth agency is direct action. The action taken by Lok Satta, an NGO inAndhra Pradesh to expose the extent of tampering of meters in petrol pumps and corruptpractices were put and end to it is an encouraging example.

47 We have focussed on means of good governance and how the corruption which is

coming in the way of good governance can be fought by agencies like Rotary. This isonly one aspect of problem of governance in India. If we look at Mankind is our

business, the current theme, then the question arises: can the Rotary do anything so faras economic development is concerned? I have been arguing that in the current fractured

politics of India it is necessary consciously to develop a network of champions. A lookat this concept will be worthwhile here.

48 One of the recent steps we are taking is to bring out a more focussed attention on

the debate on corruption. We propose to therefore come up with three indices about thelevel of corruption in government organisations which I would to see become an annual

feature.

49 The first index will be the corruption intensity index which will be based on thefollowing data available with the CVC namely (a) number of complaints received; (b)

number of cases of major penalty recommended; (c) number of cases of minor penaltyrecommended; (d) number of cases referred to CVC; and (v) number of cases for

prosecution. These numbers will be divided by the number of public servants who areunder the purview of the CVC in that organisation.

50 Meta perception or self image of the organisations is the second index. All the

organisations under the purview of the CVC are asked to rate themselves in a scale of 1to 10, one being the least corrupt and ten being the most corrupt about how perceive their

own organisation to be. They are also asked to identify the areas of corruption and whataction plan they have to fight corruption. Thus the exercise of annual publication of the

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probity perception index will become an opportunity for self introspection and initiating

action to eliminate corruption.

51 The third element will be a field study made in Delhi, Mumbai, Calcutta, Madrasand Guwahati by NGOs like Transparency International, Centre for Media Studies etc.

over a period of two months. This in turn will give an idea about the level of corruptionas perceived by the public based on exit polls.

52 The weightage to arrive at the probity perception index will be 70% for the field

study, 20% for the corruption intensity index and 10% for the meta perception. The wordprobity perception index is preferred because it does not have the stigma of the corruption

perception index while it still retains the sting.

53 It is a healthy development that there seems to be a growing awareness about theneed for fighting corruption even from those who are in the supply side of corruption.

Recently I had to address the Builders Association of India at Trichy on 23.1.2002. The

Builders Association representatives said, We want to come out of the trap ofcorruption. We seem to have caught a tiger by the tail. How can we escape? Can youguide us?

54 Black money is the poison, which is leading to corruption in practically every

walk of life in India whether it is politics or business, education or governmentoperations. One of the sectors which is very closely associated with black money is real

estate and the building profession. The construction industry can be a great catalyst foreconomic growth. In fact, whether it is a power station or a factory or roads, ports or

even telecommunication, you need construction. If infrastructure is vital for development,construction industry is the infrastructure of the infrastructure industry.

55 Nevertheless the construction industry and builders have an image that their

industry is very much corrupt. In the olden days one of the cynical observations aboutPWD was plunder without danger. The concept of percentage of cuts to be given in

every project was well known. Even in the Trichy meeting I attended of BAI, I wasshown informally what is the rate to be given to every level in the administration and also

at the political level making up to a total of up to nearly 20.5%. If the cuts are not given,then our bills are not passed. In the meeting the BAI, the chairman pathetically said, We

are now having a period of recession. If we do not bribe, we do not get contracts. Evenif we take contracts because of the present conditions and perform at a loss, our partner

who has not invested in our business continues to get his return. What he politely meantwas that corrupt officials insist on their cut as there seems to be a very close linkage in

this prevailing culture of corruption which involves bureaucracy, business and politics.There does not seem immediately to be a way out.

56 The builders themselves recognise that they are very much part of the problem.

After all corruption involves two parties. It is not a one way street. It is like two handscoming together to clap. In every act of corruption there is a bribe giver and a bribe

taker. The bureaucrats and political leaders form the demand side. The supply side is the

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business. I had written in 1999 to FICCI, ASSOCHAM and CII about what these

associations, which represent the Indian industry and business can do to check corruption.After all they were on the supply side of corruption. The replies received from CII and

ASSOCAHAM are as follows:

Dear Mr Vittal

I am writing to you in regard to your appeal to play an active role in dealing with the

issue of corruption. I do so after consultations within CII at the National and Regional

levels.

First we propose to communicate your appeal to all 4000 member companies of CII

and to all 100 affiliated associations and their member companies.

Second we request you to write a special message of 900 words which we would like to

publish in the CII Communique which has very wide circulation

I am pleased to bring to your notice that several companies have confirmed to CII thatthey do not "pay" irrespective of the pressures and implications. However many

corporates do face ground-level problems, harassment and delays. There are

enormous difficulties on account of laws and rules which are complex and which

provide opportunities to create difficulties. The SSI sector is a major sufferer. This

raises two issues:

a) Simplification of laws and rulesb) Need for accountability of the administration, and of individual officialsWe need to set up an institutional mechanism to deal with these issues and we wish to

be proactive, to work with you jointly and to work on a sustained basis. We would liketo meet you in the near future to discuss further action.

With warm regards

(Arun Bharat Ram)

Dear Vittal Saheb

I am writing to thank you, most sincerely, for giving time. I greatly appreciate the

opportunity to discuss several issues relating to corruption, simplification of rules and

laws etc.

May I also take this opportunity to confirm that ASSOCHAM would be happy to convey

your appeal via-a-vis corrupt practices to its members through out communications as

also putting your message on our website. I would therefore be grateful to receive a

suitable message from you. You have formally requested industry associations to take

up this issue and I am writing to confirm that ASSOCHAM supports your initiative and

action.

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We look forward to receiving your message as also your addressing us on the

Information Technology Bill: Implications for the Banking Sector at ASSOCHAM

House, 47 Prithviraj Road on 27th

of this month.

57 Globally there is a growing awareness that from the supply side also it isnecessary to control corruption. The United States in 1977 passed an Act known as theForeign Corrupt Practices Act American companies if they indulge in bribing outside

their country can be punished under that Act. Subsequently the whole issue was pursuedby the American government vigorously with other OECD countries because the

American companies brought to the notice of that government that other Europeancompanies like French, German or Swedish companies were paying bribes. They could

show this expenditure as business expenditure and get income tax rebates. Finally in 1997an Anti Bribery Convention was entered into by 34 OECD countries and ratified by

February 1999.

58 There is a growing worldwide consensus evolving about the need for controllingcorruption. This is because the cold war between the West led by the US and the

Communist led by the Soviet Union had ended. So long as the world was divided intotwo blocks then if international organisations like World Bank, IMF etc. could gave loans

to countries which happened to be corrupt or had corrupt dictates, the justification wasthat the particular leader might be a son of a bitch but he is our son of a bitch. But this

sort of protection of the corrupt on the ground of strategic geopolitical considerations ofthe super powers no longer exists. Therefore today the developed countries are realising

that when they give aid to other countries, their tax payers must be satisfied that themoney is not wasted. In a way therefore globally fighting corruption is becoming an

important issues. In this context, what the editor of Business Standard Shri Ninan wrote

after attending the second world conference against fighting corruption held on 28-31

st

May 2001 at The Hague in Netherlands is worth noting:

The wisecrack goes that everyone complains about the weather but no one does anything

about it. I suppose the same thing could be said about corruption, on which Indira

Gandhi famously explained away her own inaction: it was a global phenomenon, she

said. Well that turns out to be true. Except that something is in fact being done about it

on a global scale. Conferences are being held in quick succession to discuss the issue:

one at the Hague earlier this week, which 1800 people attended; another soon in Prague,

and then two more in South Korea before the end of the year. After working up

remarkable steam on the environment and human rights, the global conferencing

community has discovered corruption as an issue on which corrective action is urgentlyrequired.

Dont laugh and turn the page. This is serious business. It may take a while before the

conferences leads to measurable action, but it seems pretty clear that well get there.

Remember that that the first major international conference on environment was held in

Stockholm in 1972. From there to Kyoto was just over a quarter century. The human

rights movement has gone from agenda item to action item in a much shorter period, and

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I suspect that this will be true of corruption as well. Though what kind of action, and how

effective it will be, remain unclear.

59 It is therefore obvious that worldwide there is a concern about corruption from the

supply side. In India also it appears that the business community who are on the supply

side of corruption would like to see that they come out of the trap of corruption. Let us bealso practical and realise that not everybody in business feels that we should come out ofcorruption. There may be quite a few who are very happy with the present corrupt system

and would like to have corrupt officials so that they are sure that if they paid theappropriate bribe their work will be done. There are businessmen who probably feel that

a honest official is a nuisance to their way of doing business and instances are not knownunknown where pressures have been brought on to see that honest people are removed

from sensitive posts. One of the reasons for the prevailing corruption in our country isthat in quite a few sensitive posts we may find corrupt people being posted.

60 The basic question is: is it possible to control corruption from the supply side?

Attempts have been made in the past. For example in January 2000, the customs houseagents in Mumbai had a meeting and decided that they would no longer bribe customs

officials. This was because earlier they were paying bribes and they were showing thatbribes as business expenditure and eligible for income tax deduction under Section 32(b).

Subsequently, the Supreme Court ruled that the expenditure incurred for business shouldbe legal and not illegal. Certainly giving bribe was illegal expenditure and hence they

decided not to bribe. They came to me in January 2000 and said that they wanted to stoppaying bribe it in every major port in India. I was very hopeful. But very soon I found

that they went back to the status quo ante earlier stage. The customs department cameout with a press note saying that this was an attempt to tar their image.

61 Can the builders association succeed where the customs house agents failed? Itall depends on a number of factors. The first factor is how much determined are thebuilders to stop corruption? The builders were very open. They said that if they

individually try to tackle the issue of corruption they would be crushed by the corruptofficials because they may just not get the contracts at all. It is a question of being

willing to strike but afraid to wound. Can we make omelette without breaking eggs?

62 This is where if there is imagination and intelligence as well as a commitment tofight corruption, it may be possible to succeed. One of the ideas that came up in the

meeting was that the following strategy may be adopted: The builders if they comeopenly against the corrupt officials stand to run a great risk of losing their own business.

On the other hand, if there are NGOs which are active in the consumer movement or forthat matter in fighting corruption the builders association can use them as a front to carry

on the fight against corruption. A particular effective type of NGOs are the vigilancecouncils of Maharastra.

The concept of giving voice to citizens in their fight against corruption was

institutionalized in a unique government-citizen partnership in Maharashtra. Initiated by

the Anti-Corruption Bureau of Maharashtra under the guidance of Shri R. Mendonca, the

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formation of vigilance cells specific to trade, business, profession, industry etc. was seen

as one way to resist and expose corruption. Having gained momentum, various

organisations like Indian Merchants Chamber, Federation of Associations of

Maharashtra, NGOs like AGNI (Action for Good Governance and Net working in India),

Senior Citizens Forum, Association for Consumers Action on Safety and Health, Mohalla

Committees etc. have promoted this idea.

Despite a general belief that corruption has come to stay, those in the vanguard in the

fight against corruption have not given up hope; nor have they been cowed down by the

apparent power exercised by the corrupt. The structure of the vigilance cell is such that

specialists from trade, business, industry would provide the technical inputs to a group of

citizens and will perform the following functions:

a) The Cell will advise and enlighten members of their industry/trade etc. about law,

rules and procedures governing their trade etc. with a view to minimise the scope for

exploitation and harassment by corrupt officers.

b) The Cell will maintain a dialogue with senior government officers concerned withrespective trade etc. Their interaction can help in bringing about reforms in laws, rules

and administrative procedures.

c) The Cell will function as a watch dog and thereby encourage citizens and corporates

to resist and expose corruption.

d) The Cell members will be in a position to intervene by taking up instances of

harassment etc. of individual members of their group and insulate them from any

persecution for blowing the whistle on corrupt officials.

e) The Cell could also take up with the ACB the instances of demands for bribe and

furnish verifiable information regarding acquisition of assets disproportionate to the

known sources of legal income by corrupt officials/public servants.

Most often in dealing with organized structures, there is apprehension that the citizen or

concerned individual will be subject to hostility. By making optimum use of vigilance

cells, the forthright voice will assume an air of authority and the deviating organization

will be forced to take note of such voices.

63 There are consumer councils which are very active like the CERC, VOICE etc.

These organisations may be encouraged to set up vigilance councils on the model of whathas happened in Maharashtra. Such vigilance councils are formed, while the main activity

of fighting corruption will be done by the consumer movement, the builders can givedetails about specific cases of corruption. The Vigilance Council can highlight these

cases and arrange for traps if necessary. They can also take advantage of the CVCsbenami black money scheme so that the corrupt officials who are having disproportionate

wealth can be raided and brought to book. In addition to NGOs, the Indian MerchantsChamber for example has set up a separate council for fighting corruption Eminent

people like JF Rebeiro, former Governor of Punjab are associated with this. It shouldtherefore be possible to combine the concerned elders in the society who are keen to fight

corruption and NGOs and use them as the spearhead by the organisation like the buildersassociation to tackle the issue of corruption. After all as it is said, Sange Shakti Kaliyuge.

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64 Comparisons, it is said, are odious. Nevertheless, in any discussion on economicprogress, especially since the process of liberalisation began, comparisons are the order

of the day. Comparisons of our country are generally made with China. While makingsuch comparisons the central issue is forgotten that India is a democracy and a vigorous

democracy at that, whereas China has a totalitarian system, even though their economicpolicies might have been liberalised. Sometimes comparisons of India are made with

Singapore also. Singapore is an example of a country with hardly any resources, makingtremendous progress. The progress of Singapore can be traced mainly to the influence of

a visionary leader like Lee Kwan Yew who was also tough in ensuring discipline. OtherSouth East Asian countries which made progress economically did not have the type of

democracy we have.

65 If India is to develop more vigorously than at present, what should be the modelthat should be adopted? We have had visionary leaders who also had the political clout

three times since independence Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi

enjoyed a tremendous political clout and they could have shaped the nation in the waythey wanted. They did initiate measures for development and the results have beenmixed.

66 In the fractured politics of the country today, what we are witnessing is the

weakening of the all India parties and increasing assertion of the regional parties. In sucha political scene, can we expect a national vision to emerge and the vision realised by

effective implementation of policies at the centre and state levels? Prima facie such adevelopment appears to be an impossibility. Nevertheless, we can look at the successes

we have achieved so far and see how they can be replicated. This may lead to a possiblestrategy for better development of the country.

67 If we make a list of our successes since independence, some achievements stand

out. In spite of cross border terrorism we have remained so far as a single nation which isa billion strong and is multilingual as well as multi ethnic. The Green Revolution under

which India achieved self reliance in agriculture and food; the White Revolution underwhich India became the largest producer of milk; The Blue Revolution which will

include missile technology, atomic energy and space are some of our other achievements.The green revolution was achieved because of the necessity of freeing ourselves from

being in a ship to mouth condition. The fortuitous combination of three eminentindividuals C Subramaniam, Dr MS Swaminathan and B Sivaraman was a

coincidence which resulted in the political leadership providing the broad directionsfollowed by effective technical and administrative action for realising the green

revolution.

68 The white revolution owes its success to two visionaries namely TribhuvandasPatel and Dr V Kurien who had dedicated their lives to the development of the dairy

sector, through the cooperatives. The blue revolution owes its success to the governmentsperception about the strategic importance of atomic energy, space and missile technology

and the relative freedom and flexibility provided to the scientists and technocrats who ran

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these departments compared to the rest of the bureaucracy. Nevertheless these successes

form only a patchy record against the all round economic development achieved bycountries like China or Singapore.

69 Their overall success is because of an overarching vision for the nation articulated

by leaders like Lee Kwan Yew or Deng Xiao Ping. India is not likely to have suchleaders. So, the articulation of the vision has to come from eminent individuals who are

concerned about the progress of the country. Dr Abdul Kalam has given such a vision tothe country when he suggested that by the year 2020, India should become a developed

country. He has also indicated that he would be going round the country, talking to atleast one lakh high school and college students to spread this idea. After spending a life

time in the service to the nation, Dr Kalam is truly living up to the honour of the BharatRatna conferred on him. The question is how will that vision be realised?

70 The vision can be realised only by consciously promoting what I would call a

network of champions. In every sector there are people who are dedicated and who have

achieved success. For example in the area of medical care we have institutions like theShankar Netralaya of Dr Badrinath at Chennai, LV Prasad Institute at Hyderabad or theArvind Institute at Madurai which have shown how excellent medical care could be made

to reach the poorest of the poor. If successful cases like this can be replicated throughoutthe country by forming a network of champions in one sector, then at least in that sector

there would be nation wide progress. The same concept of network has been successfullydemonstrated in the dairy sector by the NDDB where the Anand experiment has been

reproduced successfully in other parts of the country including Bihar. The advantage offocusing consciously on promoting a network of champions in different sectors is that

this will be in tune with the Indian ethos of supreme individuality on the one hand and thenear impossibility of the political leadership in the context of the fractured politics of

today to provide a direction when it comes to national development. The politicalleadership can still play a part if at least they can provide a vision. Lal Bahadur Shastri

had this vision when he visited Anand and indicated that India should have thousands ofAnands. We can therefore visualise a model where the network of champions would be

encouraged both by the coming together of successful champions in different sectorsthrough media like the Internet and also the patriotic and committed leaders in politics

playing the role of what Lal Bahadur Shastri did in the dairy sector.

71 In the context of the fractured politics today, the question is whether it will bepossible to achieve this network of champions on a nation wide basis. Such network may

be more easily possible in the states. The Prime Minister while inaugurating the IndianSchool of Business in Hyderabad said that he would welcome a healthy competition

among the states. Perhaps such a competition based on a network of champions maytrigger India on to a new model for rapid and all round development which has not been

thought of so far.

*****