Who needs to be blamed for the spread of corruption in India to stratospheric levels--.
--Is it the British Raj, the License Raj or the Economic Boom following that?
As corruption is the omen dealt under as a sub-branch of Economics, we will try to deal with it step-by-step right from the British Raj till the effects of Liberalization.
Indian economy can broadly be categorized according to three different economic regimes --British Raj, followed by the License raj and finally the Economic Liberalization post 1991.
As we talk about corruption, it will not be wise for us to limit our discussion only within the boundaries of finding the main driving factor that lead to corruption, instead let us broaden our horizon into a deep retrospection of each of these three Economic parameters.
The British Raj---
As we begin our discussion with the British Raj, India was a stark victim ofcolonization and domination. We were deprived of almost all basic rights as a citizen in out own nation. And to add to the misery of the Indians, the colonial power deprived the Indians of their own raw materials, this flooding Indian markets with their own finished products. indians were given low post, as the top-notch positions wer held by the British officials. Corruption was not as much rampart as it is today, as the Indians held low posts and the Britishers were against corruption, Moreover, they were micro-managed, hence reducing the least possible chances of corruption
But to add to it and an entirely different view is that the colonial power almost legalized bribery in the Indian society. As quoted by a company official making proposals to an Indian engineer--
--thus while fact is a government official accepting bribes or favors rendered in his official capacity was as legal as the unwritten British Constitution, regardless of the stringent punishment provided against it in the written law.
Not only that, even marrying off a daughter to a government employee the parents always enquired openly about the “outside income” of the prospective bridegroom. Historians specialising in British rule in India are aware of how East India Company agents worked their way into the hearts and minds of Moghul kings and other sovereign potentates throughout the country by liberally bribing the courtiers.
Thus, “Keep the officers and men happy to win their loyalty” was their motto. What is called bribe today was then called a “fee” or “commission”, and was given openly across the table and not, as now, under it.
--the above policy proved to be a Boon for the British Raj which sustained them through the Sepoy Mutiny and even the World War II, while bane for the indian society is well accessed. In the Sepoy Mutiny of 1857, the British rulers could not have succeeded in crushing the Mutiny without the active support of their loyal Indian employees.
The strategy was applied manifold during World War II when all that the Viceroy had to do was to print currency notes in unlimited numbers and leave it to the Indians to spend them on the “War Effort.”
This War Effort was mainly the construction of all infrastructure facilities across the British empire in India to sustain them in the WWII. Indians worked at break-neck speeds to build these facilities to feed the War machine that had developed on the Western front.
Bribery was not an issue at all--so far it was able to content the government employees with small salaries (the average salary of an average governemnt Indian employee in the mid-19th Century was Rs 2)
Post Independence--
License Raj
The Independence and the consequent partition of India in 1947 saw a plethora of changes in the economic front. Socialist infrastrcuture was the base of the till-then poverty-stricken Indian economy which was trying hard to come out of the British Raj by purging out the ill-effects.
But this was not so easy. The British Raj had almost smashed the Indian economy to the ground level, while Partition and the mass genocide that followed it opened the floodgates of corruption on a massive scale.
Refugee issues, Pakistan, China war were some of the biggest issues. Coupled with these rehabilitation efforts, providing temporary camps and permanent townships, cleaning vast tracts of forest land, rebuilding swathes of marshes to make them cultivable, expansion of health education, transport and other facilities.
---All these invariably provided impetus to corruption, where one involved in the refugee relief work was a shortest possible way to become rich and gain wealth.
If World War II bred large-scale corruption during the British rule, the aftermath of Partition institutionalized and formalised it. The same administration which had ‘delivered' results during the War came in handy for repeating and multiplying its ingenious practices
India was thus not able to harp the benefits, even to the smallest amount that Hong Kong manipulated to insurmountable levels, staying under the same British raj and once ruled from Calcutta.
Eventually came the License Raj (Nehru;s policy) where industries were heavily clamped down, restricted the private players and thus they had to resort to corrupt ways to obtain licences.
Thus a mixed and controlled economy played the role towards leading India to corruption
India gradually became more and more corrupt-stricken and economically weak.Also, Skewed tax structure introduced post independence, led to tax evasion especially high earners.
Some of the factors that screwed up the License raj eventually giving rise to corruption were--
1. In the late 1980s India's political system was imploding. Prime Minister Rajiv Gandhi was involved in a series of troubles - Bofors scandal, IPKF misadventure, Shah Bano case that eventually led to his ousting in 1989. What followed were two more terrible leaders who were as unstable as they were incompetent
2. Now, India is a consumption based economy unlike China (export based) which grossly depends on local markets. So there are three factors playing an interconnected role here..---
3. Primary buyer---, we depend on West Asia for our oil, South Africa for our gold, US for our technology, South East Asia for vegetable oil
Primary Sellers--Mainly Soviet Union, which was crampled due to its Dissolution. . In late 1980s, Soviet Union started to crack and by 1991they were split into 15 nations (Russia, Kazakhstan, Ukraine, etc). Now, India had a major problem because our primary buyer was in turmoil. Exports were down significantly
4. With the shrinkage of exports, US dollars were shrinking as well, amking us difficult to buy anything from the aforesaid nations.
5. To top it all, The Gulf war and the 1990s Oil Price Shock lead to the destruction of our oil imports and the prices shot up substantially - doubling in a few months--again giving rise to more corruption.
We were running out of dollars to buy essential items like crude oil and food from the rest of the world. This is termed a "Balance of Payments Crisis--again giving rise to corruption.
India thus took loans from the IMF, paying for its gold reserves on the basis of an emergency Loan. Thus even the gold stock of India was moving out of India. ---this gave rise to GOld smuggling, invariably accentuating corruption.
Though these Socialist based corruption were aimed at aleviating poverty, it never actually happened. India faces huge food shortages and lead to massive food shortages in many parts of the country.
Finally the Economic Liberalization in 1991--
Rapid shift in policies based on the following--
1. Socialism to Capitalism
2. Import restriction and Export Liberalization
3. Devaluating rupee a couple of times
4. Industrial de-licensing followed shortly afterward
5. The MRTP Act (that protected businesses from monopolies) was reformed and India could finally be on the path to producing competitive and productive industries
6. Gradual reduction of import duties followed, allowing foreign investments to slowly start flowing in. More clearance was given to capital goods
7. Slowly, taxes were lowered (income and corporate taxes) and Foreign Technology Agreements started getting signed
8. cities having populations less than a million even did not need a Government permit, for a new start-up
Liberalization of industries, accepting foreign technology, free movement of goods and capitals, foreign investments were allowed in large numbers.
But these did not however were able to put a stop to the prevalent corruption in the society, which took a turn to a different level. Stratospheric levels of real estate, education, items of daily consumption made the actual ideals of a Democratic polity invalid. This is evident as we take a look into the latest amount incurred in the Elections. Political parties and administration are examples which speaks much of the extent of corruption and black money in our country. The unending list of scams bears a testimony to the above fact.
The transition of India from an agrarian based economy rapidly to a service led economy has purged in all the related ill-effetcs of corruption.
And thus agriculture is the worst affected sector for corruption--
This is mainly because imbalance in economic and political power in hands of farmers of developed and developing countries. In developed countries, commercial and capitalistic agriculture is in place which is owned by influential Agri corporations. They easily influence policies of WTO and extract a better deal for themselves at cost of farmers of developing world.
Farming in developing world is subsistence and supports large number of poor people. With globalization there has been high fluctuation in commodity prices which put them in massive risk. This is particularly true for cash crops like Cotton and Sugarcane. Recent crises in both crops indicate towards this conclusively.
---With all in a gist, although India is still not able to purge out the ill-effects of corruption, which is a Bane to its economy from 2500 years now, it has accentuated to stratospheric levels with the Economic Liberalization post 1991.
The process of reforms was initiated to unshackle the economy to lead to higher growth and also remove the impediments of licence -permit raj that was leading to corruption
The increase of GDP at one hand has led to the greater distortion of the economy of India on the other.
And here the main role is played by politics. the economy of India is used as a device to garner as much wealth as possible, also increasing the gap of the economic disparity.Worse still, businessmen are increasingly taking to politics (the reverse is also true, politicians are also becoming businessmen) and today many are adorning the portals of Parliament or state assemblies. Many of them are using their political clout to corner economic benefits for themselves.
With liberalization, businessman are playing an important role in accentuating the GDP while elaborating their own profits, thereby harming the economy. Secondly, we have to change the way that we elect our public representatives. This aggregates at a macro nation-wide level to create more distortions because parties come to power on the basis of minority number of votes.
Way out--
1. The way out is to change the electoral system. --like the double electoral system in France or the proportional representation list system in germany. But these has to be well-tested before implementing in the Indian democracy.
2. RTI and technological innovations are doing much justice to fight corruption .
3. Economic reforms without political reforms will lead to further distortions in the political economy of the country. So the need for political reforms is the need of the hour. Like the fight for the Lokpal bill.
We can win this war against corruption but for that to happen we have to change our attitude and strive for transparency in our day to day dealings. We should pressurize our political class to accept our demand to come under RTI. Transparency in political funding is sine qua non for this fight against corruption to succeed. We have to create a new environment through better education because education and awareness are the most effective weapons in our fight against corruption.
--Is it the British Raj, the License Raj or the Economic Boom following that?
As corruption is the omen dealt under as a sub-branch of Economics, we will try to deal with it step-by-step right from the British Raj till the effects of Liberalization.
Indian economy can broadly be categorized according to three different economic regimes --British Raj, followed by the License raj and finally the Economic Liberalization post 1991.
As we talk about corruption, it will not be wise for us to limit our discussion only within the boundaries of finding the main driving factor that lead to corruption, instead let us broaden our horizon into a deep retrospection of each of these three Economic parameters.
The British Raj---
As we begin our discussion with the British Raj, India was a stark victim ofcolonization and domination. We were deprived of almost all basic rights as a citizen in out own nation. And to add to the misery of the Indians, the colonial power deprived the Indians of their own raw materials, this flooding Indian markets with their own finished products. indians were given low post, as the top-notch positions wer held by the British officials. Corruption was not as much rampart as it is today, as the Indians held low posts and the Britishers were against corruption, Moreover, they were micro-managed, hence reducing the least possible chances of corruption
But to add to it and an entirely different view is that the colonial power almost legalized bribery in the Indian society. As quoted by a company official making proposals to an Indian engineer--
I know normally a contractor pays five per cent as commission to the engineer supervising his work but this is a big project and it is difficult to calculate each engineer's share. You being the seniormost among them, I shall bring you on the first of every month a packet containing an amount equal to twice the salary of each member of the engineering staff here and you can distribute it among them.”
--thus while fact is a government official accepting bribes or favors rendered in his official capacity was as legal as the unwritten British Constitution, regardless of the stringent punishment provided against it in the written law.
Not only that, even marrying off a daughter to a government employee the parents always enquired openly about the “outside income” of the prospective bridegroom. Historians specialising in British rule in India are aware of how East India Company agents worked their way into the hearts and minds of Moghul kings and other sovereign potentates throughout the country by liberally bribing the courtiers.
Thus, “Keep the officers and men happy to win their loyalty” was their motto. What is called bribe today was then called a “fee” or “commission”, and was given openly across the table and not, as now, under it.
--the above policy proved to be a Boon for the British Raj which sustained them through the Sepoy Mutiny and even the World War II, while bane for the indian society is well accessed. In the Sepoy Mutiny of 1857, the British rulers could not have succeeded in crushing the Mutiny without the active support of their loyal Indian employees.
The strategy was applied manifold during World War II when all that the Viceroy had to do was to print currency notes in unlimited numbers and leave it to the Indians to spend them on the “War Effort.”
This War Effort was mainly the construction of all infrastructure facilities across the British empire in India to sustain them in the WWII. Indians worked at break-neck speeds to build these facilities to feed the War machine that had developed on the Western front.
Bribery was not an issue at all--so far it was able to content the government employees with small salaries (the average salary of an average governemnt Indian employee in the mid-19th Century was Rs 2)
Post Independence--
License Raj
The Independence and the consequent partition of India in 1947 saw a plethora of changes in the economic front. Socialist infrastrcuture was the base of the till-then poverty-stricken Indian economy which was trying hard to come out of the British Raj by purging out the ill-effects.
But this was not so easy. The British Raj had almost smashed the Indian economy to the ground level, while Partition and the mass genocide that followed it opened the floodgates of corruption on a massive scale.
Refugee issues, Pakistan, China war were some of the biggest issues. Coupled with these rehabilitation efforts, providing temporary camps and permanent townships, cleaning vast tracts of forest land, rebuilding swathes of marshes to make them cultivable, expansion of health education, transport and other facilities.
---All these invariably provided impetus to corruption, where one involved in the refugee relief work was a shortest possible way to become rich and gain wealth.
If World War II bred large-scale corruption during the British rule, the aftermath of Partition institutionalized and formalised it. The same administration which had ‘delivered' results during the War came in handy for repeating and multiplying its ingenious practices
India was thus not able to harp the benefits, even to the smallest amount that Hong Kong manipulated to insurmountable levels, staying under the same British raj and once ruled from Calcutta.
Eventually came the License Raj (Nehru;s policy) where industries were heavily clamped down, restricted the private players and thus they had to resort to corrupt ways to obtain licences.
Thus a mixed and controlled economy played the role towards leading India to corruption
India gradually became more and more corrupt-stricken and economically weak.Also, Skewed tax structure introduced post independence, led to tax evasion especially high earners.
Some of the factors that screwed up the License raj eventually giving rise to corruption were--
1. In the late 1980s India's political system was imploding. Prime Minister Rajiv Gandhi was involved in a series of troubles - Bofors scandal, IPKF misadventure, Shah Bano case that eventually led to his ousting in 1989. What followed were two more terrible leaders who were as unstable as they were incompetent
2. Now, India is a consumption based economy unlike China (export based) which grossly depends on local markets. So there are three factors playing an interconnected role here..---
3. Primary buyer---, we depend on West Asia for our oil, South Africa for our gold, US for our technology, South East Asia for vegetable oil
Primary Sellers--Mainly Soviet Union, which was crampled due to its Dissolution. . In late 1980s, Soviet Union started to crack and by 1991they were split into 15 nations (Russia, Kazakhstan, Ukraine, etc). Now, India had a major problem because our primary buyer was in turmoil. Exports were down significantly
4. With the shrinkage of exports, US dollars were shrinking as well, amking us difficult to buy anything from the aforesaid nations.
5. To top it all, The Gulf war and the 1990s Oil Price Shock lead to the destruction of our oil imports and the prices shot up substantially - doubling in a few months--again giving rise to more corruption.
We were running out of dollars to buy essential items like crude oil and food from the rest of the world. This is termed a "Balance of Payments Crisis--again giving rise to corruption.
India thus took loans from the IMF, paying for its gold reserves on the basis of an emergency Loan. Thus even the gold stock of India was moving out of India. ---this gave rise to GOld smuggling, invariably accentuating corruption.
Though these Socialist based corruption were aimed at aleviating poverty, it never actually happened. India faces huge food shortages and lead to massive food shortages in many parts of the country.
Finally the Economic Liberalization in 1991--
Rapid shift in policies based on the following--
1. Socialism to Capitalism
2. Import restriction and Export Liberalization
3. Devaluating rupee a couple of times
4. Industrial de-licensing followed shortly afterward
5. The MRTP Act (that protected businesses from monopolies) was reformed and India could finally be on the path to producing competitive and productive industries
6. Gradual reduction of import duties followed, allowing foreign investments to slowly start flowing in. More clearance was given to capital goods
7. Slowly, taxes were lowered (income and corporate taxes) and Foreign Technology Agreements started getting signed
8. cities having populations less than a million even did not need a Government permit, for a new start-up
Liberalization of industries, accepting foreign technology, free movement of goods and capitals, foreign investments were allowed in large numbers.
But these did not however were able to put a stop to the prevalent corruption in the society, which took a turn to a different level. Stratospheric levels of real estate, education, items of daily consumption made the actual ideals of a Democratic polity invalid. This is evident as we take a look into the latest amount incurred in the Elections. Political parties and administration are examples which speaks much of the extent of corruption and black money in our country. The unending list of scams bears a testimony to the above fact.
The transition of India from an agrarian based economy rapidly to a service led economy has purged in all the related ill-effetcs of corruption.
And thus agriculture is the worst affected sector for corruption--
This is mainly because imbalance in economic and political power in hands of farmers of developed and developing countries. In developed countries, commercial and capitalistic agriculture is in place which is owned by influential Agri corporations. They easily influence policies of WTO and extract a better deal for themselves at cost of farmers of developing world.
Farming in developing world is subsistence and supports large number of poor people. With globalization there has been high fluctuation in commodity prices which put them in massive risk. This is particularly true for cash crops like Cotton and Sugarcane. Recent crises in both crops indicate towards this conclusively.
---With all in a gist, although India is still not able to purge out the ill-effects of corruption, which is a Bane to its economy from 2500 years now, it has accentuated to stratospheric levels with the Economic Liberalization post 1991.
The process of reforms was initiated to unshackle the economy to lead to higher growth and also remove the impediments of licence -permit raj that was leading to corruption
The increase of GDP at one hand has led to the greater distortion of the economy of India on the other.
And here the main role is played by politics. the economy of India is used as a device to garner as much wealth as possible, also increasing the gap of the economic disparity.Worse still, businessmen are increasingly taking to politics (the reverse is also true, politicians are also becoming businessmen) and today many are adorning the portals of Parliament or state assemblies. Many of them are using their political clout to corner economic benefits for themselves.
With liberalization, businessman are playing an important role in accentuating the GDP while elaborating their own profits, thereby harming the economy. Secondly, we have to change the way that we elect our public representatives. This aggregates at a macro nation-wide level to create more distortions because parties come to power on the basis of minority number of votes.
Way out--
1. The way out is to change the electoral system. --like the double electoral system in France or the proportional representation list system in germany. But these has to be well-tested before implementing in the Indian democracy.
2. RTI and technological innovations are doing much justice to fight corruption .
3. Economic reforms without political reforms will lead to further distortions in the political economy of the country. So the need for political reforms is the need of the hour. Like the fight for the Lokpal bill.
We can win this war against corruption but for that to happen we have to change our attitude and strive for transparency in our day to day dealings. We should pressurize our political class to accept our demand to come under RTI. Transparency in political funding is sine qua non for this fight against corruption to succeed. We have to create a new environment through better education because education and awareness are the most effective weapons in our fight against corruption.
Chanakya has rightly said---It is as difficult to find out whether an officer is dishonest or otherwise as it is to figure out whether a fish in a tank drank water or not."
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