India Reckoning: Rewards and Discontents of Democracy by Bimal Jalan

Author:Bimal Jalan [Jalan, Bimal]
Language: eng
Format: epub
ISBN: 9789354351341
Google: 9vDRzgEACAAJ
Publisher: Bloomsbury
Published: 2021-09-15T22:03:11+00:00

Demand-Side Measures

The demand for corruption has two components. The most pervasive and ‘retail’ component consists of the demand generated by members of the public who require various kinds of permissions or licences which are necessary to carry on with the ordinary business of life. Surveys done by the Public Affairs Centre in India some years ago have provided telling statistics about the extent of retail corruption in India. According to these surveys, every fourth person in one of the large cities in India ends up paying a bribe when dealing with agencies such as those for urban development, electricity, and municipal services. In another large city, it is commonly believed that every person who has to deal with the income tax department or any other tax agency has to pay a bribe even to get a confirmation that tax has actually been paid!

The other component of the demand for corruption is the ‘wholesale’ component, which is selective and generated by a few corporates (including some large business houses) to take advantage of a restrictive practice or price control for their own pecuniary benefit. This component was most conspicuous during the industrial licensing and control era, when there were numerous controls on output, distribution, and pricing. A well-known example of such comprehensive controls pertains to iron and steel in the 1960s and 1970s. These controls were so detailed that every stage of production and movement of all categories of steel was subject to inspection by the relevant government agency. Prices at each stage of transactions from the factory to the retail point were prescribed by the government. An unintended consequence of this system of controls was a proliferation in the demand for corruption by all producers, traders, and consumers of steel at various stages (for example, for the procurement, movement, or pricing of a consignment). A similar system prevailed in all imports and foreign exchange transactions. With the liberalization of the economy and the abolition of various kinds of licensing and pricing controls in the 1990s, the demand for wholesale corruption of this kind was reduced, but not entirely eliminated. There is still a long way to go.

While the policies for licensing, price controls, imports, and distribution were liberalized in the 1990s, the number of clearances required for setting up industrial plants and agencies involved in giving such clearances had, in fact, increased. The demand for ‘wholesale’ corruption, despite economic reforms, therefore, continued to be strong. Thus, for example, in 2005, in order to set up a medium-sized industrial factory, at least 15 clearances from the state government and 6 or 7 clearances from the Central government were likely to be required. If coal or other inputs, which are under the control of both the state and Central governments, are required, then the project becomes even more complicated. Many of the clearances required are certainly necessary in the public interest; however, the main responsibility for providing such clearances is generally entrusted to non-professionals. The rules are highly complicated and often internally inconsistent.

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