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THE TURN OF THE TORTOISE

India might become less corrupt as it becomes wealthier

By Commentary

An interesting hypothesis has been put forward that societies often get more corrupt as they start on the growth curve, but clean up their act once prosperity reaches a level where the majority in a society decide that tackling corruption is important. The countries that have the best scores (least corrupt) in the Corruption Perceptions Index compiled by Transparency International happen to be the wealthiest ones.

Countries in Scandinavia (with scores of 86 or better on a scale of 0 to 100) and other parts of Western Europe, plus outposts like Singapore (84) and New Zealand (91) are recorded as the least corrupt in the world. In Latin America, which has both rich and poor countries, Chile (the richest country on the continent) has the best corruption score (73), while Paraguay, Honduras and Nicaragua have the worst (going down to as low as 24).

The BRICS countries offer a mixed picture. Brazil (with a corruption score of 43) is richer than China (40 in 2013, and only 36 in 2014), which until the latest year used to have a better score than its poorer neighbour India. Russia, which is closer to Brazil on per capita income, scores only 27 and is the outlier, possibly because of its oligarchy-driven system, while South Africa, which has gained a reputation for political venality even as its economic performance dips, has seen its corruption score drop over almost a decade from 51 to 44.

In India’s case, its corruption score improved over the years, from a miserable 27 in 2002 to 35 in 2007. The score then dropped during the years of scandal, to 31 in 2011, but has moved up since to 38 in 2014—a score that places it in league with noticeably better-off countries like Peru and Thailand.

In India’s case, its corruption score improved over the years, from a miserable 27 in 2002 to 35 in 2007.

Despite visible variations in the pattern, the hypothesis put forward by Vivek H. Dehejia of Carleton University is that corruption follows a trajectory somewhat similar to the trend that the economist Simon Kuznets postulated for inequality. It increases in an economy up to a certain stage of development, then levels off and eventually comes down as incomes rise beyond a threshold.

The Kuznets thesis on income inequality has come under question in recent years, because some of the most advanced countries have seen inequality of income and wealth rise sharply. But in the case of corruption, it is undeniable that the best corruption scores are for the richest countries and the worst are mostly for the poorest—Somalia, Afghanistan, Sudan (all below 15). Indonesia in its worst days had a corruption score of 19 or less, but has since improved to 34. Bangladesh, emerging as a success story that in many ways outshines India, has seen its score jump from 12 in 2003 to 25 in 2014. The only poor country with a score better than 60 is Bhutan, and there is no rich country with a score worse than 40 (Italy and Greece are at 43). The moral of the numbers: wealth and low levels of corruption go together. But which is the cause and which the effect? Or are they mutually reinforcing?

We need to understand the social context, in terms of the forces and processes that get unleashed as development takes place and incomes rise.

One is urbanisation, which for India is expected to accelerate in the next three decades. Urban voters in India are less likely to vote along identity lines than their rural counterparts; in Delhi, for instance, state elections in a predominantly urban state feature issues like women’s safety and corruption, clean air and reliable power supply, proper public transport and better medical care, whereas most voters in a poor, predominantly rural state like Bihar tend to vote along the lines of caste and religious community. The party that swept the Delhi state elections in early 2015 promised free wi-fi, but also free water and subsidized electricity—testifying to the abiding attraction of government freebies. Still, it was different from identity politics.

Urban voters in India are less likely to vote along identity lines than their rural counterparts.

A second and related development is, of course, the growth of the middle class, as Habermas outlined. By most accounts, India’s middle class and neo-middle class are reaching a size, especially in urban areas, that could bring about a sea change in the nature and responsiveness of administration. Also, some 40% of parliamentary constituencies now have a significant urban voter segment, and the middle class in cities and towns has given birth to a more vocal public sphere, through a noisier media and an active civil society.

The political class ignores these trends at its peril. As the thoughtful parliamentarian BJ Panda of Odisha’s Biju Janata Dal has argued when talking of the gilded age and the passage to the Progressive Era, India’s own Progressive Era is still some way off. But Narendra Modi swept into power in 2014 on the twin promises of good governance and development—promises that found resonance particularly with the young.

Without waiting for the long-term play of social and economic forces, are there shorter-term solutions to corruption?

The answer is of course yes, and technology provides some of them—especially when it comes to the widespread problem of petty corruption, which throws grit into the government–citizen interface. The corruption isn’t really “petty”, because the government spends many hundreds of thousands of crores on a variety of income transfer schemes—food subsidy, fertiliser subsidy, old-age pension, widows’ pension, kerosene and cooking gas subsidy, free meals for schoolchildren and free medical insurance.

It is widely recognised that much of the money in some of these schemes is misdirected or lost in transit, so to speak, or subject to such heavy overheads that the intended beneficiary gets only a minuscule part of the money the government spends. Rajiv Gandhi famously put the figure at 15%.

West Bengal’s food minister Jyotipriyo Mullick claimed in late 2014 that he had eliminated 19 million bogus ration cards—in a state that according to the 2011 Census had all of 20 million households! The potential saving in expenditure: Rs3000 crore. Bogus cards don’t get created by accident, and leakages are usually designed to feed the bottom rungs of different political machines. Kerosene leakage and its diversion to adulterate petrol and diesel cannot really be an ‘unorganized’ business; it needs political protection. So there are substantial vested interests involved.

The great white hope on the technology front is said to be the Aadhaar programme.

In theory, this has the merit of enabling cash transfers to replace existing programmes that involve costly duplication of distribution systems, avoiding the distortion of product and factor markets, and reducing overheads and thereby saving the government a ton of money at a time when the fiscal deficit is bloated. It also helps to tackle partially the problem of mis-targeting through wrong selection of beneficiaries.

Meanwhile, other IT-enabled solutions (for delivering ration cards, driving licences and passports, paying taxes and getting easy access to property records, for instance) are making processes simpler, quicker and more transparent, thus making a noticeable difference to the government–citizen interface. The computerisation of railway reservations made a dramatic difference to the ease of booking a seat or berth for a journey, and also cut out rampant corruption involving ‘touts’. However, driving licences are even now not issued to only those who pass a test, as Abhijit Banerjee and Esther Duflo show.

India is in a halfway house. Corruption had caught the system in a maelstrom, enmeshing what was a rapidly growing economy and testing the political class, challenging it to devise new rules for the system. Until the results of the Delhi state elections in December of 2013, and then the Lok Sabha polls of 2014, the political class did not seem to recognize that the old way of doing business was no longer sustainable.

But recent electoral success has gone to those who could claim a clean record without being seriously challenged. While they would be naive who believe that all corruption will end, the risk—reward equation has changed, and could change some more. Has a tipping point been reached? Perhaps not yet. But even allowing for the birth and power of home-grown oligarchs, the system is moving in the broad direction of positive change and not descending into a Russian-style kleptocracy that overrides all institutional checks. After four years of almost endless scandal, that is something to be grateful for.

Excerpted with permission from The Turn of the Tortoise: The Challenge and Promise of India’s Future, TN Ninan, Allen Lane.

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