HERE is an intimate link between widespread corruption and continued deceleration in Punjab’s rate of economic growth. Corruption is responsible for financial bankruptcy of the government and consequently its incapability to intervene in critical areas. At the same time corrupt officials do not respond to the situation the way it is required. The mental incapacity adds to the apathetic attitude of the official human resources towards societal needs. Moreover, whatever little capacity exists, the corrupt officials derail the efforts for positive improvements in favour of making money even in distress situations.This has been happening in the state for nearly two decades. The exposure of recruitment scandals of the PPSC, departmental committees and in the posting and transfer of officials of departments concerned with execution of various public works has focused the issue of corruption in Punjab. The prime focus of the newspaper reporting remains on the bribes of hefty amounts accepted by the persons concerned. The persons entrusted with responsibility of selecting officials on merit have ignored it in a brazen manner.
Prior to the exposure of the recruitment scandals in the media, several stories were circulating among the people about the price tags for various vacancies and the key persons holding public offices allowing their family members to negotiate deals through touts. The media exposure following unearthening of some scandals by vigilance section of the Punjab Police has confirmed the public perception that the public offices are grossly misused by the power that be. Instead of merit it is hefty bribe which has been adopted as criterion of selections.
This has not only discredited the system of recruitment but has subverted the system of academic merit and excellence in selections. Several individuals got placement on considerations other than well defined merit. Such persons neither have the capacity nor the motivation to function as officials to provide efficient and transparent service to society in its endeavour to progress towards prosperity and humane existence. Persons selected on the strength of money become willing participants for breeding corruption.
Primary source of bribery is black/unaccounted money and wealth acquired through illegal means. Black economy is generated by income in the form of rent, interest and profit. Thus, it is property/wealth in the farm land, capital/enterprises and business from where black money originates. Bribe is offered by those who have command over sizeable property and wealth. Sections deprived of the command of large property have little capacity to pay bribe. Such sections live largely on wage income, including salaries, they are not participant in black economy. Bribe is one of the causes as well as effects of black economy.
Since black economy is largely defined as income from sources which are not reported to the tax authorities, therefore, it is unrecorded and unaccounted income. This form of corruption is very important for the governments. This reduces the tax compliance and the tax collection and thereby results in a fiscal crisis. The campaign of Captain Amarinder Singh against recruitment scandals is likely to be short-lived and less rewarding if it is not extended to achieve better tax compliance. In a recently held discussion on “White Paper on State Finances” a very senior functionary of the previous government stated that annual revenue loss to Punjab on account of tax evasion stood at Rs 2000 crore. This was rectified by a senior functionary of the present government by stating that this loss stood at Rs 4000 crore. Thus, by mere plugging of tax evasion, the fiscal crisis of the Punjab Government can be overcome.
The widespread system of bribery and tax evasion is an integral part of the same phenomenon. Officials accepting money and gifts from the potential tax payers connive in the process of tax evasion. In fact the money/gifts received by the officials is a fee for allowing tax evasion several times more than the money and value of gifts accepted by them. Prof Arun Kumar of Jawaharlal Nehru University, New Delhi, the author of The Black Economy in India (Penguin, 1999) holds the triad responsible for it. This includes the businessmen, the politicians and the bureaucrats. “Even if one of the three is missing there can be no generation of black income.”
Judiciary is treated as a part of the bureaucracy. Prof Arun Kumar states that “if bureaucracy refuses to carry out illegal acts or judiciary acts firmly when cases are brought before it, illegality cannot become systemic — it would remain sporadic.” Corruption being a joint product of politicians, bureaucrats (and judiciary) and businessmen (including industrialists and landlords), it cannot be fought by attacking only one of the triad. The other two are likely to come to the rescue of the one under attack. The fight against corruption would be sustainable if all the three elements are attacked in unison. It is rightly being pointed by top journalists (led by Mr Hari Jaisingh) that investigation of case of persons involved in corrupt practices be allowed to be reported in the press so that whole gamut of the dirty game is exposed and punished.
Corruption and black economy have derailed the normal development activity of the country. The flow of revenue to different layers of the governments has lagged much behind the expenditure. Consequently governments have gone bankrupt. The Union Government, state governments and local governments are facing fiscal deficit on an unprecedented scale. This crisis began to build up in 1970s and engulfed the governments in 1980s and assumed alarming proportion with no solution in sight in 1990s.
The Punjab Government did not face any fiscal crisis till early years of 1980s but got involved nearly in debt trap by the end of 1990s. The clue to this crisis can be found in burgeoning size and proportion of black economy in India. The size of black economy was merely 3.0 per cent of GDP in mid 1950s which increased to 7 per cent by the end of 1960s and to 20 per cent by 1981. Since growth in black economy got a big jump in 1970s the debate on this also began during this time. The Wanchoo Committee (1972) gave some estimates of the tax evasion as a cause of this. But in spite of the debate this phenomenon remained unchecked and the size of black economy jumped to 35 per cent of the GDP in 1990-91 and 40 per cent in 1995-96.
With 40 per cent as the size of black economy the loss of tax revenue at a given rate of taxes was estimated to be Rs 2,00,000 crore (Arun Kumar). If this amount is collected effectively the fiscal crisis of the government would just disappear. The lack of adequate resources has led to postponing of certain projects causing escalating costs and massive borrowing as a convenient method to finance government spending. This made governments highly indebted and a large share of its tax revenue (nearly one-third) going for debt servicing.
Along with large tax evasion, there has been a tendency to misuse and loot public sector undertakings. According to one estimate public sector lost Rs 30,000 crore through corruption in 1990-91. This resulted in reduction of the rate of profit to 5 per cent. Had this not happened, the rate of profit of public sector would have been 30 per cent. In fact, scandal after scandal had surfaced in India and culprits remaining unpunished has given deep roots to corruption and plundering of public resources for private personal benefits. The scandal of PUNWIRE is a glaring example in Punjab.
The corruption/black money has paralysed the system. The persons employed in governments remain either non-functional or disinterested in work unless it is personally rewarding to them. Public money even for development is supposed to be siphoned off and wasted. As mentioned by Rajiv Gandhi, out of every rupee allotted for rural development only 15 paise reached the field.
Some of the intellectuals justify/rationalise corruption as a global phenomenon and term it as a lubricant of the system. Ultimately, they have come around the idea that since nothing works in the state sector, privatisation is the only solution. They fail to understand that the state has to function and perform at least at some minimum level and particularly for people living below poverty line. There is no substitute to efficient and effective working of the state sector in these areas and corruption has no place there.
At a macro level the widespread corruption and black economy is transferring resources from common man and the government sector (tax revenue) to holders of black money. The black money accounting for 40 per cent or more of the GDP is being used for nonproductive activities. Various studies point out that the largest proportion of this money is invested in real estate and other speculative activities such as trading of shares. Another large proportion is taking the form of outflow of funds abroad in Swiss banks or via NRIs in the advanced countries. The remaining part of the black money is spent for ostentatious consumption. The construction of palatial houses for residential purposes, purchase of luxury items,
mega-functions celebrating birthday and marriage parties can be placed in this category. These functions are a medium of vulgar display of ill-gotten money. Everything has been happening in full knowledge of those who are supposed to check corruption. This has created a consumer culture among a section of population which is devoid of any moral value, ethics or even national pride. They have become wheeler and dealers in the game of money by any means. They are also seducing ordinary people to a mode of life based on consumer culture which is unsustainable in this country.
Thus, corruption/black money has blocked a large portion of country’s resources (40 per cent) which are used for unproductive purposes. This has also created a non-work culture in government departments and a class of people leading luxurious life and promoting unsustainable consumer culture. Corruption is promoting immorality, lack of ethics and absence of positive value system. It is not only paralysing working of the government, derailing development activities but also creating security risks for the country.
A fight, therefore, against corruption is a fight for making the government to work and perform. It is an effort to put development process back on rails, establish rule of law, create positive values so essential for our country to exist as a proud and secure nation. This fight deserves the support of right thinking people in all parties and in every corner of this country. A good beginning has been made in Punjab and it needs to be sustained. A Delhi-based intellectual of Oriya origin remarked that things are going on the same way elsewhere in India also but Punjab has shown the way. But this fight would have to break the nexus of corrupt politicians, bureaucrats (including judiciary) and businessmen if it is to sustain. Estimates indicate that hardly 3 per cent of the total population is in command of black money and indulges in corruption. A genuine
campaign against corruption is bound to get response of the majority of the population. It would also allow the basic rule of democratic governance to prevail that a meritorious person born in a poor family has a chance to move to the top position.
Further the sustained campaign against corruption, for acceleration in the rate of economic progress and effective governance would absolve the leadership of the charge that it is backward in outlook. This is a historic task and has to be performed for modern transition of society even though within capitalist framework. Any leadership performing this task would synchronise itself with the dynamic and forward outlook of the society. The task is not easy because the elements to be fought are well entrenched in the corridors of power. But this task has to be accomplished from the perspective of society. A beginning has been made. Its sustenance would depend on the public support and vigilance which seem to be emerging through media and legitimacy at the
hustings.