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Historical Development of Corruption C

orruption has always been in existence, in one form or another. As far back as the fourth century BCE, Kautiliya, a Sanskirt scholar,wrote, Just as it is not possible not to taste honey (or poison) placed on the surface of the tongue, even so it is not possible for one dealing with the money of the king not to taste the money in however small a quantity. Just as fish moving inside water cannot be known when drinking water, even so officers appointed for carrying out works cannot be known when appropriating money. Kautiliya points out the ways in which employees can be involved in corruption and prescribes the modus operandi to be adopted by the king to deal with corruption and make appointments.

Forms of Corruption
Most reports and studies emphasise that the country continues to face major governance challenges. There is a lack of transparency in governance rules, procedures are complicated and the bureaucracy enjoys broad discretionary power. Nepotism is embedded in the civil service, journalists are harassed for reporting on corruption and recent years have seen an increase in off-the-books campaign finance arrangements. The country is further characterised by rigid bureaucratic structures, an exclusivist process of decision-making, overly centralised government, poorly-paid civil servants and the absence of effective internal control mechanisms. Political corruption and corruption scandals involving high ranking officials and ministers periodically hit the headlines, undermining the legitimacy of democratic processes and citizens trust in public institutions. A recent analysis of reports of bribery demands in India conducted by Trace International was published in January 2009 and provides an overview of the general patterns of corruption in the country. 96 anonymous reports about bribery demands were filed between July 2007 and October 2008 on the organisations Business Registry for International Bribery and extortion (BRIBEline). This is a secure, multilingual online tool for reporting bribe demands worldwide. 91% of the reported bribe demands were requested by a government official, including 33% from national level officials, 30% from the police, and 16% from state or provincial officials. 77% of the reports described bribe demands made for avoiding harm rather than for gaining an advantage. Of those, more than 51% were for the timely delivery of services to which the individual was

already entitled, such as clearing customs or getting a telephone connection. Only 12% of the reported bribe demands were for gaining an advantage.

Bureaucratic corruption
These findings confirm the prevalence of the bureaucratic and administrative forms of corruption that take place at the implementation end of politics, where the public meets public officials. Bureaucratic corruption pervades the Indian administrative system with widespread practices of bribery, nepotism, and misuse of official positions and resources. The Bertelsmann Foundation 2008 report states that India is characterised by a deeply rooted patronage system and pervasive corruption at all levels of the polity and administration.

The 2006 World Bank Enterprise Survey also confirms the prevalence of bureaucratic and administrative corruption in the country. Red tape and wide ranging administrative discretion serve as a pretext for extortion and almost 48% of the firms surveyed expected to pay informal payments to public officials to get things done. Close to 26% of the respondents identified corruption as a major constraint for doing business in the country. Companies also ranked corruption as the fourth most problematic factor for doing business in India in the World Economic Forum Global Competitiveness Report India 2007- 2008, indicating that corruption seriously compromises private sector development in the country.

Political Corruption
The public trust in democratic processes in India is seriously undermined by opaque financing of electoral processes, widespread bribery and other forms of corrupt practices. The 2007 Global Corruption Barometer reveals that political parties are perceived by Indian citizens as one of the sectors most affected by corruption in the country, with a score of 4.6 on a 5 point scale. Freedom House 2008 reports that the electoral system relies on black money obtained by dubious means, including tax evasion. Although politicians are regularly involved in major corruption scandals, investigations are rare and very few politicians and civil servants have been convicted. Circumstantial evidence confirms that practices such as buying votes with bribes or promises, conflicts of interest, or state capture are common in India. In December 2005, 11 members of parliaments were accused of accepting cash for raising specific questions in Lok Sabha sessions and subsequently forced to resign. More recently, a Parliamentary Enquiry Committee was established to look into the alleged cash-for-votes scam during a trust vote that took place in July 2008. Three

parliamentarians displayed wads of currency notes alleging that huge sums were offered to them to save the Manmohan Singh government. The report presented in December 2008 found the evidence unconvincing and recommended further investigations on the role played by the three parliamentarians. The entry of criminals into politics - despite laws requiring public disclosure of candidates assets, criminal records and educational backgrounds is another alarming facet of political corruption in India. According to The Economist, more than a fifth of federal parliament members in 2008 faced criminal charges. Of the 522 members of Indias current parliament, 120 are facing criminal charges; around 40 of these are accused of serious crimes, including murder and rape.

Vulnerable Sectors and Institutions

Public procurement Public procurement is especially vulnerable to corruption in most developing countries. In India, there is a reasonably good framework of rules and procedures for public procurement that requires open tenders available to all qualified firms without discrimination, the use of non-discriminatory tender documents, public bid openings and selection of the most advantageous tenders, taking all factors into consideration. These regulations are apparently poorly enforced, however, as public contracting continues to be marred by major corruption scandals involving high level politicians. In the 2006 World Enterprise survey, close to 24% of respondent firms confirmed they were expected to make a gift or payment to secure a government contract. In addition, companies face different laws in different states, which complicate their operation throughout the country. According to the World Bank Country Procurement Assessment Report 2003, the Indian public procurement system is generally affected by a lack of consistency as well as low credibility and public confidence in the system. Corruption is perceived to be worse at the state level than at the federal level, due to the lack of qualified staff and widespread political interference in state administration. The report further notes that the average bribe to obtain a public contract is estimated at 15% of the contracts value.

Licences and public utilities 52.2% of the firms surveyed by the above-mentioned 2006 World Bank Enterprise survey reported being expected to give gifts to secure an operating licence. Corruption also affects access to public utilities such as water, phone and electricity. Compared to the 2006 edition of the Global Corruption Barometer, most utilities and departments have fared worse in terms of public perception of corruption in 2007. Procedures surrounding access to water and electricity are complicated and cumbersome and firms may be tempted to make facilitation payments to speed up the process.

Close to 40% of the World Bank Enterprise survey reported paying bribes to get an electrical connection and 27% to get a water connection. According to the Global Corruption Report 2008, citizens believe that corruption is on the rise in these sectors.

Tax and customs administration 52.3% of the firms covered by the World Bank Enterprise survey reported being expected to give gifts in meetings with tax officials. In this sector, rules and procedures are extremely cumbersome; giving tax officials wide discretionary powers to interpret the rules. Some are suspected of deliberately stalling administrative procedures to induce facilitation payments. Bribes may be paid for an underassessment of incomes or to obtain penalty reductions or tax refunds. According to the 2005 TI India corruption survey, 20% of the respondents admitted having paid bribes to the tax department, while 60% perceived the department to be corrupt.

The police force The 2007 Global Corruption Barometer identifies the police force as one of the institutions most affected by corruption, with a score of 4.5 on a 5 point scale. The 2005 TI-India corruption survey also ranks the police as the most corrupt public service in India - with 80% of citizens believing that corruption exists in the police force and 77% believing it is on the rise. The 2007 TIIndia/ CMS study indicates that 48% of below poverty line households who interacted with the police claimed to have paid a bribe while 17% used a contact to access police services. Many of them claimed that procedural delays were part of a deliberate strategy to compel citizens to pay bribes. About half of them paid a bribe for ensuring that their complaint could be registered. Examples of corrupt practices among the police have also been identified in a 2006 Marketing and Development Research Associates/Transparency India report on corruption in trucking operations. The study reveals that truck drivers must pay bribes at every stage of their operations, mostly to police forces, to obtain permits, for traffic violations or toll payments. When transporting goods across the country, stoppages by authorities on the pretext of checking documents are frequent. According to truck drivers, 60% of the checkpoints and forced stoppages on roads are for extorting money. Police recruitment is also compromised by practices of nepotism, bribery and political interference.

Until the apex court4 granted the Indian Police Service (IPS) autonomy from political control in 2006, the Minister had powers of transfers and promotion over police chiefs careers. In 2007, in Uttar-Pradesh, an inquiry into fraudulent practices in police recruitment led to the dismissal of 10,000 police officers over alleged irregularities in their recruitment processes As the police - along with the courts - are the public institutions most directly involved in sanctioning and punishing corrupt practices, police corruption seriously undermines the governments anti-corruption efforts. Judicial corruption The Indian court system consists of a supreme court, high courts at state level and subordinate courts at district and local level. According to the Global Corruption Report 2007, the upper judiciary is considered relatively clean, with open court proceedings and free access to prosecution documents, authenticated orders, etc. In the lower justice institutions, corruption is reportedly rampant and systemic. (Please see: 4 The term is mostly found in texts originating in India, where the Apex Court stands for
the Indian Supreme Court. 07).
The Global Corruption Barometer 2007 gives the judiciary a score of 3.8 on a 5 point scale, while 80% of the 2005 TI India CMS studys respondents perceive the judiciary as corrupt. 47% claim to have paid bribes to lawyers or court officials. Court procedures are very slow and complicated, and the court system is severely backlogged and understaffed. This results in delays in the processing of cases, and a loss of confidence in the law and in the justice system. (Freedom House 2008 estimates that there are currently 30 million civil and criminal cases pending). There is also a high level of discretion in the processing of paperwork during trials and multiple points where court officials can misuse their power with impunity. In such contexts, people are tempted to resort to bribes, favours, hospitality or gifts not only to obtain a favourable decision but to move the case through the system and speed up the court proceedings. The independence of the judiciary is guaranteed by the Constitution and India is ranked 26th of 131 countries on indicators of judicial independence in the Global Competitiveness Report 2007-2008. According to the Global Corruption Report 2007, however, there have been recent cases of political interference in judicial decisions involving powerful individuals. In spite of the various legal provisions in place, the appointment of judges is not always free from political interference. The Global Integrity Report 2007 also rates judicial accountability as weak. ( The weakness of the judiciary, the lack of political independence of the police and poor law enforcement contribute to a culture of impunity where few politicians or civil servants are indicted or convicted for corruption.

Regional Patterns
India has a decentralised federal system of government in which state governments possess broad regulatory power. Although corruption is found to be pervasive across all states and public services, several reports indicate important regional variations in the level and impact of corruption. A World Bank and IFC report from 2004 notes that corruption and excessive regulations are cited as major obstacles to business across all India, but that these figures rise respectively to 62% and 64% in the states of Gujarat and Karnataka. ( Both the 2005 and 2007 TI-India corruption studies also point to regional variations in corruption patterns. For example, Himachal Pradesh, Andhra Pradesh and Maharashtra are perceived to experience moderate levels of corruption while states such as Bihar, Jammu and Kashmir and Madhya Pradesh are affected by alarming levels of corruption. In 2007, the level of corruption was found to be moderate in all services studied in Himachal Pradesh, whereas in Madhya Pradesh and Assam, the level of corruption in all services was high, very high or alarming. There are also regional differences in the sectors and institutions most affected by corruption at the state level, as illustrated by the 2005 study: In Gujarat, the judiciary, the police and land administration are ranked as the most corrupt services in the state. In Maharashtra, municipal services are perceived as most corrupt. In Punjab, the police, the judiciary and municipal services are perceived to be most affected by corruption. In Bihar, all public services are ranked among the most corrupt in India; According to Freedom House 2008, rebel groups operate extensive extortion networks in the North East of the country, compounding the impact of corruption in the various affected states.

Extent of Corruption Major Corruption Scandals

Major scandals involving high level public officials have shaken the Indian public service in recent years, with politicians and public servants regularly caught accepting bribes or mismanaging public resources. This suggests corruption has become a pervasive aspect of Indian politics and bureaucracy. A report by Global Integrity provides an overview of the major corruption scandals that have hit the headlines over the past years, including: September 2000: Former President Rao was convicted of criminal conspiracy and corruption in the 1993 votebuying scandal and became the first Indian Prime Minister to be convicted in a criminal case. He was

acquitted on appeal, however, in March 2002. March 2001: Following the release by an Indian news website of a videotape showing 31 politicians, high level officials, bureaucrats and army officials taking bribes, the Defence Minister and leaders of the ruling BJP party were forced to resign. Four defence ministry officials were also suspended. September 2005: Railway Minister Laloo Prasad Yadav was charged with misappropriating state funds in the long running fodder scam. He and Bihar Chief Minister were charged with embezzling over US$ 40 million in state funds intended for the purchase of animal fodder. In total, 170 persons were charged in connection with this scandal. In January 2006: A reporter in Assam writing articles accusing local forestry service officials of having links to timber smuggling was murdered. In March 2006: The BJP alleged corruption in a military contract to buy six submarines from two French companies, claiming that the government overpaid by approximately US$ 113 million and used the excess to pay middle men that helped secure the deal. In January 2009: Satyam Computer Services Ltd was barred by the World Bank from bidding for contracts for eight years and top officials were arrested after a major financial fraud over several years was disclosed.

Corruption Surveys and Indices

Though India is credited with having made considerable progress in terms of economic reform over the past few years, corruption is perceived to be widespread and entrenched at all levels of the political and administrative system. India ranks 85 from 180 countries surveyed in Transparency Internationals 2008 Corruption Perception Index (CPI), with a score of 3.4. Since the first iterations of the index, India has scored between 2.7 and 3.5, indicating that despite some progress - corruption continues to be perceived as rampant and endemic by the various CPI sources. ( Similarly, the 2007 World Bank Governance Indicators suggest little change over the years. The country performs consistently above average on indicators of voice and accountability, government

effectiveness and the rule of law, but poorly in terms of regulatory quality and control of corruption1. Its rating for political stability is particularly weak ( Freedom House 2008 comes to similar conclusions, noting that government effectiveness and accountability continue to be undermined by the close connections between crime and politics, weak government institutions and widespread corruption. ( page=363&year=2008&country=7411). According to the Global Corruption Barometer 2007, petty corruption is common practice in India with 25% of respondents admitting paying bribes to obtain basic services. Citizens do not expect the situation to change in the short term and expressed scepticism with regard to government political will and/or capacity to curb corruption. 90% of respondents believed that corruption would increase in the next three years while 68% perceived government efforts against corruption as ineffective. ( A corruption survey published in June 2008 by Transparency International-India and the Centre for Media Studies India confirms these findings. One-third of Below Poverty Line (BPL) households across the 31 states covered by the survey paid bribes to access one or more of 11 public services. The percentage of respondents paying bribes to access services was especially high for the police, land registration and housing. These findings echo the results of a 2005 corruption survey conducted by Transparency International India2 which found that more than 50% of the respondents had firsthand experience of paying bribes or peddling influence to get a job done in a public office. ( India is also perceived to export corruption outside its borders. The country comes at the bottom of Transparency Internationals 2008 Bribe Payer Index3, ranking 19 from 22 countries with a score of 6.8. This indicates that Indian firms are perceived by business people as very likely to engage in bribery when doing business abroad. (

Causes of corruption The causes of corruption are many and complex. Following are some of the causes of corruption. Emergence of political elite who believe in interest-oriented rather than nation-oriented programmes and policies.

Artificial scarcity created by the people with malevolent intentions wrecks the fabric of the economy. Corruption is caused as well as increased because of the change in the value system and ethical qualities of men who administer. The old ideals of morality, service and honesty are regarded as an achronistic. Tolerance of people towards corruption, complete lack of intense public outcry against corruption and the absence of strong public forum to oppose corruption allow corruption to reign over people. Vast size of population coupled with widespread illiteracy and the poor economic infrastructure lead to endemic corruption in public life. In a highly inflationary economy, low salaries of government officials compel them to resort to the road of corruption. Graduates from IIMs with no experience draw a far handsome salary than what government secretaries draw. Complex laws and procedures alienate common people to ask for any help from government. Election time is a time when corruption is at its peak level. Big industrialist fund politicians to meet high cost of election and ultimately to seek personal favour. Bribery to politicians buys influence, and bribery by politicians buys votes. In order to get elected, politicians bribe poor illiterate people, who are slogging for two times meal.

IMPACT OF CORRUPTIO_ A_D THE _EED FOR A _ATIO_AL A_TI-CORRUPTIO_ STRATEGY Impact of Corruption Globally, there is a general consensus amongst most academics and policy makers that the debilitating effects of corruption permeate through all aspects of public life. Several studies have shown that corruption not only stifles growth, it also perpetuates inequalities, deepens poverty, causes human suffering, dilutes the fight against terrorism and organised crime, and tarnishes Indias image globally. The impact of corruption is multi fold, encompassing: political costs, economic costs, social costs, environmental costs and issues of national security. (a) Political Costs: The political costs of corruption are manifested in weakened public trust in political institutions, reduced political participation, perversion of the electoral process, restricted political choices available to citizens and loss of legitimacy of the democratic system. (b) Economic Costs: Corruption reduces economic efficiency by misallocation of resources in favour of rent seeking activities, increasing the cost of public transactions, acting as an additional tax on business thereby reducing investment, reducing genuine business competition.

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(c) Social Costs: The effect of corruption on the social fabric of society is perhaps the most alarming damage of all. It undermines people's trust in the political system, in its institutions and its leadership. Corruption distorts the value systems and wrongly attaches elevated status

to occupations that have rent seeking opportunities. This results in a disillusioned public, a weak civil society, which attracts unscrupulous leaders to political life. Eventually, there is a risk that demanding and paying bribes could become the norm. (d) Environmental Costs: Environmental degradation is an indirect but serious consequence of corrupt systems. Environmentally devastating projects are given preference in funding, because they are easy targets for siphoning off public money into private pockets. (e) Issues of national security: Corruption within security agencies can lead to a threat to national security, including through distortion of procurement, recruitment of ineligible persons, providing an easy route for smuggling of weapons and terrorist elements into the country and money laundering.

Impact of Corruption
Corruption drastically reduces tax revenues, forcing governments to find other avenues for financing government expenditure, including borrowing. Future fiscal flexibility is reduced, because servicing of debt has to be given priority over other expenditures. This creates a vicious circle endangering fiscal sustainability. Corruption is particularly alarming because it breeds further corruption corruption may corrupt, as stated by Andvig and Moene (1990).Collusion between corrupt taxpayers and corrupt tax officials puts honest taxpayers at a disadvantage, encouraging them to evade taxes. If they do not, their profit margins are low, especially for small businesses.3 The effect on tax officials is also important. Corrupt colleagues and friends weaken the will of honest officers and reduce the probability of being detected or losing ones reputation. As the number of corrupt tax collectors increases, the guilt feeling of indulging in wrongdoing decreases. 290 Mahesh C. Purohit As Fjeldstad (2005) notes, when networks of corruption exist, firing some corrupt officials does not improve the situation, as the fired officials become consultants and add to the network. Corruption affects the quality of governance. It forces officials to make decisions that do not serve the public interest but promote the interests of corrupt individuals.Administrative efficiency is at a low level because patronage and nepotism tend to encourage the recruitment of incompetent people. Corruption adversely affects investment and growth (Mauro 1995). When growth is weak, the returns to entrepreneurship fall relative to those to rent seeking; the ensuing increase in the pace of rent-seeking activities further slows growth.Higher bribes imply declining profitability on productive investments relative to rent-seeking investments, crowding out productive investments. Innovators are particularly at the mercy of corrupt public officials, because new producers need government-supplied goods, such as permits and licenses, more than established producers (Murphy, Shleifer, and Vishny 1993). Widespread corruption reduces both foreign and domestic investment, as investors look for locales in which there is less corruption, less red tape, simpler laws and procedures, and transparent administration, all of which provide greater opportunities to grow. Corruption leads to economic waste and inefficiency, because it adversely affects the optimal allocation of funds, productivity, and consumption.When public resources meant for setting up productivity-enhancing infrastructure are diverted to politicians private consumption, growth falls.4 Pervasive corruption can also result in refusal by the donor community to grant aid.5 The cost of corruption to the society (in terms of both tangible and intangible costs) is extremely high. Intangible costs include the loss of trust

in democracy, in leaders, in institutions, and in fellow citizens.Tangible costs include the impact on trade and investments, administrative efficiency, good governance, and equality of citizens. Corruption has the potential to undermine the political stability of a country, by provoking social unrest and civil war that can threaten macroeconomic stabilization. In Tanzania corruption contributed to political instability and increased ethnic tension when a leader, for his own political purpose, claimed that some wealthy businesspeople from Asia, in collaboration with African leaders, were transferring the countrys wealth abroad and impoverishing ordinary Tanzanians (Sedigh and Muganda 1999).He also insisted that the government was selling the country to Arabs and Zanzibaris. His comments not only intensified racial tensions, which a number of politicians sought to exploit, they also caused enormous capital flight from Tanzania.

Part 2: Anti-Corruption Efforts in India

Indias performance on the 2007 Global Integrity Index indicates a huge gap between anti-corruption policies and practice. The legal and institutional framework to curb corruption is well developed and the country receives high scores in terms of anticorruption law and institutions. An analysis was conducted by Transparency India in 2007 to identify possible gaps between the UN Convention against Corruption (UNCAC) and the legal and institutional framework in place in the country. The report confirmed the good quality of the legal framework against corruption in India, with existing legislation in line with most of the requirements of the UNCAC. The largest and almost only - substantial gap was identified by the report in the area of whistleblower protection.

( df). Law enforcement, however, remains weak, suggesting a lack of political will to effectively address corruption challenges in the country.

Measures to combat corruption Is it possible to contain corruption in our society? Corruption is a cancer, which every Indian must strive to cure. Many new leaders when come into power declare their determination to eradicate corruption but soon they themselves become corrupt and start amassing huge wealth. There are many myths about corruption, which have to be exploded if we really want to combat it. Some of these myths are: Corruption is a way of life and nothing can be done about it. Only people from underdeveloped or developing countries are prone to corruption. We will have to guard against all these crude fallacies while planning measures to fight corruption. Foolproof laws should be made so that there is no room for discretion for politicians and bureaucrats. The role of the politician should be minimized. Application of the evolved policies should be left in the hands of independent commission or authority in each area of public

interest. Decision of the commission or authority should be challengeable only in the courts. Cooperation of the people has to be obtained for successfully containing corruption. People should have a right to recall the elected representatives if they see them becoming indifferent to the electorate. Funding of elections is at the core of political corruption. Electoral reforms are crucial in this regard. Several reforms like: State funding of election expenses for candidates; strict enforcement of statutory requirements like holding in-party elections, making political parties get their accounts audited regularly and filing income-tax returns; denying persons with criminal records a chance to contest elections, should be brought in. Responsiveness, accountability and transparency are a must for a clean system. Bureaucracy, the backbone of good governance, should be made more citizen friendly, accountable, ethical and transparent. More and more courts should be opened for speedy & inexpensive justice so that cases dont linger in courts for years and justice is delivered on time. Local bodies, Independent of the government, like Lokpals, Lokadalats, CVCs and Vigilance Commissions should be formed to provide speedy justice with low expenses. A new Fundamental Right viz. Right to Information should be introduced, which will empower the citizens to ask for the information they want. Barring some confidential information, which concerns national and international security, other information should be made available to general public as and when required. Stringent actions against corrupt officials will certainly have a deterrent impact.

The Legal Framework

The 1988 Prevention of Corruption Act criminalises corruption in the public and private sectors in the form of active and passive bribery, extortion, bribery of foreign officials, abuse of office and money laundering. There is also a 2002 Prevention of Money Laundering Act (amended in 2005). At the local level, state governments have state laws that address specific aspects of corruption. The 2005 Right to Information (RTI) Act represents one of the countrys most critical achievements in the fight against corruption in recent years. Under the provisions of the Act, any citizen may request information from a "public authority" which is required to reply expeditiously or within 30 days. The Act also requires every public authority to computerise their records for wide dissemination and to proactively publish certain categories of information for easy citizen access. This act provides citizens with a mechanism to control public spending. In the first year of National RTI, 42,876 (not yet official) applications for information were filed to Central (i.e. Federal) public authorities. According to the Central Information Commission, RTI applications have annually increased by 8 to 10 times annually. Less than 5% of the million applications for information have been denied information under various exemption categories.

( India does not have a law to protect whistleblowers. However, following the murder in 2003 of Sri Satyendra Dubey, who exposed corruption in the National Highway Authority, the Government faced increased pressure to ensure whistleblower protection and issued a resolution known as the Public Interest Disclosure Resolution (PIDR). This resolution authorised the Central Vigilance Commission (CVC) to be the Designated Agency to receive written complaints for disclosure on any allegation of corruption or misuse of office and to recommend appropriate action. The CVC can take action against anyone who leaks the names of whistleblowers and witnesses and may request police assistance to investigate complaints. The Central Bureau of Investigation also has an online complaints mechanism which guarantees the protection of whistleblowers reporting corruption cases. The Global Integrity Report 2007 estimates that the resolution has logged over 1300 complaints in the three years of its existence. However, the CVC reported that over 30 whistleblowers have been harassed in spite of the confidentiality of PIDR complaints. The Global Integrity Report further mentions that important pieces of anti-corruption legislation have been pending for years, including the Corrupt Public Servants Bill and the Lok Pal Bill, which is supposed to address corruption in high offices, including the office of the Prime Minister. The Judge Inquiry Bill which was designed to introduce an inquiry mechanism for allegations and complaints against members of the judiciary - and the Election Commissions recommendation to debar candidates with a criminal background from parliamentary or State Assembly elections, have been held up for years.

In terms of international norms, India endorsed the ADB-OECD Anti-Corruption Action Plan in 2001, and has signed but not yet ratified the UN Convention against Corruption (UNCAC) and the UN Convention against Transnational Organised Crime.

E-Governance has considerably increased the speed of government services in a number of areas and reduced opportunities for bribery. A wide range of public services have been digitised such as obtaining licences, paying taxes and clearing goods. The National Portal of India was subsequently created and lists all the services that have been digitised. The assessment of the legal and institutional anticorruption framework points to a combination of robust institutions and lack of accountability in key areas, as emphasised in the 2007 Global Integrity Report. Some institutions such as the Supreme Court or the Election Commission have taken a stronger stance to combat malpractice in recent years, while key pieces of legislation such as the RTI Act promote greater bureaucratic transparency, granting citizens access to

public records. Despite these emerging trends, however, the institutional anti-corruption framework generally suffers from a lack of coordination, and overlapping and conflicting mandates between institutions addressing corruption. Key institutions often
Overview of Corruption in India 9

lack the staff and resources to fulfil their mandate adequately and struggle to protect themselves from political interference. Often, they primarily focus on investigating alleged cases of corruption at the expense of preventive activities. Influential politicians and senior officials are rarely convicted for corruption, eroding public confidence in the political will to effectively tackle corruption.

Civil Society Initiatives

India enjoys a vigorous and vibrant civil society and one of the freest media in South Asia. Both have played an important role in placing corruption on the national agenda. Freedom of association is fully guaranteed and the formation of interested groups is legally straight forward, resulting in a proliferation of civil society organisations and movements. However, the 2008 Bertelsmann Foundation Report estimates that most civil society organisations are poorly institutionalised, politically fragmented and rather weak, while Global Integrity mentions cases of journalists being harassed for reporting corruption cases. Although freedom of the press is guaranteed by the constitution, the Official Secrets Act has been used by the government in the past to censor articles or prosecute journalists, although this practice seems to be on the decline. There have been recent instances where journalists have been harassed and newspapers offices attacked. In 2006, a journalist was killed after revealing corruption in the states forestry services in a series of articles. India is ranked 120th out of 169 countries on Reporters without Borders Worldwide Press Freedom Index 2007. (Please see: com/normal.asp?pageid=205). Despite these limitations, there is considerable potential for civil society impact in the fight against corruption. Civil society has played a critical role in advocating for access to information, which has resulted in the enactment of the RTI Act. This is demonstrated by example of Mazdoor Kisan Shakti Sangathan (MKSS) ( MKSS is a small organisation formed in the 1990s which seeks to insert citizens and their associations directly into oversight functions. It pioneered a method for the participatory audit of local spending in rural Rajasthan. To combat various forms of official corruption in public works programmes and fight for minimum wages, the organisation sought access to official expenditure documents that could be verified by MKSS workers.

Participatory audits of local government performance were conducted based on these expenditure records. The struggle to access official records led to a national campaign for legislation granting citizens a right to information that contributed to the adoption of the Right to Information Act in 2005. MKSS succeeded in getting the state government to change the local government act to include local residents directly in auditing official development schemes. (Please see: hybrid-forms-of-accountability).

The RTI act has opened up critical opportunities for civil society involvement in the fight against corruption. It has allowed civil society organisations to participate in debates on public spending and help them uncover corrupt practices in many states and projects. There are several organisations that are explicitly active in the anti-corruption arena, including: Transparency International India is the Indian Chapter of Transparency International. TI India promotes transparent practices in government, raises awareness among citizens, and partners with civil society groups working towards similar goals. It manages various projects in different areas, on different fronts, working in partnership with other NGOs to promote good governance, raise awareness about the RIA Act, and promoting the adoption of citizens charters in all public institutions. It also conducts anticorruption research and social audits. TI India advocates with like-minded NGOs for the ratification of UNCAC ( The Centre for Media Studies (CMS) is a non-profit, multi-disciplinary development research agency which has undertaken corruption tracking surveys since 2000. Its transparency Studies Unit publishes a quarterly magazine that compiles research on selected issues relevant for public accountability and transparency. It has published in collaboration with TI India the 2005 and 2007 India Corruption Studies. ( Parivartan was established in 2000 as an attempt to expose corruption within the Income Tax Department in New Delhi. The movement now focuses on using the RIA Act to promote transparency and accountability in public services.

Combating Corruption in Tax Administration

Which policy measures need to be adopted to combat corruption in tax administration depends on the social environment and the attitude about corruption held in the societythe factors that account for the degree of corruption in a country. What is regarded as corrupt practice in one country may be regarded as part of a routine transaction in another country. Social norms may be such that allegiance to their ethnic or religious group supersedes individuals responsibility to act as honest bureaucrats. Each country has to evolve the measures best suited to its own local requirements. Some policies that could be adopted by all developing countries plagued with corruption are described below.

Rationalize the Design of Tax Laws One of the most important policy prescriptions for curbing corruption is establishing a rational tax system with simplified tax laws. The number of tax rates should be as low as possible and the number of tax exemptions as small as possible (if they cannot be eliminated altogether). In addition, the tax system should be integrated,with different taxes levied by all tiers of government. For taxes on commodities and services, it is important to avoid end-use exemptions, a major source of corruption. The design of the tax structure should be as broad based as possible. The goal should be to have as many taxpayers as possible in the tax net, depending on the administrative capability of the country. If the number of taxpayers is well below its potential, the burden on each taxpayer will be too heavy. A survey in India revealed that 89 percent of potential income taxpayers did not file (Aggarwal 1991). To expand its tax base, India adopted the one-in-six scheme, under which an individual satisfying one out of six criteria has to file an individual income tax return, irrespective of his or her level of income.6 This measure significantly increased the number of individual income taxpayers. Designate Corruption a National Crime The problem of corruption needs to be addressed at both the national and international levels. National political leaders must make a commitment to eradicate this menace. A holistic approach, including prevention and enforcement, will have a much better chance of success than a simple focus on individuals. The problem of corruption needs to be checked at the international
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level as well. Particularly given the fact that multinational companies bribe officials of developing countries to procure orders and contracts, a coordinated approach by bilateral donors and international organizations is useful. An important step in this direction would be blacklisting by multinational organizations of multinational corporations that engage in corrupt practices to obtain international contracts and encourage corruption in developing countries. Reduce Monopoly Power Since the monopoly power of tax officials encourages them to indulge in wrongdoing, the first step in combating corruption has to be to curb the

monopoly power of these officials. Two steps have to be taken. First, tax departments must be reengineered in countries where all activities of administration and assessment are performed by the same unit. It would be useful to assign the role of administration and audit to different units, as many developed countries do. Second, tax officials should not be assigned to particular jurisdictions. Random assignment would not only take away the opportunity of tax officers to misuse their monopoly powers, it would also free taxpayers from the clutches of tax officials. For the selection of cases for audit, a separate unit should look into all available information and apply principles of risk management. This would eliminate contact between tax officers and taxpayers, reducing opportunities for corruption. Another way to reduce the monopoly power of tax officials is to give them competing jurisdictions. Since collusion among several officials is difficult, competition tends to reduce the level of bribes substantially. Competition in the provision of government services must also be accompanied by more intensive monitoring and auditing to prevent corruption.

Conclusions and Policy Recommendations

An irrational tax structure, monopoly and discretionary power in the hands of government officials, a low degree of accountability or transparency in administration, and interference by political leadership are the main causes of corruption in tax administration. Low pay, the lack of severity of punishment for corrupt behavior, poor-quality service, and greater politicization of government also encourage corruption. In most developing countries, tax administration is tax policy. Failure to properly administer the tax, therefore, defeats its very purpose and threatens equity. When corruption becomes a way of life, it has far-reaching implications. It undercuts efficiency and equity, as well as the macroeconomic and institutional functions of government. It reduces revenue to government, endangering fiscal sustainability, and adversely affects investment and growth. The presence of corrupt officials encourages other officials to engage in corruption, because the probability of being detected or losing ones reputation declines. Likewise, the presence of corrupt taxpayers encourages other taxpayers to cheat.

Policy Recommendations
Fighting corruption takes time. Power groups whose interests are threatened can scuttle efforts. But letting corruption fester can be even more dangerous.

Which policy measures need to be adopted to combat corruption in tax administration depends on the social environment and the attitude about corruption held in the societythe factors that account for the degree of corruption in a country. What is regarded as corrupt practice in one country may be regarded as part of a routine transaction in another country. Social norms may be such that allegiance to their ethnic or religious group supersedes individuals responsibility to act as honest bureaucrats. Each country has to evolve the measures best suited to its own local requirements. Some policies that could be adopted by all developing countries plagued with corruption are described below. One of the most important policy prescriptions for curbing corruption is creating a tax system that is rational, equitable, and simple. Reducing the monopoly and discretionary power of tax officials is also very important. The tax structure should be as broad as possible in order to maximize equity. Bureaucrats should be given competing jurisdictions, so that competition among officers will drive the level of bribes to zero. Monitoring and auditing must be increased to prevent corruption. The system of recruitment of officers should be streamlined, and officers should be given intensive and repetitive training for promoting a code of conduct, with emphasis on ethical values, such as integrity, honesty, public service, justice, transparency, accountability, and rule of law. Salaries should be high enough that officials are able to support themselves and their dependents without accepting bribes. An anticorruption commission can be set up that maintains transparency in the system and makes political leaders and officers accountable for their actions. Decentralization can also help curb corruption. Its effectiveness depends on the design of decentralization and the institutional arrangements governing its implementation.


Experience and theory suggest that an organization is most vulnerable to corruption when bureaucrats enjoy a monopoly over taxpayers and take actions that are difficult to monitor. The relation between the executive branch and other participants in government, such as the legislature, the judiciary, local jurisdictions, political parties, the media, the private sector, and nongovernmental organizations, needs to be broadly articulated.

Democratic systems offer a mechanism to minimize corruption by introducing greater accountability and transparency in governance. When local governments have some real power, they not only address local interests more authentically and confidently, they also exercise a check on the operations of higher levels of authority. However, the effectiveness of decentralized service delivery depends on the design of decentralization and the institutional arrangement governing its implementation. An institutional environment should provide political, administrative, and financial authority to local governments, along with effective channels of local accountability and central purview. Two key ingredients are needed for the potential gain to outweigh the costs. First, decentralization must involve real delegation of authority, including the authority to generate and reserve a portion of local revenues. Second, local authorities must themselves be accountable to higher levels and local groups. Abuse of authority and public corruption are less likely to occur if the rules governing local officials are at least in part defined by local norms (Charlick 1993).

Establish a Code of Ethics

At the national level, every country should have a comprehensive code of ethics that spells out appropriate and inappropriate behavior for politicians as well as bureaucrats. A leadership code of conduct is important, because the countrys future prospects depend, to a very large extent, on the quality and honesty of its leaders. The leadership code should describe the expected and prohibited forms of conduct by government leaders It should outline a broad concept of what constitutes leadership, emphasize the role of leaders in setting an example, and identify principles of good leadership. It should include provisions that check the misuse of state property through annual disclosure of leaders income, assets, and liabilities. At the same time, it should ban certain activities, such as seeking or accepting gifts or benefits relating to official duties and personal interests; abusing government property; and misusing official information not available to the public.

Severely Punish Corrupt Officials

Punitive action against corrupt officials can have an important deterrent effect. The role of the media is important in publicizing the punishment of corrupt officials. Pecuniary penalties for corrupt behavior should be harsh enough to discourage officials from engaging in wrongdoing.

Stringent laws for punishment of corrupt officials, along with the confiscation of property amassed through bribery, will help reduce corruption. Such laws must apply to domestic offenders and foreigners alike.

Make Civil Servants Accountable and Salaries Competitive The system of recruitment of officers should be streamlined and a competitive examination system introduced. In addition, training must make tax officials committed to achieving clearly identified objectives. It should be made clear to officials that they are fully responsible and accountable for their assigned duties. Civil servants salaries should be high enough to allow them to resist the temptation to use their office for private gain. The incentives for corruption are considerably greater where salaries do not allow civil servants to live above the poverty level.7
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In many African countries, civil servants salaries and conditions of service have continuously deteriorated over the years, in most cases failing to keep pace with inflation (Kpundeh 1992). In such circumstances, employees may look for other ways to generate additional income. Departments such as customs and VAT, which have large numbers of low-paid workers who are in direct contact with the public, are especially ripe for corrupt behavior. In precivil war Somalia, salaries were so low that officials had to hold more than one job. Such a situation encourages bureaucrats to fall prey to corrupt practices (Klitgaard 1988). An attempt should be made to reduce the overall number of employees in the public sector.8 It would also be useful to adopt an incentive-based wage policy for public officials, as Singapore and Hong Kong (China) have done (Mookerjee 1995). In Singapore salaries in the public sector are higher than those in the private sector, discouraging corruption (Mookerjee 1995). It is also important to adopt a broad range of human resources measures, including development of performance indicators and performance-based incentive and promotion schemes.

Inform Taxpayers of Their Rights Access to accurate information should be a right that is publicized adequately so that taxpayers are aware of it. All tax rules, rates, and procedures should be available on the Internet. Lack of access to information about rules and regulations makes taxpayers unaware of their rights and exposes them to discretionary treatment by corrupt officers.

Restructure Tax Administration Agencies

Tax administration agencies could be restructured functionally. The duties of various functionaries within the VAT department should be streamlined, with an eye to minimizing personal interactions with taxpayers (Purohit 2001a). Internal audits must also be strengthened. The selection of an audit must be based on risk assessment based on information from local offices, the results of audits conducted in the past, and the results of the computer assessment of returns received in the department. It is equally important to establish a wing of auditors specially trained to examine the accounts of vendors. Checkposts must be abolished and enforcement strengthened.

Use Information Technology to Combat Corruption

Many countries around the world, at all income levels, are attempting to use information technology to combat administrative corruption. The use of such technology reduces the discretionary power of local officials, cuts transaction costs, and increases transparency. Most important, it reduces the interaction between taxpayers and tax officials, thereby reducing the opportunity to engage in corrupt practices. The use of information technology automates government actions and procedures, reducing delays and face-to-face contact. It builds transparency and trust by sharing information with the public and making them more aware of their rights and privileges. It encourages greater accountability by officials, as it creates disincentives for corruption by creating fear of exposure. Before introducing information technology, it is important to have a completely integrated system of taxes. Data from tax returns of individuals and corporations should be collected from the time of registration, continuing up to the payment of tax and the processing of returns. Information from the mainframe and data warehouse should be used to select cases for audit. Results of investigations should also be recorded, and other agencies should provide all necessary information. Such a system should maintain very tight security and confidentiality, without which the information could be abused.

Using Information Technology to Streamline Services and Reduce Corruption in India

The Indian state of Andhra Pradesh has used information technology to reduce corruption in several tax areas. The Computer-Aided Administration of Registration Department (CARD) replaces manual procedures that lacked transparency in property valuation and resulted in a flourishing business for brokers and middlemen, who exploited citizens buying or selling property. The CARD system replaces the manual services with computerized services and introduces several new services. It eliminates interaction with tax officers. It completes registration formalities within an hour, through electronic delivery of all registration services. It improves the quality of services offered by providing a computer interface between citizens and the government. Eseva Kendra provides a one-stop venue for services of the state and central government departments and private businesses. It provides online transaction processing of various payments to government agencies and issues certificates needed by citizens and businesses. It connects citizens to departments and agencies such as the state VAT and other state taxes; the electricity, water, and telephone utilities; the passport office; municipal corporations; and the departments of transport, tourism, and health.

All offices of Indias commercial tax department, including checkposts, have been computerized. Databases contain details regarding registered dealers, which can be analyzed and used for investigating evasion of the state VAT. Land records have also been revolutionized by computer technology. Until recently, obtaining land record documents was difficult and almost always required the help of middlemen. With the digitization of land records, farmers can now obtain land ownership certificates in 530 minutes from a Citizen Information Centre (CIC) at the Revenue Office. Computerization of this function has ensured transparency in the system and made the life of ordinary citizens easier. Farmers can now apply for mutation either at the CIC or over the Internet. They can also check the status of their request online and present documentary evidence to authorities if their request is not processed within the stipulated time period.


The Institutional Framework

There are various bodies in place for implementing anticorruption policies and raising awareness on corruption issues. At the federal level, key institutions include the Supreme Court, the Central Vigilance Commission (CVC), the Central Bureau of Investigation (CBI), the Office of the Controller & Auditor General (C&AG), and the Chief Information Commission (CIC). At the Sate level, local anti-corruption bureaux have been set up, such as the Anticorruption Bureau of Maharashtra. The Supreme Court has taken a stronger stance against corruption in recent years. It has challenged the powers of states in several instances. For example, in 2007 in Uttar Pradesh, it challenged the state governors powers to pardon politically connected individuals based on arbitrary considerations. In other instances, judges have taken on a stronger role in responding to public interest litigation over official corruption and environmental issues. In December 2006, in a landmark ruling, the Supreme Court ruled that prosecutors do not need prior permission to begin proceedings against politicians facing corruption charges. It has also started addressing corruption in the police by mandating the establishment of a police commission to look into these matters and has ruled that corrupt officers can be prosecuted without government consent. The Central Vigilance Commission (CVC) is an independent watchdog agency established in 1964. The CVC has the power to undertake inquiries or investigations of transactions involving certain categories of public servants. It also has supervisory powers over

the Central Bureau of Investigations. The CVC can investigate complaints against high level public officials at the central level, in cases where they are suspected of having committed an offence under the Prevention of Corruption Act. The CVC is mandated to investigate public sector corruption at the federal level and not at the state level. The CVC has an online whistleblower complaint mechanism available on its website. More recently, the CVC is working in collaboration with Transparency International India on introducing Integrity pacts in all state-owned public sector companies, industries and banks. In December 2007, the Commissioner issued a directive to this effect which has resulted in 32 public sector undertakings having adopted an integrity pact. The Central Bureau of Investigation (CBI) is the prime investigating agency of the central government and is generally referred to as a credible and respected institution in the country. It is placed under the Ministry of Personnel, Pensions & Grievances and consists of three divisions: the AntiCorruption Division, the Special Crimes Division and the Economic Offences Division. These units have the power to investigate cases of alleged corruption in all branches of the central government, but need the permission of state governments to investigate cases at the state level. The Supreme and High Courts can instruct the CBI to conduct investigations. Like the CVC, the CBI has a complaint mechanism on its website. The Office of the Comptroller and Auditor General (C & AG) are praised by the 2007 Global Integrity Report for being independent and well-staffed, with offices of Accountant Generals (AG) in all states. The C & AG has produced several reports on state departments such as railways, telecommunications, public sector enterprise, and tax administration. These reports have revealed many financial irregularities, suggesting a lack of monitoring of public expenses,poor targeting and corrupt practices in many branches of government. However, since the C & AG has no authority to ensure compliance with its recommendations, the government often fails to implement the reports proposals. The Chief Information Commission (CIC) was established in 2005 and came into operation in 2006. It has delivered decisions instructing government, courts, universities, police, and ministries on how to share information of public interest. State information commissions have also been opened, thus giving practical shape to the 2005 Right to Information (RTI) Act. The commissions have not been immune to criticism, however. Of India's 28 states, 26 have officially constituted information commissions to implement the RTI Act. Nine pioneered access to information laws before the RTI Act was passed. A state report card one year on complimented the quality of the law, but criticised the apathy and lack of awareness of many citizens.

Set Up an Independent Anticorruption Organization (using Comparative Studies)

Many countries have set up anticorruption commissions (box 9.4). Some are constitutionally independent of the executive branch; others are set up by the executive branch to serve either in an advisory role or with the authority to investigate and help prosecute public officials at all levels. Countries also use presidential commissions, multisectoral advisory groups, institutions to administer ethical codes of conduct, special authorities or commissions to handle or investigate specific corruption allegations, and other bodies.

Using an Independent Agency to Combat Corruption.

The wide variety of anticorruption management structures suggests the diverse approaches for combating corruption in different countries. Hong Kong (China) established an Independent Commission against Corruption, which carries out investigative, preventive, and communications functions. It has enjoyed resounding success in fighting corruption: Hong Kong now ranks as one of the least corrupt jurisdictions in East Asia ( India and Singapore established bodies devoted entirely to investigating corrupt acts and preparing evidence for prosecution. These bodies have also been successful in reducing corruption (Heilbrunn 2004; Vittal 2003). In New South Wales, commissions report to parliamentary committees; they are independent from the executive and judicial branches of state. These commissions have changed the norms of how business is conducted, preventing corruption from occurring (Heilbrunn 2004). The United States implemented a multiagency model that includes offices that are individually distinct but together form a web of agencies that fight corruption (Heilbrunn 2004). The success of such organizations has encouraged governments elsewhere (in Argentina, BosniaHerzegovina, Guinea, the Republic of Korea, and Mauritius, for example) to create similar organizations. Mounting evidence suggests, however, that commissions have not been successful in countries where low levels of political commitment, lack of articulation among branches of state, and severe budgetary constraints have prevented the establishment of large and expensive anticorruption commissions (Heilbrunn 2004).

TRAINING Provide Tax Officers with Ethics Training

Intensive training of officers in ethical conduct is of paramount importance, even in countries that lack good governance (Huther and Shah 2001).

Course contents should include the laws and rules to be administered and emphasize ethical values such as integrity, honesty, public service, justice, transparency, accountability, and the rule of law. Training should be repetitive in nature, followed up with refresher courses. Officers should be aware of existing anticorruption measures, as well as their responsibilities and the liability involved. A public ethics program can be carried out in several ways. Ethics management guidance can be offered by training tax officials. Ethics audit research and inquiry can be conducted to assess their strengths and weaknesses. The objective of ethics maintenance is to make the ethical gains of the agency sustainable. Assistance from anticorruption bodies, civil society organizations, and private firms can be used to sustain best practices, as well as to improve and monitor the effectiveness of public ethics programs. Taxpayer education programs could be strengthened through interactive television and radio programs and pamphlets.

Assistance from anticorruption bodies, civil society organizations, and private firms can be used to sustain best practices, as well as to improve and monitor the effectiveness of public ethics programs. Taxpayer education programs could be strengthened through interactive television and radio programs and pamphlets.

Inform Taxpayers of Their Rights Access to accurate information should be a right that is publicized adequately so that taxpayers are aware of it. All tax rules, rates, and procedures should be available on the Internet. Lack of access to information about rules and regulations makes taxpayers unaware of their rights and exposes them to discretionary treatment by corrupt officers.