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2002) N Vittal, Central Vigilance Commissioner BASF is a transnational corporation operating in India for the last 58 years with a strong value system which is zealously cared for and practiced. In fact the issue of values had become increasingly important in the context of globalisation. The collapse of the South East Asian economy tigers from middle of 1997 highlighted that if there was lack of corporate governance, there would be an adverse impact on business and investment. 2 The recent implosion of Enron has brought out in sharp relief how if there is lack of proper corporate governance, a spectacularly successful company like Enron can also lead to disaster. 3 The issue of good corporate governance has become important so far as global business is concerned especially when investments may take place across borders whether in the capital market or in the form of foreign direct investment. The issue of corruption which has a direct bearing on the quality of public governance also becomes important. It may be very difficult to have good corporate governance practices if the overall environment is one of poor governance and especially high corruption. 4 As the Central Vigilance Commissioner I have been dealing with this issue of corruption for the last more than three years and I would like to share with you my perceptions about the challenge of good governance in the country. Good governance in our country is not possible unless we tackle the issue of corruption in public life. 5 Governance is the function performed by the Government. Good governance would mean that there is equality and equal protection of the law. For all citizens it would also mean that there is an opportunity for every individual to realise his full potential. It will also mean that there is no wastage of resources and productivity is high. If the Rotary were to focus their attention on these aspects of good governance in turn they would have lived up to the larger theme of this year - mankind is our business. 6 India today is not governed well at all. This will be obvious from the fact that there we are one of the most corrupt countries in the world. Indians do better abroad than within the country. There is also tremendous wastage of resources in our country. We waste 10% of our foodgrains because of poor storage, 22% of vegetables because of poor storage, 40% of our people are illiterate, in power we lose 22% in transmission. We can go on listing how our productivity is very low in our economy. 7 The root cause of the very poor governance in India lies in corruption. I have been working for more than three years as the Central Vigilance Commissioner. I would like to dwell on this issue of corruption and what agencies like Rotary can do to fight corruption.

8 The progress of any country depends on ultimately the level of the quality of governance in the society and the productivity of its operations. Corruption affects the quality of governance and definitely corruption is anti-economic development, as we will see presently. It is therefore proper that we focus our attention today on the issue of corruption in our society. 9 Before we proceed further, what do we understand by corruption? Corruption is lack of integrity. This could be financial integrity, moral integrity and intellectual integrity. As the Central Vigilance Commissioner, I am mostly concerned with the issue of financial integrity. But moral integrity and intellectual integrity are equally important. 10 Today perhaps the main cause of corruption in society can be traced to be the following standards in morals. In a way, the corruption temperature of any society depends on three factors. These are: (i) the individual sense of values, (ii) the values cherished by society, and (iii) the system of governance. Probably it is worth looking at the social roots of corruption at this stage. 11 Corruption is harmful in three different ways. Corruption is anti-national. The Hawala scam showed how the anti-national Kashmiri militants were getting money from abroad through hawala, the same route through which other sections of the society like politics, business and bureaucracy were also receiving money. The expose on 13.3.2001 also dramatically highlighted the extent of corruption in politics and defence deals. From these experiences, it will be obvious that corruption threatens national security and is anti-national. 12 Corruption is anti-poor. 31% of the food grains and 36% of the sugar meant for the Public Distribution System (PDS), which is designed to provide food security to the people below the poverty line, gets diverted to the black market. The government of India (GOI) spends Rs.15,000 crores every year by way of subsidy to the PDS. This means that Rs.5000 crores are not used for giving relief to the poor but land in the pockets of the corrupt shopkeepers and their Godfathers in politics and bureaucracy. Rajiv Gandhi once observed that out of every rupee meant for the anti- poverty programmes only 15 paise reached the beneficiary. Out of the 85 paise may be 40 paise can be accounted for as administrative overheads. The leakage of the remaining 45 paise is definitely due to corruption. Corruption is, therefore, anti-poor. 13 Corruption is also anti-economic development. The collapse of the South East Asian economies in mid-1997 showed how even the so-called miraculously growing tiger economies of South-East Asia were not immune from the disastrous consequences of corruption and crony capitalism. The 1999 Human Development Report for South Asia, published by the Mahbub Ul Huq Centre in Islamabad, says that if Indias corruption level comes down to that of Scandinavian countries Indias GDP will grow by 1.5% and the FDI will grow by 12%. 14 Corruption, many a time, can be a matter of life and death. For example, corruption in the pharmaceutical industry, resulting in spurious drugs flooding the

market, may mean the death of many innocent people. The Mumbai blast of 1993 which resulted in the death of 300 people was the result of RDX being smuggled in with the help of corrupt people in the government. Illicit liquor tragedies are another example of how corruption leads to death. 15 In short, corruption is anti-national, anti-economic development and anti-poor. Nevertheless we have perhaps come to take corruption as a fact and a way of life. This may be partly due to sociological reasons and partly due to a sense of helplessness and defeatism. 16 India is like a snake whose head is in the 21st century and whose tail is in the 17th century. We are a billion-strong country and we have wide differences in terms of social and economic development of different parts of the country. From a sociological point of view, the family is the basis of our society. The joint family and caste are only the extended versions of the family. The joint family might have been eroded in recent times especially in the urban areas but kinship, in the form of caste, still prevails. Casteism gets a continuous boost because this seems to have become the basis of our entire politics. Jawaharlal Nehru used to talk about building India into a casteless classless society. The classless society never evolved and, instead of building a casteless society, we have today a highly atomised society where caste defines the basis of politics. From casting our votes in the first election in 1952 we have come to the stage of voting our caste in recent elections. 17 This organisation of our society based on caste and kinship and the differences in the stages of development between the states provides a very strong rationale for corruption. Caste and nepotism become the basis for distribution of patronage. One of the Chief Ministers is reported to have replied when asked why he was favouring his relatives If I do not favour my relatives, whose relatives am I supposed to favour? 18 This concept of standing by ones caste or family is also reflected in the sense of tribalism of the corrupt. In addition to the social bond provided by caste and family ties, the common financial interest is another cementing factor. We are largely an illiterate society with at least 40% of our people being illiterate. Hence, emotions dictate politics. Politics is the route to power in a democracy. So when the politics is based on caste and the voter takes decisions at the emotional level, corruption is probably considered more tolerable. 19 One of the social roots of corruption in India can be traced to our Indian culture of tolerance. Any number of examples are given in the Puranas where the sinner having led a life of sin can get redemption by taking the name of Lord Narayana in his last moments as in the case of Ajamila. In social terms this has come to be accepted. People who lived a life of sin like the prodigal son return to the straight and narrow path at some stage, usually late in life. 20 If we examine the root of corruption, we will find that it arises perhaps from the extreme attachment of people to their families. Nepotism is natural in this situation.

Corruption, as defined by the World Bank, is the use of public office for private profit. A person in office feels that he should earn enough not only for himself and his lifetime but also for his children, grand children and perhaps seven generations. That is probably the basic motive behind the enormous accumulation of wealth by the corrupt in our country today. 21 Equally important is another psychological factor. Power is never demonstrated in a society unless it is misused. In certain communities being as corrupt as possible and amassing as muchwealth as possible is seen as a macho demonstration of competence. If this is the attitude, those sectors of society that did not have an opportunity to share the power cake in the past may also rationalise that they must also be able to emulate those who had earlier enjoyed misuse of their power and amassed wealth by rampant corruption. Thus a vicious cycle of corruption is launched where a society tolerates amassing of wealth and does not question how that wealth is accumulated. 22 There was a time when socially a corrupt person was considered not a desirable person. Such persons were not held in high esteem. But today we have reached such a cynical stage that corruption is not only taken for granted but the capacity for making money as much as possible from ones position is welcomed. It is said that in France, in the police, those who are corrupt are socially ostracized. Small measures like social boycott or ostracism of corrupt persons, if this could be inculcated, can also go a long way in creating an appropriate psychological atmosphere for promoting a culture of integrity. 23 This brings us to another important social root for corruption that is probably getting more accentuated in recent times. This is the spreading cult of consumerism. The electronic media has had a tremendous impact in creating a desire in the mind of everyone to have the best of the consumer goods even at the beginning of life. Newspapers regularly report how domestic servants have been the agents of crime in many cases. Perhaps it is this upstairs-downstairs syndrome or the ostentatious consumption of the well to do and the sense of jealousy created as a result among the deprived which leads to crimes. Consumerism and desire for an ostentatious life style tempts many to make money by hook or crook. Corruption is the result. 24 There was a time when socially a corrupt person was considered not a desirable person. Such persons were not held in high esteem. But today we have reached such a cynical stage that corruption is not only taken for granted but the capacity for making money as much as possible from ones position is welcomed. It is said that in France, in the police, those who are corrupt are socially ostracized. Small measures like social boycott or ostracism of corrupt persons, if this could be inculcated, can also go a long way in creating an appropriate psychological atmosphere for promoting a culture of integrity. 25 Evil social practices also promote corruption. One major social cause that promotes corruption is the dowry system. Every public servant wants to see that his daughter is married off well and there is continuous pressure for having a minimum level

of dowry. This may be one of the reasons why one comes across cases where even public servants who have otherwise led a clean life become vulnerable to corruption towards the end of their career. Dowry system is definitely one of the social roots of corruption in our country. 26 Equally important is the social pressure in a competitive society for ensuring that children get the best possible education. Right from kindergarten in every educational institution, there is pressure of competition and education has become commercialised. This has been further accentuated by government policies about affirmative action resulting in a great incentive for self-financing colleges who charge a lot of donation fee and most of it is collected in black. Education pressure and corruption in the education sector is another social factor contributing to corruption in our system. 27 India is considered as one of the most corrupt countries today. According to the Transparency International, an NGO based in Berlin which rates countries on the basis of Corruption Perception Index, India ranks 72 out of 91 countries according to the CPI 2001. The entire list is as follows:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Finland Denmark New Zealand Iceland Singapore Sweden Canada Netherlands Luxembourg Norway Australia Switzerland United Kingdom Hong Kong Austria Israel USA Chile Ireland Germany Japan Spain France CPI 2001 by Transparency International 24 Belgium 47 Bulgaria 25 Portugal 48 Croatia 26 Botswana 49 Czech Republic 27 Taiwan 50 Colombia 28 Estonia 51 Mexico 29 Italy 52 Panama 30 Namibia 53 Slovak Republic 31 Hungary 54 Egypt 32 Trinidad & Tobago 55 El Salvador 33 Tunisia 56 Turkey 34 Slovenia 57 Argentina 35 Uruguay 58 China 36 Malaysia 59 Ghana 37 Jordan 60 Latvia 38 Lithuania 61 Malawi 39 South Africa 62 Thailand 40 Costa Rica 63 Dominican Rep. 41 Mauritius 64 Moldova 42 Greece 65 Guatemala 43 South Korea 66 Philippines 44 Peru 67 Senegal 45 Poland 68 Zimbabwe 46 Brazil 69 Romania 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 Venezuela Honduras India Kazakhstan Uzbekistan Vietnam Zambia Cte-d'Ivoire Nicaragua Ecuador Pakistan Russia Tanzania Ukraine Azerbaijan Bolivia Cameroon Kenya Indonesia Uganda Nigeria Bangladesh

28 The economic consequence of corruption was recently highlighted by a study made by the PHD Chambers of Commerce reported in the Economic Times of 4th September 2001. This is what the report says: According to a study by PHD Chamber of Commerce and Industry, investment would increase by 2.9 per cent of GDP and GDP growth by 1.3 per cent if corruption index improves by one standard deviation or around 15 per cent. Implication is that India is

loosing its least Rs.63,800 crore worth of additional investment per annum, roughly three times the foreign direct investment (FDI) we are attracting now and Rs.28,600 crore of consequent national income per annum. 29 The unaccounted money in India is estimated to be in the range of Rs.350 to 700 thousand crore more than the combined revenue of the Centre and the state government in the last fiscal. A survey of exporters by Exim Bank found that 64 per cent of interviewed face major problems with customs clearance processes and with port authorities. Exporters spend 1-15 per cent of export revenue to grease the corruption machinery. The international level evidence is stark. Surprisingly, corruption has not always been perceived to have a negative impact upon economic development and growth. One view is that corruption acts as an efficient lubricant for facilitating development in a highly regulated and slow moving economic environment as it enables actors to cross barriers which hamper economic decision making. However, the fact is that the impact of corruption is systematic in nature. It generates negative economy wide externalities that denigrate the performance of the system as a whole and compromise the economys long-term dynamic efficiency. Corruption leads to the favouring of inefficient producers, distorts the allocation of scarce public resources and causes leakage of revenue from government coffers to private hands. Large scale tax evasion erodes the tax base and in the process helps generate black money. Corruption in the economy leads to inflated government expenditures and scarce resources are squandered on uneconomic projects because of their potential to generate lucrative pay off. Hence it is not uncommon to find schools without students, teachers without schools, hospitals without doctors or medicines, and so on, though on paper all expenditures have been accurately accounted for. The result is the crowding out of investment in priority sectors such as education or health. Corruption in post independence India is attributed to an over-regulated environment in which the state played a pre-dominant role in economic decision making providing powerful incentives to bureaucrats and those in power to indulge in corruption. The economic liberalization and the associated opening up of the Indian economy has significantly reduced the structural rigidities in the system. 30 We are still recovering from the shock of the terrorist attacks of September 11, 2001 at New York on the World Trade Twin Towers and in Pentagon the same day. While terrorism of this type catches the attention, we must realise that corruption is nothing sort of financial terrorism. 31 The whole world has been shocked by the terrorist attack on the twin towers of the World Trade Centre in New York and Pentagon in Washington on 11th September.

The United States is talking about a war against terror. While the physical damage caused by terrorism is grabbing public attention, there is another type of terrorism taking place in our country and which apparently has not shocked the people to the same extent. 32 Corruption is nothing but financial terrorism. The terrorist attacks in New York reminded many of us about the Mumbai blasts of 1993 where 300 people died. This was not only an act of terrorism but also a case of financial terrorism. The RDX used to kill the innocent people was smuggled by bribing certain customs officials to the tune of Rs.20 lakhs. Corruption as financial terrorism can have the same disastrous impact on human lives. 33 Corruption also encourages physical acts of terrorism. The militant activity we are witnessing in the North East and in Jammu and Kashmir can be directly linked to the extensive and pervasive corruption in these places. The government of India has been consistently throwing a lot of money in an effort to promote development in these states but thanks to corruption, the legitimacy of the formal state is compromised and the militants gain greater public sympathy and legitimacy. 34 Death caused by the physical act of terrorist is well known. The starvation deaths of the poor are due to the financial terrorism of corruption. Everybody has been commenting about the overflowing granaries of the Food Corporation of India, while starvation deaths are taking place in Orissa. It is learnt that government of India has given substantial amount of grains free to the states like Orissa but apparently these are not reaching the starving poor. On the contrary, part of the grains made available to Orissa is being re-circulated and sold back to the Food Corporation of India. It seems that last year, because of failure of monsoon hardly 30% of the paddy area was planted in Orissa but already the Food Corporation of India has equaled if not exceeded the procurement target for paddy in that state! This is a clear example of how financial terrorism in the whole public distribution system is playing with the life of the hungry poor who are dying of starvation. Is not the damage caused to the poor in our country as heinous as the terrorist attack on the twin towers of New York? 35 There is an economic price to be paid for the uncertainty arising from acts of terrorism. The terrorist attack had an adverse impact on stock exchanges in United States and elsewhere. Some industries like travel and airlines were particularly affected by the terrorist attack. Financial terrorism also has a much wider impact on the economy. The PHD Chamber of Commerce recently came up with a report about how reduction in corruption by 15% will increase investment to 2.9% of GDP or Rs.63000 crores, which is thrice the FDI we get. It will increase GDP growth by 1.3%. In the Terror Tuesday attack about ten thousand people might have lost their lives. But in the UTI scam the two crores investors who had put their savings in US 64 found that their trust has been betrayed. The suffering of the victims who have lost their means of financial support, especially in their old age is no less. 36 Corruption can also be seen as a disease of the body politics. This disease is the disease of AIDS. AIDS flourishes because of uncontrolled sexual behaviour. Corruption

is financial AIDS and it flourishes because of financial rape and financial adultery. Financial rape occurs when the public servant forces the helpless citizen to bribe him to get even what the citizen is entitled to get as a matter of his right. Financial adultery takes place when both the public servant and the citizen or particularly the business community collude at the cost of the society. The World Bank came up with the following perception about the economic consequences of corruption. The World Bank views on the impact of corruption on the economy have been spelt out in the report on corruption in Poland. The relevant extracts form the report are reproduced below: For operational purposes, the World Bank defines corruption as the abuse of public office for private gain. While this definition does not include wholly private sector corruption, it does include the interface between private and public sectors without which much private sector corruption could not occur. Some of the examples are Bribery in purchasing government contracts, benefits, licenses, judicial decisions, evading customs duties, taxes and other regulations; theft or misappropriating budgetary funds and public assets; patronage, nepotism and cronyism; influence peddling like election or party financing in exchange for influence. Corruption is not likely ever to be fully eliminated but the objective is to minimise it so that it becomes and exception and not the rule, by turning it from a low risk and high return activity into a high risk and low return activity. The World Bank's approach therefore focuses on an economic analysis of the conditions conducive to corruption based on rents, discretion and accountability. Corruption is a function of all three. Corruption has the potential to flourish where rents are high, discretion extensive, and reporting and monitoring are poor. In combating corruption, it is useful to focus on minimising the extent to which these factors can influence behaviour, rather than relying solely on prosecution of corrupt individuals. Prosecuting the guilty is important but can do little to reduce the opportunities and incentives for corruption "upstream". To do this, it will be necessary to focus on rents, discretion and the efficiency of monitoring and accountability mechanisms in the political, administrative and other structures of the state. At the same time, it is important to ask why there have not been more successful prosecutions of corruption. This highlights the importance of including judicial, prosecutorial and police bodies among the state organisations to be scrutinised. The analysis based on high potential rents, extensive discretion and low transparency is also relevant to them. Corruption undercuts the macroeconomic, efficiency, equity and institutional functions of government. It is helpful to distinguish these four types of costs imposed by corruption: Macro-fiscal: lost revenues (from tax, customs duty and privatisation) and excessively high expenditure (through corruption loadings on state contract); Reduction in productive investment and growth: through abuse of regulatory powers, misprocurements and other costs imposed by corruption. International evidence indicates that countries with higher incidence of corruption systematically have lower

investment and growth rates and that public safety can be compromised by unsafe infrastructure. Costs to the public and to the poor in particular: via higher taxes than necessary, bribe extraction in delivery of services and poor quality of and access to services. Bribe are frequently a higher proportion of income of the poor even though they do not pay the highest bribes Loss of confidence in public institutions: corruption can undermine the rule of law, tax compliance, respect for contracts, civil order and safety, and ultimately the legitimacy of the state itself. 37 We have so far analysed the damaging consequences of corruption and the social roots of corruption. The challenge before us is, can India become corruption free. Is it possible to tackle the issue of corruption in society? As the Central Vigilance Commissioner, I believe that it is possible. My belief is based on the experience of other countries like Britain, Botswana and Singapore which have been able to effectively tackle the issue of corruption. In the Indian context, I think such a change is possible. My confidence is based on the following five principles observed by five eminent men: 38 Bertrand Russell, the eminent British philosopher observed that every opinion becomes respectable if you hold it for a sufficiently long time. Today it may not be respectable to think that India can become corruption free. But similar was the situation, at the height of British imperialism, when it was unthinkable that the sun would ever set on the British Empire. Nevertheless, the leaders of our freedom struggle led by Mahatma Gandhi made the idea, that India can become free of colonialism, a reality. Their opinion about a free India, which at one time might have been considered as a dream or impossibility, became a reality. 39 This goes to prove the truth of the statement made a French writer Victor Hugo who said There is nothing more powerful than an idea whose time has come. Perhaps looking to the extensive corruption in every walk of life that we see in India today, the idea that India must improve and become a less corrupt country is an idea whose time has come. 40 The third observation was made by another French thinker Alexis de Toqueville. He said that The inevitable becomes intolerable the moment it is perceived to be no more inevitable. Today the citizens of India may view corruption as inevitable. The purpose of this Guide is to make every Indian citizen realise that corruption is not inevitable. The moment the citizens of the country realise that corruption is not inevitable, then it will become intolerable and we can see a dramatic change coming up in the country for the better. 41 The fourth observation is attributed to the British writer George Bernard Shaw. He said that An ordinary person accepts the limitations of life in the society in which he lives and leads a peaceful life. The unreasonable man wants the society to change to his way of thinking and in the process achieves success. Today, reasonable citizens in India may come to terms with the prevailing corruption and try to lead a peaceful life. The

morally aware and activist citizens of the country would be following the footsteps of Mahatma Gandhi and in trying to bring about a change in the system. It may be recalled that when Gandhiji was in South Africa, he was thrown out in the middle of the night from the first class compartment of the train in which he was traveling, even though he had a valid first class ticket, because he was black. Many other Indians in his position would have accepted the injustice of the system and led a peaceful life. But Gandhiji who was a great moral leader thought this to be an unfair system and rebelled against it. Satyagraha was born in the mind of Gandhiji on that railway platform that night in South Africa. The citizens who read and take an activist approach to fighting corruption in our country by reading this guide will be following the footsteps of Mahatma Gandhi. 42 Unless there is a plan of action, mere sentiment or unguided action will not bring results. There is a story about a rat, a cat and an owl. The rat was being harassed by the cat. It went to the owl for the advice. The owl said that the rat could face the cat if it also became a cat. When on the next day the rat went and inquired from the owl how it, a rat, could become a cat, the owl said that he was there to give policy directions but implementation was the rats problem! The very purpose of this Guide is to empower every Indian citizen who wants to fight corruption and from being weak like the rat to become strong like the cat. For this, the strategy to be followed is the advice given by Michelangelo Buonarotti, the immensely talented Italian sculptor of the fifteenth century. Michelangelo was asked how he made beautiful statues out of marble that had no shape. He replied that the statue was in his mind and he went on removing from the marble whatever was not part of the statue and the statue emerged. Today every patriotic citizen desires that India must become a corruption free country. How to go about it and ensure that the prevailing corruption is tackled is the main theme of this guide. Specific actions have been indicated so that vision of a corruption free India can be realised. 43 There are four agencies in our country, which can be approached by the citizen to fight financial terrorism. The first is the judiciary. In its recent judgments the Supreme Court has enunciated three important principles, which will go a long way to improve the probity of public life and thereby check financial terrorism originating from the politics of our country. The first decision is that in the democracy, Constitution is supreme and it expresses the peoples will. Till now it was very common for the corrupt politicians to claim that they have been acquitted in the highest court in the democracy, namely the peoples court in the elections. The second decision is that the special provision in the constitution to the effect that a person who is not a member of a legislature can still be made a minister or chief minister or prime minister for 180 days. This provision was sought to be misused by some to virtually flout the spirit of the constitution. The court has held that the 180 days limit cannot be invoked more than once. The third decision is the clear judgment in the case of the chief minister of Tamilnadu pointing out that a person, who is not eligible to contest elections, cannot be sworn in as a minister or chief minister. These three judgments will go a long way in improving probity of public life in India. 44 The second agency that can be utilized by the citizen to fight financial terrorism are bodies like the CVC, CBI, anti corruption bureau, vigilance commissioners in the


state etc. The recent case in Delhi where the issue of corruption to the extent of the Rs.40 crores per month indulged in by the police and the municipal officials by collecting bribes from the hawkers, vendors and rickshaw pullers was resolved is a case in point. Ms Madhu Kishwar, an activist of the NGO Manushi, collected this data very patiently and the matter was brought to the notice of the CVC who then took up the matter with the Chief Minister of Delhi, Delhi Administration as well as Minister for Urban Development. The matter finally came to the notice of the PMO. Ultimately the PM on 23.8.2001 wrote to the Lt Governor calling for the abolition of licensing of hawkers, vendors and cycle rickshaw pullers, which was the source of massive corruption. The directive of the PM is being implemented. 45 The third agency available to the citizen is the print and electronic media to publicize cases of corruption and policies that encourage such financial terrorism. In the case of cycle rickshaw pullers and hawkers, the media played a very important part in highlighting the issue. 46 The fourth agency is direct action. The action taken by Lok Satta, an NGO in Andhra Pradesh to expose the extent of tampering of meters in petrol pumps and corrupt practices were put and end to it is an encouraging example. 47 We have focussed on means of good governance and how the corruption which is coming in the way of good governance can be fought by agencies like Rotary. This is only one aspect of problem of governance in India. If we look at Mankind is our business, the current theme, then the question arises: can the Rotary do anything so far as economic development is concerned? I have been arguing that in the current fractured politics of India it is necessary consciously to develop a network of champions. A look at this concept will be worthwhile here. 48 One of the recent steps we are taking is to bring out a more focussed attention on the debate on corruption. We propose to therefore come up with three indices about the level of corruption in government organisations which I would to see become an annual feature. 49 The first index will be the corruption intensity index which will be based on the following data available with the CVC namely (a) number of complaints received; (b) number of cases of major penalty recommended; (c) number of cases of minor penalty recommended; (d) number of cases referred to CVC; and (v) number of cases for prosecution. These numbers will be divided by the number of public servants who are under the purview of the CVC in that organisation. 50 Meta perception or self image of the organisations is the second index. All the organisations under the purview of the CVC are asked to rate themselves in a scale of 1 to 10, one being the least corrupt and ten being the most corrupt about how perceive their own organisation to be. They are also asked to identify the areas of corruption and what action plan they have to fight corruption. Thus the exercise of annual publication of the


probity perception index will become an opportunity for self introspection and initiating action to eliminate corruption. 51 The third element will be a field study made in Delhi, Mumbai, Calcutta, Madras and Guwahati by NGOs like Transparency International, Centre for Media Studies etc. over a period of two months. This in turn will give an idea about the level of corruption as perceived by the public based on exit polls. 52 The weightage to arrive at the probity perception index will be 70% for the field study, 20% for the corruption intensity index and 10% for the meta perception. The word probity perception index is preferred because it does not have the stigma of the corruption perception index while it still retains the sting. 53 It is a healthy development that there seems to be a growing awareness about the need for fighting corruption even from those who are in the supply side of corruption. Recently I had to address the Builders Association of India at Trichy on 23.1.2002. The Builders Association representatives said, We want to come out of the trap of corruption. We seem to have caught a tiger by the tail. How can we escape? Can you guide us? 54 Black money is the poison, which is leading to corruption in practically every walk of life in India whether it is politics or business, education or government operations. One of the sectors which is very closely associated with black money is real estate and the building profession. The construction industry can be a great catalyst for economic growth. In fact, whether it is a power station or a factory or roads, ports or even telecommunication, you need construction. If infrastructure is vital for development, construction industry is the infrastructure of the infrastructure industry. 55 Nevertheless the construction industry and builders have an image that their industry is very much corrupt. In the olden days one of the cynical observations about PWD was plunder without danger. The concept of percentage of cuts to be given in every project was well known. Even in the Trichy meeting I attended of BAI, I was shown informally what is the rate to be given to every level in the administration and also at the political level making up to a total of up to nearly 20.5%. If the cuts are not given, then our bills are not passed. In the meeting the BAI, the chairman pathetically said, We are now having a period of recession. If we do not bribe, we do not get contracts. Even if we take contracts because of the present conditions and perform at a loss, our partner who has not invested in our business continues to get his return. What he politely meant was that corrupt officials insist on their cut as there seems to be a very close linkage in this prevailing culture of corruption which involves bureaucracy, business and politics. There does not seem immediately to be a way out. 56 The builders themselves recognise that they are very much part of the problem. After all corruption involves two parties. It is not a one way street. It is like two hands coming together to clap. In every act of corruption there is a bribe giver and a bribe taker. The bureaucrats and political leaders form the demand side. The supply side is the


business. I had written in 1999 to FICCI, ASSOCHAM and CII about what these associations, which represent the Indian industry and business can do to check corruption. After all they were on the supply side of corruption. The replies received from CII and ASSOCAHAM are as follows: Dear Mr Vittal I am writing to you in regard to your appeal to play an active role in dealing with the issue of corruption. I do so after consultations within CII at the National and Regional levels. First we propose to communicate your appeal to all 4000 member companies of CII and to all 100 affiliated associations and their member companies. Second we request you to write a special message of 900 words which we would like to publish in the CII Communique which has very wide circulation I am pleased to bring to your notice that several companies have confirmed to CII that they do not "pay" irrespective of the pressures and implications. However many corporates do face ground-level problems, harassment and delays. There are enormous difficulties on account of laws and rules which are complex and which provide opportunities to create difficulties. The SSI sector is a major sufferer. This raises two issues: a) b) Simplification of laws and rules Need for accountability of the administration, and of individual officials

We need to set up an institutional mechanism to deal with these issues and we wish to be proactive, to work with you jointly and to work on a sustained basis. We would like to meet you in the near future to discuss further action. With warm regards (Arun Bharat Ram) Dear Vittal Saheb I am writing to thank you, most sincerely, for giving time. I greatly appreciate the opportunity to discuss several issues relating to corruption, simplification of rules and laws etc. May I also take this opportunity to confirm that ASSOCHAM would be happy to convey your appeal via-a-vis corrupt practices to its members through out communications as also putting your message on our website. I would therefore be grateful to receive a suitable message from you. You have formally requested industry associations to take up this issue and I am writing to confirm that ASSOCHAM supports your initiative and action.


We look forward to receiving your message as also your addressing us on the Information Technology Bill: Implications for the Banking Sector at ASSOCHAM House, 47 Prithviraj Road on 27th of this month. 57 Globally there is a growing awareness that from the supply side also it is necessary to control corruption. The United States in 1977 passed an Act known as the Foreign Corrupt Practices Act American companies if they indulge in bribing outside their country can be punished under that Act. Subsequently the whole issue was pursued by the American government vigorously with other OECD countries because the American companies brought to the notice of that government that other European companies like French, German or Swedish companies were paying bribes. They could show this expenditure as business expenditure and get income tax rebates. Finally in 1997 an Anti Bribery Convention was entered into by 34 OECD countries and ratified by February 1999. 58 There is a growing worldwide consensus evolving about the need for controlling corruption. This is because the cold war between the West led by the US and the Communist led by the Soviet Union had ended. So long as the world was divided into two blocks then if international organisations like World Bank, IMF etc. could gave loans to countries which happened to be corrupt or had corrupt dictates, the justification was that the particular leader might be a son of a bitch but he is our son of a bitch. But this sort of protection of the corrupt on the ground of strategic geopolitical considerations of the super powers no longer exists. Therefore today the developed countries are realising that when they give aid to other countries, their tax payers must be satisfied that the money is not wasted. In a way therefore globally fighting corruption is becoming an important issues. In this context, what the editor of Business Standard Shri Ninan wrote after attending the second world conference against fighting corruption held on 28-31st May 2001 at The Hague in Netherlands is worth noting: The wisecrack goes that everyone complains about the weather but no one does anything about it. I suppose the same thing could be said about corruption, on which Indira Gandhi famously explained away her own inaction: it was a global phenomenon, she said. Well that turns out to be true. Except that something is in fact being done about it on a global scale. Conferences are being held in quick succession to discuss the issue: one at the Hague earlier this week, which 1800 people attended; another soon in Prague, and then two more in South Korea before the end of the year. After working up remarkable steam on the environment and human rights, the global conferencing community has discovered corruption as an issue on which corrective action is urgently required. Dont laugh and turn the page. This is serious business. It may take a while before the conferences leads to measurable action, but it seems pretty clear that well get there. Remember that that the first major international conference on environment was held in Stockholm in 1972. From there to Kyoto was just over a quarter century. The human rights movement has gone from agenda item to action item in a much shorter period, and


I suspect that this will be true of corruption as well. Though what kind of action, and how effective it will be, remain unclear. 59 It is therefore obvious that worldwide there is a concern about corruption from the supply side. In India also it appears that the business community who are on the supply side of corruption would like to see that they come out of the trap of corruption. Let us be also practical and realise that not everybody in business feels that we should come out of corruption. There may be quite a few who are very happy with the present corrupt system and would like to have corrupt officials so that they are sure that if they paid the appropriate bribe their work will be done. There are businessmen who probably feel that a honest official is a nuisance to their way of doing business and instances are not known unknown where pressures have been brought on to see that honest people are removed from sensitive posts. One of the reasons for the prevailing corruption in our country is that in quite a few sensitive posts we may find corrupt people being posted. 60 The basic question is: is it possible to control corruption from the supply side? Attempts have been made in the past. For example in January 2000, the customs house agents in Mumbai had a meeting and decided that they would no longer bribe customs officials. This was because earlier they were paying bribes and they were showing that bribes as business expenditure and eligible for income tax deduction under Section 32(b). Subsequently, the Supreme Court ruled that the expenditure incurred for business should be legal and not illegal. Certainly giving bribe was illegal expenditure and hence they decided not to bribe. They came to me in January 2000 and said that they wanted to stop paying bribe it in every major port in India. I was very hopeful. But very soon I found that they went back to the status quo ante earlier stage. The customs department came out with a press note saying that this was an attempt to tar their image. 61 Can the builders association succeed where the customs house agents failed? It all depends on a number of factors. The first factor is how much determined are the builders to stop corruption? The builders were very open. They said that if they individually try to tackle the issue of corruption they would be crushed by the corrupt officials because they may just not get the contracts at all. It is a question of being willing to strike but afraid to wound. Can we make omelette without breaking eggs? 62 This is where if there is imagination and intelligence as well as a commitment to fight corruption, it may be possible to succeed. One of the ideas that came up in the meeting was that the following strategy may be adopted: The builders if they come openly against the corrupt officials stand to run a great risk of losing their own business. On the other hand, if there are NGOs which are active in the consumer movement or for that matter in fighting corruption the builders association can use them as a front to carry on the fight against corruption. A particular effective type of NGOs are the vigilance councils of Maharastra. The concept of giving voice to citizens in their fight against corruption was institutionalized in a unique government-citizen partnership in Maharashtra. Initiated by the Anti-Corruption Bureau of Maharashtra under the guidance of Shri R. Mendonca, the


formation of vigilance cells specific to trade, business, profession, industry etc. was seen as one way to resist and expose corruption. Having gained momentum, various organisations like Indian Merchants Chamber, Federation of Associations of Maharashtra, NGOs like AGNI (Action for Good Governance and Net working in India), Senior Citizens Forum, Association for Consumers Action on Safety and Health, Mohalla Committees etc. have promoted this idea. Despite a general belief that corruption has come to stay, those in the vanguard in the fight against corruption have not given up hope; nor have they been cowed down by the apparent power exercised by the corrupt. The structure of the vigilance cell is such that specialists from trade, business, industry would provide the technical inputs to a group of citizens and will perform the following functions: a) The Cell will advise and enlighten members of their industry/trade etc. about law, rules and procedures governing their trade etc. with a view to minimise the scope for exploitation and harassment by corrupt officers. b) The Cell will maintain a dialogue with senior government officers concerned with respective trade etc. Their interaction can help in bringing about reforms in laws, rules and administrative procedures. c) The Cell will function as a watch dog and thereby encourage citizens and corporates to resist and expose corruption. d) The Cell members will be in a position to intervene by taking up instances of harassment etc. of individual members of their group and insulate them from any persecution for blowing the whistle on corrupt officials. e) The Cell could also take up with the ACB the instances of demands for bribe and furnish verifiable information regarding acquisition of assets disproportionate to the known sources of legal income by corrupt officials/public servants. Most often in dealing with organized structures, there is apprehension that the citizen or concerned individual will be subject to hostility. By making optimum use of vigilance cells, the forthright voice will assume an air of authority and the deviating organization will be forced to take note of such voices. 63 There are consumer councils which are very active like the CERC, VOICE etc. These organisations may be encouraged to set up vigilance councils on the model of what has happened in Maharashtra. Such vigilance councils are formed, while the main activity of fighting corruption will be done by the consumer movement, the builders can give details about specific cases of corruption. The Vigilance Council can highlight these cases and arrange for traps if necessary. They can also take advantage of the CVCs benami black money scheme so that the corrupt officials who are having disproportionate wealth can be raided and brought to book. In addition to NGOs, the Indian Merchants Chamber for example has set up a separate council for fighting corruption Eminent people like JF Rebeiro, former Governor of Punjab are associated with this. It should therefore be possible to combine the concerned elders in the society who are keen to fight corruption and NGOs and use them as the spearhead by the organisation like the builders association to tackle the issue of corruption. After all as it is said, Sange Shakti Kaliyuge.


64 Comparisons, it is said, are odious. Nevertheless, in any discussion on economic progress, especially since the process of liberalisation began, comparisons are the order of the day. Comparisons of our country are generally made with China. While making such comparisons the central issue is forgotten that India is a democracy and a vigorous democracy at that, whereas China has a totalitarian system, even though their economic policies might have been liberalised. Sometimes comparisons of India are made with Singapore also. Singapore is an example of a country with hardly any resources, making tremendous progress. The progress of Singapore can be traced mainly to the influence of a visionary leader like Lee Kwan Yew who was also tough in ensuring discipline. Other South East Asian countries which made progress economically did not have the type of democracy we have. 65 If India is to develop more vigorously than at present, what should be the model that should be adopted? We have had visionary leaders who also had the political clout three times since independence Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi enjoyed a tremendous political clout and they could have shaped the nation in the way they wanted. They did initiate measures for development and the results have been mixed. 66 In the fractured politics of the country today, what we are witnessing is the weakening of the all India parties and increasing assertion of the regional parties. In such a political scene, can we expect a national vision to emerge and the vision realised by effective implementation of policies at the centre and state levels? Prima facie such a development appears to be an impossibility. Nevertheless, we can look at the successes we have achieved so far and see how they can be replicated. This may lead to a possible strategy for better development of the country. 67 If we make a list of our successes since independence, some achievements stand out. In spite of cross border terrorism we have remained so far as a single nation which is a billion strong and is multilingual as well as multi ethnic. The Green Revolution under which India achieved self reliance in agriculture and food; the White Revolution under which India became the largest producer of milk; The Blue Revolution which will include missile technology, atomic energy and space are some of our other achievements. The green revolution was achieved because of the necessity of freeing ourselves from being in a ship to mouth condition. The fortuitous combination of three eminent individuals C Subramaniam, Dr MS Swaminathan and B Sivaraman was a coincidence which resulted in the political leadership providing the broad directions followed by effective technical and administrative action for realising the green revolution. 68 The white revolution owes its success to two visionaries namely Tribhuvandas Patel and Dr V Kurien who had dedicated their lives to the development of the dairy sector, through the cooperatives. The blue revolution owes its success to the governments perception about the strategic importance of atomic energy, space and missile technology and the relative freedom and flexibility provided to the scientists and technocrats who ran


these departments compared to the rest of the bureaucracy. Nevertheless these successes form only a patchy record against the all round economic development achieved by countries like China or Singapore. 69 Their overall success is because of an overarching vision for the nation articulated by leaders like Lee Kwan Yew or Deng Xiao Ping. India is not likely to have such leaders. So, the articulation of the vision has to come from eminent individuals who are concerned about the progress of the country. Dr Abdul Kalam has given such a vision to the country when he suggested that by the year 2020, India should become a developed country. He has also indicated that he would be going round the country, talking to at least one lakh high school and college students to spread this idea. After spending a life time in the service to the nation, Dr Kalam is truly living up to the honour of the Bharat Ratna conferred on him. The question is how will that vision be realised? 70 The vision can be realised only by consciously promoting what I would call a network of champions. In every sector there are people who are dedicated and who have achieved success. For example in the area of medical care we have institutions like the Shankar Netralaya of Dr Badrinath at Chennai, LV Prasad Institute at Hyderabad or the Arvind Institute at Madurai which have shown how excellent medical care could be made to reach the poorest of the poor. If successful cases like this can be replicated throughout the country by forming a network of champions in one sector, then at least in that sector there would be nation wide progress. The same concept of network has been successfully demonstrated in the dairy sector by the NDDB where the Anand experiment has been reproduced successfully in other parts of the country including Bihar. The advantage of focusing consciously on promoting a network of champions in different sectors is that this will be in tune with the Indian ethos of supreme individuality on the one hand and the near impossibility of the political leadership in the context of the fractured politics of today to provide a direction when it comes to national development. The political leadership can still play a part if at least they can provide a vision. Lal Bahadur Shastri had this vision when he visited Anand and indicated that India should have thousands of Anands. We can therefore visualise a model where the network of champions would be encouraged both by the coming together of successful champions in different sectors through media like the Internet and also the patriotic and committed leaders in politics playing the role of what Lal Bahadur Shastri did in the dairy sector. 71 In the context of the fractured politics today, the question is whether it will be possible to achieve this network of champions on a nation wide basis. Such network may be more easily possible in the states. The Prime Minister while inaugurating the Indian School of Business in Hyderabad said that he would welcome a healthy competition among the states. Perhaps such a competition based on a network of champions may trigger India on to a new model for rapid and all round development which has not been thought of so far. *****