We in India have reached a turning
point, where growth and corruption are playing their
roles in equal measure. How these two pan out, and
the extent to which corruption becomes central to
the life of the nation will determine India’s polity
and reputation in the next few years.
The reputation has taken a huge beating over the
last few months. Make no mistake about that. I
remember March 2001 in Washington DC, just after an
excellent budget of Yashwant Sinha, when Tehelka’s
spy-cam caught BJP President Bangaru Laxman
accepting a bundle of Rs.1 lakh. For the next few
days, I had to deal with one sniggering question
after the other about politicians taking bribes as
little as $2,200. It was terribly embarrassing. But
trivial in today’s context.
The big fish are no longer interested in minnows.
Today, we are talking of several thousands of crore,
and billions of round-tripped dollars. Transparency
International’s 2010 Corruption Perception Index
ranks India 87th out of 178 countries. Things have
worsened. The rank was 84th in 2009; 85th in 2008;
and 72nd in 2007. I suspect that the 2011 index will
show an even greater decline, given the public
discourse on, and universal disenchantment with, the
monumental telecoms corruption.
Here’s my take on growth and corruption. Some days
ago, the government released its final figures for
real GDP growth during 2009-10, as well as the
estimates for 2010-11. Last year’s GDP growth has
now been frozen at a very creditable 8 per cent. For
this year, growth is estimated at 8.6 per cent —
close enough to the 9 per cent that we now consider
our birthright.
I have no doubts that we will witness several years
of GDP growth in the region of 9 per cent per annum.
It has everything to do with outstanding
entrepreneurship at all levels, across all sectors,
in urban as well as rural areas, and covering all
manner of goods and services. This growth has
created, and will continue to create, greater
prosperity for many and, hence, the desire for more
wealth, income and consumption among the
beneficiaries. The gainers from growth will multiply
over the years, as they have in the last decade.
Within this framework of high growth sits the
central and state governments which, for all their
liberalisation, still have a plethora of permits and
quotas for doing business. The World Bank’s Doing
Business, 2011 survey ranks India as 134th out of
183 countries. It involves activities like starting
a business, dealing with construction permits,
registering property, getting credit and enforcing
contracts. We are in great company. Some of the
countries as bad or worse are the West Bank and
Gaza, Algeria, Nigeria, Lesotho, Tajikistan,
Madagascar, Sierra Leone and Syria — just so that we
know where we belong.
In this vast kingdom of permits sits a few choice
emperors. These have to do with what I call the
“Zamin key neeche aur aasman key upar” licenses —
mining, hydrocarbons, civil aviation and spectrum.
The investments are large; the gains are huge; and
governments have total monopoly over the power to
grant entry. It is not surprising, therefore, that
2G seems to have been the font of the biggest bribes
in modern India, followed by mining. As we continue
to grow, there will be greater pressure on such
resources. In addition, there will be burgeoning
demand for land — be it for highways, housing
estates, industrial parks and special economic
zones.
Each of these high income earning resources will
increasingly demand heftier approval prices.
Superimpose this with the shortening half-lives of
ministers and the rapidly rising costs of election
campaigns throughout India, and the story of
corruption growing hand in glove with growth becomes
complete.
Up to the mid-1980s, we had low growth and purely
re-distributive corruption. By that I mean a large
number of chaps trying to get their tiny slices of a
very small pie. By 2011, we have fully transited to
growth oriented corruption, where the permission
giver demands much more because he is giving the
permission seeker an opportunity to tap exponential
growth. Unfortunately, the stage of rampant
growth-driven corruption tends to have a long shelf
life, especially in Asia. It is not surprising that
Transparency International ranks China 78th,
Kazakhstan 105th and Indonesia 110th. Anybody in the
know will vouch for the manner in which officials in
local governments and the People’s Liberation Army
make money by giving permits in China; or that the 5
per cent culture is alive and well throughout
Indonesia.
The real question is when will India transit to
growth without pervasive, high priced corruption?
That depends upon the quality of governance in the
states and in Delhi. Which is why one must expect
the worst — and so fight against the shame every
passing day.
Published: Business World, February 2011