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Make laws to prevent scams
Posted on November 23, 2010 | Author: Abheek Barman | View 130 | Comment : 1

The sudden convulsion against corruption is politically motivated, but there is at least one major thing politicians can do to clean up most of the mess.

India's Parliament is obsessed this autumn with one subject: corruption.

This avalanche of moral outrage began in the drawing rooms and cocktail lounges of Delhi around July or August with well-heeled folks shaking their heads and muttering their doubts whether the city would be ready for the Commonwealth Games.

It took little time for tales of delay and ineptitude to snowball into charges of graft.

Then the focus shifted to Mumbai’s Adarsh Society, built for war widows, gifted to military and political bigwigs.

One chief minister and one sitting MP were gone by the time Barack Obama’s aircraft took off from Delhi.

But the biggest charges of graft have been levelled at former telecom minister Andimuthu Raja, who’s being accused of having caused losses of up to . 1.7 lakh crore to the exchequer. Raja too has left government.

Most Indians, from the humble truck driver buying his way through toll gates to the homemaker who has to bribe the agency to supply cooking gas, live with graft every day.

So why are we suddenly convulsed by sleaze in government?

The answer, most probably, is because there isn’t much else for the Opposition to do.

The scandals were headlined before and during this session of Parliament and an Opposition bereft of issues or ideas to debate, seized it gratefully with both hands to block both Houses.

This makes the main Opposition parties, the BJP and the Left, guilty of blocking reforms that could have made important changes in rules that govern critical — and unreformed — sectors of the economy. Karnataka is being rocked by allegations that over the last two years, chief minister B S Yedyurappa has been signing over government land to his relatives, who’re supposed to build businesses on these plots.

India has warped rules that allow governments to do this sort of thing.

In this session, Parliament was supposed to discuss a new law that could have cut through the clutter and loosened governments’ grip on land. But the Opposition won’t let that happen.

Three men, Karunakar, Janardhan and Somashekhar Reddy, were critical in the BJP’s 2008 victory in Karnataka.

By some accounts, these folks, who operate mining businesses in Bellary, propelled the party to victory in at least four districts by greasing palms all around.

The Reddy brothers are being investigated for mining — and exporting — billions of dollars of iron ore illegally in Karnataka and neighbouring Andhra Pradesh.

The Reddy brothers and their main benefactor in Delhi, Sushma Swaraj, aren’t too pally with Yedyurappa.

Earlier this year, hemmed in by charges of sleaze in mining activities, Yedyurappa’s government banned the export of iron ore from the state, a ban that the high court upheld recently.

A new law to replace India’s archaic rules governing mining activity was supposed to have been tabled in Parliament in this session. By blocking Parliament, the Opposition is unlikely to let that happen. So, illegal mining and the gigantic profits from that are likely to continue merrily for many months to come. So the Opposition, which claims to be campaigning against corruption, seems to have quite another agenda.

To hold up Parliament before it can get down to legislating rules which could have cut down on sleaze. One of my aunts claims that India has become more corrupt with every passing year. Has it?

Is there a way to measure corruption? This month, Washington-based think tank Global Financial Integrity (GFI) published the results of a study on India’s underground economy. It that says through the 60 years from 1948 to 2008, Indians illegally salted away more than $460 billion overseas. Another $178 billion is hidden away within the country.

GFI says, quite apologetically, that this number could be much smaller than what’s actually stashed away, because it’s impossible to measure transactions from cross-border criminal activity or hawala trades. GFI reckons that the much of the money illegally sent overseas goes through mispricing of trade: imports are overpriced and exports are underpriced. Both ensure that a lot of cash which should have flowed into India stays back. The study also points out, quite logically, that as India opened up to more trade flows, the avenue to salt money away grew wider.

It reckons that the size of the underground economy was about 27% of the economy in the pre-reform years of 1948-1990. Thereafter, things get jollier, and in the years 1991-2008, the underground economy bloats to about 43% of the economy. That seems to bear out my aunt’s hunch. As with most other things, when it comes to illegal money, fashions change. Earlier, the bulk of illegal money stayed at home. By 2008, only 28% was held in India, the rest went overseas.

Till the mid-1990s, people who were sending money overseas preferred to keep it in banks in developed countries like Switzerland and the US, rather than in offshore havens like the Canary Islands. Today, it’s the opposite: nearly 60% of the money overseas is in offshore havens, the rest are with banks. If trade reforms speeded up illegal money transfers overseas, will further reforms help curb corruption?

They will, if the reforms just make India an easier, hassle-free place to do business in legally. Tax rules, which got incredibly complex and cluttered with exemptions, surcharges and cesses, need to be cleaned up. Governments in Delhi and the states need to get out of acquiring land and peddling it. But there's one thing that could be the real game changer. Parliamentarians must agree to change the rules by which political parties and election costs are funded.

Today’s rules encourage parties to accept cash; businessmen at every level therefore need to hold cash to pay politicians and parties. Bodies like the Election Commission make things worse by capping election spends to ridiculously low levels. In Karnataka, for example, a candidate for municipal elections can spend a measly . 2 lakh.

For a Lok Sabha election, where candidates must fight for the affections of a million voters in each constituency, the spending cap is . 25 lakh — or two rupees fifty paisa per voter.

Want less corruption? Start by making political funding legit.

Comments (1)

On the issue of corruption,Mr.Abheek Barman opined that the opposition is spending more time on the issue.what is the role of opposition in a democracy? When government is spending lot of time on very old issues like blast cases and CBI leaking information to the press selectively and media giving dis-proportionate coverage, what else opposition will do?
The question of mis-governance and corruption are as old as our independence day. Corruption has entered every where from the subtle aspect to the gross aspect of our society. The prime ministers, chief ministers, chief justices and other constitutional authorities are mute spectators and victims of circumstances. The rulers/politicians over the years have created institutions around their families. The primary family interest is national/state interest. Postings and governance are done accordingly.Now talking of eradicating corruption all of a sudden is a joke. People have become used to it. "Yedha Raja Thadha Praja". People are given moral licence to be corrupt.
So if corruption has to be eradicated or minimized and if proper governance has to come in place, a second independence movement has to come. In this direction MATERIALIST SPIRITUALIST MISSION TRUST has done substantial theoretical work and can become a guidance.
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Posted by Venkataramanaiah Chekuru,CEO at CVR SYNERGY MANAGEMENT SERVICES|23 Nov, 2010

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