Extortionary Corruption and ways to remove it..


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Corruption in India is the fire topic now a days.
But extortionary Corruption is the viral problem in country....

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Extortionary Corruption and ways to remove it..

  1. 1. Mehul Bhanawat
  2. 2.  Meaning of corruption Forms of corruption Extortionary corruption in India. Statistical Analysis* Bribe* Corrupt Department* Areas of corruption* Ranking of corrupt country Impact of Extortionary corruption* To Economy* To Society* To Country as a whole Measures to combat Extortionary corruption – Productive theory toremove Extortionary corruption Ways to empower Citizen of India Conclusion.
  3. 3. This is the condition of the risingcountry India…Think about it…
  4. 4. “Ethical values in general have drasticallycome down and society has becomepermissive and accepts corruption asnormal.”- CFO of a leading pharmaceutical companyCorruptionEthical values
  5. 5. There is no one comprehensive and universally accepted definition ofcorruption. It can be broadly defined as:-“the misuse of public office for personal gains”“as an act of bribery involving a public servant and a transfer of tangibleresources”“Corruption = Monopoly + Discretion – Accountability”“An act x performed by an agent A is an act of institutional corruption if and only if:1. x has an effect, E1, of undermining, or contributing to the undermining of, some institutionalprocess and/or purpose of some institution, I, and/or an effect, Ec, of contributing to thedespoiling of the moral character of some role occupant ofI, agent B, qua role occupant of I;2. At least one of (a) or (b) is true:a) A is a role occupant of I, and in performing x, A intended orforesaw E1 and/or Ec, or A should have foreseen E1and/or Ec;b)There is a role occupant of I, agent B, and B could have avoided Ec, if B had chosen todo so.Note that (2)(a) tells us that A is a corruptor and is, therefore, either (straightforwardly)morally responsible for the corrupt action, or A is not morally responsible for As corruptcharacter and the corrupt action is an expression of As corrupt character.”Source: http://plato.stanford.edu/entries/corruption/
  6. 6. – Corruption is a serious disease and occurs in every economy, in every corner ofthe world. No country is free of corruption.– There can be various reasons :-*Competition.*Inflation.*Desire of luxury etc.– Corruption has no shape. It manifest itself in a variety of ways, continuouslymorphing into new forms.– It ranges from misuse of position of trust for personal gain to bending of rulesand regulations and also to turning a build eye to act which are morally andsocially unacceptable to the society.
  7. 7. Forms of corruptionThe main forms of corruption can be bribery, embezzlement, fraud, scams, extortion or broadly “some act that is against the law.” Is also includessevere deficiencies in corporate integrity systems, such as conflictsExtortionEmbezzlementScamsFraudBribery
  8. 8. Extortionary corruption• Extortion is invariably one-sided where in the publicservant extorts bribe from the beneficiary on thepretext of the threat of denial of service.• Extortionary Corruption can be defined as corruptionwhere money has to be paid to acquire services thatare legitimately due and honestly entitled.
  9. 9. • Extortion (alsocalled blackmail, shakedown, outwresting, and exaction)is a criminaloffence ofunlawfully obtainingmoney, property, orservices from aperson, entity, orinstitution, throughcoercion.
  10. 10. • The classical example for extortionary corruptionis a tax bureaucrat who demands hiscut, threatening to classify the clients tax returnas fraudulent and prosecute unless a bribe is paid(Hindriks, Keen and Muthoo 1999).
  11. 11. Details of Bribes Paid to VariousAgencies in BangaloreAgency/Service Proportion insample claiming tohave paidAverage payment pertransaction (IndianRupees)Electricity Board 11% 206Water Board 12% 275City Corporation 21% 656Hospitals 17% 396Regional Transport Office 33% 648Telephones 4% 110Development Authority 33% 1850Average 14% 857Further, 50% of the cases involving payment of bribes were extortionary in nature asagency officials demanded money; in a third of the cases, citizens offered speedmoney, anticipating that it would be necessary anyway.Source:- Citizen Feedback Surveys report of Public Affairs Centre, Bangalore
  12. 12. • Clearly politicians spending huge amount ofmoney in election, will want to get a good rate ofreturn.• C K Prahalad, the late management guruestimated that almost Rs. 2.5 lakh crore isearned by politicians over a 5 year term. Thiscalculation stems from an estimate that almostRs. 8000 crore is spent on Union Parliamentaryelections by political parties.• If assembly elections are included, theexpenditure could easily exceed Rs. 25000 crore.Clearly for this kind of ‘investment’ a return of atleast 10 times would be expected. Hence it is notunreasonable to estimate that almost Rs. 2.5lakh crores is earned by politicians over 5 yearperiod. That would mean almost Rs. 50,000 croreper annum.
  13. 13. Thus out of total corruption of Rs. 3 lakh crore, anywherebetween Rs. 50,000 crores to Rs. 75,000 crores(including localgovernment corruption) is political corruption and almost 80%of corruption is retail corruption. Thus though politicalcorruption attracts most attention, retail corruption cannot beneglected as it almost forms 70-80% of all corruption. Indeedwhile there are mere 5000 politicians there are almost 20million government employees.However, very few, if any people, much less politicians are punishedfor corruption. Indeed not a single politician has been jailed forprolonged period for corruption, though it is realistic to presumethat a very large percentage of politicians are corrupt. There is alsovery scant and not strong enough action against retail corruption.Hence both retail corruption and political corruption continue tothrive unchecked by law.
  14. 14. ImpactEconomyCorporateSocietyCountry aswhole
  15. 15. Impact of corruption on India’s GDP growth01020304050607080Corruption is a deterrentand a key risk to theprojected 9 percent GDPgrowth rate.India can achieve morethan 9 percent GDPgrowth if corruption isreduced.Corruption has no impacton India’s GDP growthrate.Source: KPMG’s Bribery and Corruption Survey 2011%ofRespondents
  16. 16. • It is difficult to estimate the quantum of corruptionin India. But in a GDP of national economy of Rs. 60lakh crores, almost 3 lakh crores – 5 lakh crores isrouted through corruption. Thus almost 5% of GDPis routed through corruption.• New York: Rating agency Standard & Poors (S&P) lowered Indias GDPgrowth forecast to 5.5 per cent despite a slew of policy measuresannounced by the government last week.• The World Bank estimates that almost 5% of globalGDP is lost due to corruption around the world andthis may be as high as 25% in some Africancountries.
  17. 17. 020406080100120Agree DisagreeIMPACT OF CORRUPTION ON BUSINESSCorruption skews the level playing fieldand tends to attract organisations withlesser capability to execute projectsCorruption creates inefficiency in thesystem and hence increases the cost ofoperationsIn many cases corruption is inducedby the private sectorCorruption has had a direct impact onyour business and reduced yourcompany’s growth which it could haveotherwise achievedCorruption has reduced your ability toaccessfunds from domestic financial marketsSource: KPMG’s Bribery and Corruption Survey 2011
  18. 18. Society is now afraid of extortionarycorruption, Aam Admi has nothing todo with this………
  19. 19. 1. Lack of strict enforcement and strongpunitive action.2. Weak enforcement of law.3. Tolerance of corruption.
  20. 20. What should corporate do?Corporate should realize that corruption is not merelymoral issue but actually an economic one. Corporateshould at least pay due taxes. Corporate should useinternational instruments to check corruption in thenation.What should common people do?Common people should use RTI to expose corruption. Withinformed collective assertion, common people can overyears transform the extent of corruption in India. Commonpeople should elect clean politicians.
  21. 21. • Truly said by a great philosopher “JOURNEY OFTHOUSANDS MILES BEGIN WITH SINGLE STEP”First step towards removal of extortioarycorruption was taken by C RajgopalachariThe economy of India was under socialist-inspired policies for an entire generation fromthe 1950s until the late 1980s. The economywas characterized by extensiveRegulation, protectionism, and publicownership, policies vulnerable to pervasivecorruption and slow growth. In1960s, ChakravarthiRajagopalachari suggested License Raj wasoften at the core of corruption
  22. 22. • Corruption is not just cash changing hands it is farbigger and far dangerous and far more complex ...let us fight all forms of corruption in the society, scams is just one form, misuse of power andauthority is one other in many more forms ofcorruption in India, One should know the waragainst corrupt is weak as long as other formsexists.. think .. about this...This the true picture of corruption.
  23. 23. Corruption is everywhere, if you talk aboutpolitics, business, sports, police, BMC, schools, colleges or anyeducational institutes and even at hospitals and media. Corruption ismisuse of opportunity, power and money and we cannot blame onlyleaders or officials. We people are equally responsible for corruption.Corruption is like cancer, you should act when it’s at small level. If youignore it may spread and situation can become worst.
  24. 24. AS I have conducted survey on this I found answerfrom many that it is impossible to finish or makeour country free from Extortionary Corruption.WHAT YOU THINK ABOUT THIS OPINION
  25. 25. • If Rakesh Sharma can touch the heights ofMOON and can do YOGA their….who can think of it no one….But he did it….then why extortionarycorruption can not came to END…..The only thing required is THAT.
  26. 26. Fighting the menace:Road under constructionThe Indian government’s track record incombating bribery and Extrotionarycorruption has not been very effective. Themain reason for this is political interferenceand delayed justice that impairs theeffectiveness of the verdict, opined corporateIndia. Respondents also stated that corruptionlevels are expected to remain at the currentlevel irrespective of the current andimpending legislations.
  27. 27. Good0%Average16%Poor84%India’s track record ofenforcement of briberyand corruption lawsThe Prevention of Corruption Act came intoforce in 1988.However, the number of convictions under thisAct are considered a abysmally low. Nowonder, 84 percent of the respondents believethat the Indian government has not been veryeffective in enforcing anti-bribery andcorruption laws.The Right to Information Act (2005), alandmark legislation, under which one canseek specific information under the control ofpublic authorities with the objective ofpromoting transparency and accountability ofthose holding public positions .This act inrecent times has helped unearth certainprevalent malpractices in the country.Source: KPMG’s Bribery and Corruption Survey 2011
  28. 28. Other anti-bribery and extortionary corruption initiatives in India include the presence of theState LokAyuktas; Central Vigilance Co0mmission; proposed National Anti-Corruption Strategy;Guidelines on Corporate Governance. The moot pointhowever is ‘why enforcement of these legislations has notbeen effective?’REASONS %Belief that the laws will not change anything 11%Lack of understanding of the law by affected parties resulting in little or noattempts to seek legal recourse7%Political Interference 20%Delayed justice that impairs theeffectiveness of the verdict 18%Involvement of multiple agencies in investigating claims charges filed, whichfurther delays fact finding and eventually the verdict14%Penalties not being harsh enough to deter repetition of the crime 15%Fear of retribution/ victimisation by affected parties 13%Source: KPMG’s Bribery and Corruption Survey 2011
  29. 29. Public InterestDisclosure andProtection ofInformer (Whistleblower resolution)12%Prevention ofCorruptionAct, 198823%Right toInformationAct, 200516%CVC’s NationalAnti-CorruptionStrategy14%Hotlines institutedby the Income Taxdepartment andother governmentdepartments16%CentralVigilanceCommission19%Source: KPMG’s Bribery and Corruption Survey 2011
  30. 30. India has been featuring low on TransparencyInternational’s Corruption Perception Index. In fact weslipped three positions, ranking at the 87th position inthe 2010 survey (84th rank in 2009 survey) as opposed toChina at 78 and Brazil at 69.Stringent punishments, high penalties and zero toleranceof corrupt practices are some of the measures that couldbe adopted in order to curb bribery and corruption. China forinstance levies high fines and may impose death penalty incase a person is convicted of corruption.10 The laws in Chinaalso stipulate that public officials disclose their income andassets
  31. 31. • Increased awareness on laws and regulations• Increasing the sphere of current legislations• Strong law enforcement• Collective effort by the private sectorNeed To Incorporate
  32. 32. It is a fact that bribery and Extortionary corruptionis a growing menace that has the potential toadversely impact India’s economic growth, andimage to the world. By signing the G-20 Anti-corruption plan, India has signaled to the world itscommitment to tackle this issue. However, unlessconcrete steps are taken in the enforcement ofexisting provisions under law toprevent bribery and corruption, little change canbe expected.
  33. 33. In order to curb corruption, organisations couldadopt the following preventive mechanisms:• Draw up a comprehensive code of conduct and ensurestrictenforcement of the code communicating zero tolerance towardscorruption.• A regular monitoring mechanism to address issues arising out ofExtortionary corruption.• A structured whistle blowing mechanism to report potentialExtortionary corruption issues.• A comprehensive and periodic risk assessmentmechanism, including third party audits with specific reference tocorruption related risks.• While stringent compliance programs, upgraded controls andregular monitoring could help to prevent Extortionarycorruption, social control like building an ethical culture in theorganisation is one of the best ways to prevent any form ofunethical practice including Extortionary corruption.
  34. 34. “ Just as it is impossible not to taste honey or poisonthat one may find at the tip of one’s tongue, so it isimpossible for one dealing with the government fundsnot to taste, at least a little bit, of the King’s wealth. ”(Kautilya, Arthashastra).