The document discusses corruption in India, highlighting its economic impact which includes increasing costs for businesses and the creation of a black economy. It outlines a two-pronged anti-corruption strategy that combines preventive measures like the Right to Information (RTI) with deterrent measures such as Lokpal. The root causes of corruption are linked to market distorting policies and discretionary powers leading to misuse and siphoning of public funds.

1. Tackling Corruption in India
Ritesh Kumar Singh
Mumbai, India
(rk1234.singh@gmail.com)

2. To ponder
• Do you know what is the size of black economy in India?
• Do you know what was the loss to the exchequer because of 2G
scam?
• Do you what % of social sector spending actually reaches the
intended beneficiaries?
• Do you know what’s the latest ranking of India in Corruption
Perception Index of Transparency International?
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3. The Economics of Corruption
• Corruption adds 10% to the cost of doing business globally and as
much as 25% to the cost of public procurement (UN Estimation)
• Corruption is like an additional tax which cuts into the profits of
businesses.
• Corruption restricts the flow of investment, and in extreme
situations, it drives out businesses from a country and stifles
economic growth
• Corruption creates black economy and reduces the effectiveness of
public policies with regards to inflation management and distributive
justice
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4. Components of a Typical Anti-corruption
Strategy
• A typical two-pronged approach combines preventive and deterrence
measures to check the incidence of corruption
• Preventive measures, while promoting transparency are devoid of
excessive discretionary provisions and leave minimum scope for
underhand dealing and kickbacks
• Deterrence, on the other hand focuses on penalizing those found
guilty of corruption so that taking lessons others do not engage in it
• An example to distinguish the two approaches is the Right to
Information (RTI) and Lokpal, the citizen’s ombudsman
• While measures like RTI prevents corruption by increasing
transparency, Lokpal deters corruption by penalizing the corrupt
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5. Genesis of Corruption in India: Market
Distorting Policies
• In India, the root of corruption lies in market distorting policies which
induce diversion of public money and creation of vested interests e.g.
India’s price control and subsidy regime
• Subsidies on food, fuel and fertilizer are often given in the name of the
poor yet a substantial portion of these are siphoned off by un-intended
beneficiaries through corrupt means
• Such policies cause increasing subsidy burden and fiscal deficit. It also
leads to creation of black economy which reduces the effectiveness of
public policies with regards to inflation management and distributive
justice
• Discretionary powers in the hands of bureaucrats and politicians being
misused or favorable policies auctioned for personal gain, has become
quite common in India as has been seen in the allocation of 2G
spectrum.
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6. Thank you