In his recent international visits, prime minister, Modi in his characteristics style observed that “he wants the country to be recognized as ‘Skill India’ in sharp contrast to the tag of ‘Scam India’ a dubious distinction it earned during a decade of erstwhile UPA – dispensation.
The grand old party has taken strong objection to the observation which its senior leaders allege is tantamount to diplomatic misdemeanour and sullies India’s reputation in the comity of nations. This exposes its perverted mindset that perceives mere mention of scams as disturbing but not their actual happening [which is a hard fact, even the Supreme Court had given orders and sent ministers to jail].
Having presided over a plethora of scams, it is only natural that Congress would be embarrassed at the very mention of corruption all the more when the prime minister resonates this from a global platform. But, let this be understood in no ambiguous terms that corruption is the biggest enemy of development. There is in fact, a strong inverse relationship between the two.
Put simply, an act of corruption involves an official or minister [acting on behalf of government] doing favour to a private party in exchange for money or any other pecuniary advantage. While, both the former and the latter gain [as individuals] the country suffers a loss. Since, the entire governance structure is plagued by this malady, it was inevitable that the loss would run in to hundreds of thousands of crores. For details on this and resultant deleterious impact on development, please read:-
Keeping an eye on personal aggrandizement, the powers that be in the then government led by UPA formulated policies and laid such rules which put overwhelming reliance on ‘discretion’ and ‘arbitrariness’. Considering that import transactions are more amenable to discretion and manipulation, policies that led to increasing dependence on imports received greater thrust. Over-centralization in decision making gave mandarins in the seat of power additional leeway.
Viewed from this prism, one should not be surprised over India importing almost all its defense requirements despite having indigenous capabilities to manufacture the items here. The taxes and duties structure [exemption from import duty but high excise duty] was appropriately dovetailed to favour imports. Such an arrangement suited political establishment of those years which is evident from a plethora of scams in defense deals.
In fertilizers, despite India’s commitment to remove quantitative restrictions [QRs] under WTO way back in 2001, the government continues to regulate import of urea as only a select few designated state trading enterprises [all owned and controlled by government] are allowed to import it. Besides, pricing policies pursued for over two-and-a-half decade discouraged increase in domestic production leading to high imports at exorbitant price. This clearly points towards individuals gaining at the cost of nation.
For decades, government has been spending thousands of crores on import of pulses and oilseeds every year. It would be naive to believe that Indian scientists do not have the technology to help farmers increase productivity of these crops. Yet, the sole reason for stagnation in their production is flawed policies whereby these crops did not receive price support even as minimum support price [MSP] of wheat and paddy was raised indiscriminately all these years.
In oil and gas sector, under production sharing contract [PSC], cost recovery model is used to compensate exploration and production companies for their investment. This provides room for inflating expenses as the operator is first allowed to recuperate all his cost before sharing profits with the government. Revelations made in report of the Comptroller and Auditor General [CAG] on irregularities and gold plating of capital expenses in KG-D6 field clearly points towards quid pro quo conferring gains to operator at the expense of exchequer.
For distribution of natural resources such as coal, other minerals and spectrum, all along UPA dispensation followed a committee system. For instance, there was a steering committee in coal ministry which acted in a totally ‘discretionary’ and ‘arbitrary’ manner for allocation of coal mines. Department of Telecommunications [DoT] acted likewise for allocation of spectrum. Linkages for fuel viz., coal, gas etc were also given in an arbitrary and non-transparent manner.
The taxation regime in the country is crowded with all sorts of exemptions and deductions. Incentives such as accelerated depreciation and deductions for research and development [R&D] expenses alone cost the government over Rs 45,000 crores in 2014-15. Other incentives for special economic zones [SEZs] under Sections 10A and 10AA led to revenue forgone of over Rs 17,000 crores in 2013-14. Blatant misuse of these facilities in connivance with officials – albeit for a price – is too well known.
The manner of administration of subsidy and welfare schemes such as food, fuel, fertilizers, mid-day meal, healthcare, jobs etc [these guzzle hundreds of thousands crores every year] is such that these become prone to large-scale mis-appropriation and embezzlement of funds. What former prime minister Rajiv Gandhi said nearly 3 decades ago that ‘only 15% of funds under welfare schemes meant for beneficiaries actually reach them’ still holds. Given the scale of ever proliferating scams, no wonder this percentage may have declined further.
The element of ‘discretion’ and ‘arbitrariness’ in decision making has not spared public sector banks [PSBs] either. If today the non-performing assets [NPAs] of banks have increased to 4.4% of outstanding loans and expected to touch 5.9% at the end of 2015-16 [making them literally bleed], a lot of this owes to loans given to private parties/corporate without carrying out due diligence and assessment of credit-worthiness. Rarely, PSBs have held corporate accountable for delinquencies.
All such ‘customized’ policies and recourse to ‘discretionary’ processes – intended to enrich a select few – got a boost because there was easy passage for corruption money made from the dubious transactions enabled by such policies & processes. In the absence of a law, it was easy for offenders to stash funds to safe haven jurisdictions. Such easy passage prompted government of the day to frame more of such policies and the vicious cycle continued. Now, Modi – government has made a frontal attack on both.
While, on one hand the government has made all its actions ‘policy driven’ and ‘transparent’ leaving no scope whatsoever for discretion, on the other it has passed the Undisclosed Foreign Income and Assets [Imposition of Tax] or so called black money Act which will completely block movement of money abroad. Given the scale of punishment for evaders viz., 30% tax plus 90% penalty and prosecution leading to jail up to 10 years, any person keen to transfer funds illegally will think million times before venturing in to such unconscionable act!
The law will take effect from next financial year 2016-17 after granting a small window of opportunity [this will commence in July, 2015 and will be available for a brief period of 2-3 months] under which evaders can disclose their foreign assets/income and pay 30% tax plus 30% penalty. However, they will be spared prosecution; nor this disclosure will be used as evidence for initiating action under any of extant laws such as IT Act or Company Act or FEMA [foreign exchange management Act].
In a nutshell thus, Modiji has dared to catch the bull by the horn. Having clearly recognized that corruption stymies development, he has proceeded with alacrity to effectively combat both its ‘CAUSE’ and the ‘EFFECT’. He needs the support of 1.25 billion people to succeed in this mission or else putting India on a fast growth trajectory will remain a distant dream.