He also asserted that developed nations must do their part in tackling the problem of corruption as money taken out illegally from developing countries often find its way to places like London.
Replying to a question on whether corruption in India remained a big issue, the outspoken central banker said, “It is an important tax on the system which impedes good decision making and impedes economic growth”.
Stating that it has come down significantly in India, Rajan gave examples of railway ticketing and the tax department.
“I think technology helps. As for example, we moved to automated railway ticketing, the corruption there has come down substantially and the touts no longer squeeze all the supply and sell them separately. Income tax has been automated.
“You don’t have to go to the income tax inspector to get your money back. I find it easier to file income tax in India than filing my US income tax,” he said to the amusement of many present during a discussion at the Chicago Booth School of Business here.
Rajan said there is a very strong upsurge against corruption in India.
“We have sort of a free press, which tries to unearth some of these instances. We have a public which is fed up with petty corruption. I think the government has taken a number of steps to increase transparency in contracts, in allocations.
“This has been a process of the last few years and I think we are in a much better place than we used to be. So the grand-level corruption has diminished somewhat. Has the corruption been extinguished? Absolutely not. There is a lot of work that needs to be done,” he added.
He was asked about the controversy over the UK Prime Minister David Cameron being caught on camera telling the Queen that the anti-corruption summit here would see “leaders of some fantastically corrupt countries coming to Britain”.
Rajan replied, “I don’t think it is necessarily cultural, there are certain aspects of what one might call corruption in one culture which is not seen as corruption in another. But this idea of ‘I will do the wrong project if you pay me enough money’, is not something any society will welcome as an appropriate behaviour.” With regard to India, the central banker said the country was tackling the issue at various levels..
“There is more way to go and there are examples of the countries that have tackled corruption very effectively and we need to learn from them. Singapore is one example. At the same time, let me also stress that the fight against corruption does not begin and end in the developing countries.
“It also requires support of the countries like the UK and US. A lot of money that is taken out shows up in places like London or in places elsewhere and therefore the moves on trying to identify beneficial ownership and making sure that the money that was taken out illegally or the money that is evading taxes is brought to justice.
“That is extremely important and we need full support of industrial country governments to make that happen and I am glad that the need for cooperation among industrial countries is emerging on this. But countries need to walk the talk on this. It is not just the emerging markets that are part of the solution but industrial countries are also in containing corruption,” he added.