PM Modi to benefit from public perception on fight against corruption

Updated: Feb 12, 2019 7:14 AM

In 2018, India stood at 78, while China ranked 87 and Pakistan 117 in the CPI Index. Since 2015, India’s average CPI has been 78.5. The CPI is based on the opinions of business people and country analysts.

Fight against corruption: High public confidence may be PM Modi’s greatest achievement

By Suvrajyoti Gupta

Recently, the Transparency International’s Corruption Perception Index (CPI) 2018 was released where India’s ranking rose by three points, giving the Central government a much-needed boost in an election year. This is the most appropriate time to revisit the BJP government’s corruption performance between 2014-2018. In 2018, India stood at 78, while China ranked 87 and Pakistan 117 in the CPI Index. Since 2015, India’s average CPI has been 78.5. The CPI is based on the opinions of business people and country analysts. It can be seen as an important indicator of business/investor sentiment that effects foreign direct investment. For example AT Kearney’s Foreign Direct Investment Confidence Index shows that investors rank “regulatory transparency and lack of corruption” as the most important factor influencing their decision to invest. So when a legal counsel is asked to advise about the business risk associated with corruption in a given jurisdiction, the CPI is what he might look into. The CPI ranks can be attributed to the fact that the NDA has been disciplined, and has so far managed to avoid mega corruption scandals that rocked the UPA II.

The CPI, however, do not capture the everyday experiences with corruption of people. For that, we have to look to the Global Corruption Barometer (GCB) released by Transparency in 2017 (GCB for short). GCB found that the experience of corruption is much higher in India with nearly 69% of Indians having paid bribes compared to 40% Pakistanis and 26% Chinese. The government has tried to address this corruption experience by rationalising corruption sources through key economic initiatives.

For example, the improvement in India’s ranking under “Ease of Doing Business” has come because of radical improvement in just two parameters, namely ‘trading across borders’ and ‘issuance of building permits’, both of which have been digitised and been taken to single window clearance. Similarly, the introduction of the Goods and Services Tax (GST), instead of myriad state taxes, would hopefully reduce impediments to interstate commerce, introduce transparency and reduce tax evasion. Aadhaar gives people a reliable identity document. Tax evasion, inter-state trade, building permits and procurement of identity documents have been traditional rent-generating areas. The NDA, however, failed to reform other public services that are prone to bribery, namely public schools, public hospitals, courts and the police (GCB).

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When it comes to black money, the NDA’s inflated rhetoric undermines its solid achievements. It was never possible to put `15 lakh in every account. However, the NDA did manage to get declarations worth approximately `76,000 crore under its three flagship ‘black money projects’, namely Income Declaration Scheme (IDS) in 2016, Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2017 and under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

The NDA updated the anti-corruption laws in the country. It enacted the Prevention of Corruption (Amendment) Act 16 of 2018 (criminalises bribe giving, creates corporate criminal liability, extends the definition of criminal conduct), and the Benami Transactions (Prohibition) Amendment Act, 2016 (provides for expedited procedures to deal with property held for a beneficial owner where the same is fictitious or untraceable), amongst others. These legislations bring the Indian law closer to the UN Convention on Corruption 2003. There has been increased prosecution under these legislations in the last few years, leading to perhaps some deterrence against corruption.

The jury is still out on demonetisation though. It was seemingly targetted at the destruction of accumulated black money. Critics point out that 99.3% of the demonetised notes are back with RBI and India’s cash to GDP ratio remains almost the same, so, apparently, the exercise has failed. They also point to the collateral damage to the economy in terms of growth and jobs. The BJP, on the other hand, points to the tax compliance, as evidenced through rising income and corporate taxes collection, as a positive effect. Thus, even if demonetisation has failed to destroy black money, it might have slowed down its formation.

In one area where even the NDA has failed to make any difference is in building appropriate enforcement institutions, or anti-corruption infrastructure. The dysfunction in CBI is typical of this failure. Not only has the agency’s image suffered due to infighting but it remains severely understaffed (a problem noted by the parliamentary standing committee). There have been no serious efforts at building capacity at CBI or any other agency. It also has a large backlog of cases.

Enlightened laws and good intentions are to no avail if the enforcement does not match up. In the end, the GCB finds that 53% of Indians believe that the government is doing well in fighting corruption. This level of public confidence may well be PM Modi’s greatest achievement in the fight against corruption so far.

(Assistant professor and assistant director,  Centre for Alternative Dispute Resolution, Jindal Global Universit)

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