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  1. Starting with demonetisation, prime focus on corruption has now moved to issue of digitising India

Starting with demonetisation, prime focus on corruption has now moved to issue of digitising India

On April 14, the Prime Minister extolled the citizens of benefits of Digi money and urged the use of Digi Dhan as part of clean-up India campaign against the menace of corruption while emphasising the need for extensive use of BHIM app.

By: | Published: April 27, 2017 6:07 AM
The relentless fight against corruption was also reflected in the Union Budget through restrictions on funding of political parties and on cash transactions. (Reuters)

On April 14, the Prime Minister extolled the citizens of benefits of Digi money and urged the use of Digi Dhan as part of clean-up India campaign against the menace of corruption while emphasising the need for extensive use of BHIM app. Earlier, in December last year, while introducing BHIM, the PM had also emphasised the virtues of cashless economy. And earlier still, one of the two objectives of demonetisation of specified bank notes was also stated to be corruption. The relentless fight against corruption was also reflected in the Union Budget through restrictions on funding of political parties and on cash transactions.

While it is apparent that the government is making concerted efforts, to eradicate corruption by targeting the stock of unaccounted money, there are numerous anecdotes that show that flow of unaccounted money has not been stalled, and hence relentless raids continue to be conducted across the country. Indeed, the menace of corruption is hard to address, especially the flow or fresh creation of unaccounted money. And that is where, the PMs exhorting to adopt Digi-Dhan and BHIM app are appropriately contextualised. The implementation of GST, with a trail of transactions would also help in identifying creation of unaccounted money.

The eradication of corruption is not only a social necessity, but has strong economic rationale. To create an environment of conducive growth and ensure ease of doing business, corruption has to be addressed specially in interest of our young demographic population. Corruption, in socio-economic terms, has both direct and indirect costs. While the direct costs are well known in terms of scandals and loss of confidence in administration, the indirect costs are debilitating causing low growth and higher income inequality. It can also erode ethical standards of citizens. Thus, it has significant impact on macro-economic stability and sustainable economic growth. It also impedes conduct of budgetary and monetary policy, weakens financial oversight and hurts inclusive growth. Corruption weakens government capacity to raise revenue and perform its core functions by diluting culture of complaints and increasing tax evasion. Corruption also inflates costs in public procurement process and undermines the quality, and even the quantity of public spending. The general costs also rise in the economy because citizens, manufacturers, and industrialists factor corruption in the pricing model. The uncertainty for firms also hurts growth of economy. Social and environmental concerns are relegated, and enforcement of environmental regulations suffer, leading to more pollution and over-extraction of natural resources.

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The prime focus on corruption, which started from demonetisation, has now moved to a closely related issue of digitising India. To achieve a less cash economy, India would need to develop a medium to long term plan for a seamless transition from the high cash economy that it is now, to extensive adoption and use of technology in conducting business and commerce in the country. In this period of transition, three phases need to be recognised. There are certain measures that can show immediate impact. Then there are some fundamental factors that need a longer time frame and only can change with persistent and concerted efforts. And finally, there are deep rooted culture and psychological factors that require fundamental changes in thinking and have inter-generational implications. The fight against corruption to achieving a less cash economy would need to be addressed in the context of these three segments. In the second category would be those initiatives which require technological support, equipment and programming as well as cooperation from respective institutes of chartered accountants and cost accountants as well as practising legal experts on taxation. Finally, to change the deep rooted cultural and psychological factors, support of social, educational, and religious leaders would be required to effectively eradicate the menace of corruption.

It is clear that PM Modi is fighting the battle diligently as the route charted from demonetisation to Digi-Dhan strategy reveals. Now that the governments initiative in last six months has led to emergence of an army of citizens against corruption, need is to look for a courageous overall plan with a road map and benchmarks on a timeline.
The war against the malaise of corruption has to go beyond series of surgical strikes and needs precise planning with scenario analysis, and flawless execution. The government may consider strengthening efforts to eradicate corruption from exclusively tax-oriented approach to a broad-based approach. Hence, the PM’s offensive on financial corruption should be strengthened to be multi-pronged approach, to include all forms of corrupt practices. The giving up of lal battis and such VIP practices by the government is a step in right direction, which strengthens the fabric of equitable society and discourages malpractices.

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