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LAW, CORRUPTION AND DEVELOPMENT

Project work on

Law, Corruption and Development


Prof. Hanumant Yadav
(FACULTY OF ECONOMICS)
SUBMITTED BY:
Vivek kumar sai
(IIIrd Semester, Roll No.146)
Sec- C
B.A. LL.B.
SUBMITTED ON:
19 September, 2011

HIDAYATULLAH NATIONAL LAW UNIVERSITY


Raipur (C.G.)

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Table of Contents:
Acknowledgment..(i)
Objectives.....(ii)
Research Methodology.(ii)
Introduction.5

(a) Law, (b) corruption 5

(c) Development .....5


Causes of corruption and development5
Indian economy,development under the law and corruption
......6
Measurement taken by government for the law,corruption and
development 9
Corruption perception index12
The law deals with the corruption and development14
Conclusion.17
References.18

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ACKNOWLEDGEMENT
Thanks to the Almighty God who gave me the strength to accomplish the project with sheer
hard work and honesty.

May I observe the protocol to show my deep gratitude to the venerated Faculty-in-charge
Prof. Hanumant Yadav , for his kind gesture in allotting me such a wonderful and
elucidating project topic. Her sincere and honest approach have always inspired me and
pulled me back on track whenever I went astray.

Last, but by no means the least, I would like to thank all the members of HNLU family in
general and my blooming and charismatic friends in particular for their wholehearted cooperation throughout the odyssey.

Vivek kumar sai


(B.A-LL.B, III SEMESTER)

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Objectives:

Law terms to economic


Economic corruption or causes
Economic development

Research Methodology:
This research paper is descriptive and analytical a doctrinal in approach. It is
largely based on secondary and electronic sources. Books and other reference
materials from the Hidayatullah National Law University library are primarily
helpful for the completion of this research paper.

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INTRODUCTION
Law :- the law of variable propotion,then return to scale and in the next chapter
equal product curves .there are three laws of returns known to economist ,the
law of diminishing ,increasing and constant return. There is said increasing,
constant returns according as the marginal return rise, fall or remain unchanged
as the quantity of a factor of production is increased in term of coast .there three
laws are only three aspects of one law. The law of variable proportion
(b) Corruption:- its is not easy to define the corruption .but in narrow sense,
corruption is mostly concerned in bribery and it takes several forms
.demanding

and accepting pecuniary favours by public person either for

performing an assigned job or for extending out of turn favour .offering bribes,
particularly for undue and out of turn favour .pilferage and seepage of public
funds. use of public office for personal pecuniary gains and demanding and
accepting commission
(c) Development:-in a development sense, corruption appears as a factor
reflecting deviation from the avowed objectives the state consequently
,institution to govern the inter relationship between the citizen and the state are
used instead for personal enrichment and the provision of benefit to the
corruption1.

Causes of law, corruption and development


1. were there the scarcity of goods and services, corruption raised iths
head and these scare goods are made available to needy at the price which
include a premium.
2. the system of control and licence provide bureaucrats opportunities to
force the people to pay hush money .it make a major cause of corruption
in the post independence model of our country.
1

Rose Ackerman(1999),corruption and government, causes consequence and reforms

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3. Coplex law and procedures which are prescribed by the state for the
certain approvals and sanction provides dishonest bureaucracy enough
scope to harass the public and thus force it to pay the official.
4. low salaries of public servant especially the lower level bribes act as
incentives payment to clear files .
5. Protection provides to industrialist and businessman to steel power also
led to corruption by department official and in some case .connivance of
politician also found for receiving kickbacks.
6. Incresing tolerance in Indian society about corruption, treating as a
way of life also perpetuates the growth of corruption. Failure of society to
create institution to tackle case of corruption .more especially in high
palce,create feeling of helplessness about the corruption among the
masses

Indian economy development under the law and corruption


In many parts of the world, however, there are serious challenges and resource
Constraints to development, as defined above. Large segments of the population
face crushing poverty. Infrastructures and services in housing, health, education
and employment are not sufficient to meet basic needs. Vast numbers of people
are unemployed or under-employed. in a globalizing world the increasing
interconnectedness of nations and peoples has made the differences between
them more glaring. A girl born in Japan today may have a 50% chance of seeing
the 22nd century while a newborn in Afghanistan has a 1 in 4 chance of dying
before age 5. And the richest 5% of the worlds people have incomes 114 times
those of the poorest 5%.13 Moreover, many countries have recently
experienced or are experiencing strife and conflict, and citizens do not have
guarantees that their basic human rights will be respected. Under these difficult
conditions, public officials in developing countries have to take the lead in
settling conflicts, rebuilding nations, setting up infrastructures, and striving to
develop prosperous societies. In highly centralized states, public servants owe
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their positions exclusively to party loyalty or are pressured to become partisan,


facing punishment upon refusal. Their decisions in carrying out their duties will
be shaped more by party expediencies than public interest. In rapidly
decentralizing states, public officials wield enormous power as they decide on
the future of state assets. If their societies offer few opportunities for economic
advancement for them or their family members, they will face enormous
temptations to profit personally while divesting of these assets. These
conditions make corruption seem inevitable and a necessary evil in developing
countries and countries in transition. So does underdevelopment cause
corruption or does corruption cause underdevelopment? The two processes
seem to be iterative. There are pressures from many sides that developing
countries and countries in transition are facing to tackle the problems such as
conflict, corruption and crime. Bottom up, spreading democratization is giving
voice to citizens demands for more transparency and accountability from their
governments. Philippines and Indonesia witnessed crowds calling the Estrada
and Suharto governments to account which ended up in new regimes. Leaders,
like Obasanjo in Nigeria, are being elected on the difficult platform of cleaning
up governments. In addition, an international advocacy organization,
Transparency International, has been setting up country chapters to monitor
corruption since 1993. Sideways, the fiscal pressures of the 1990s in donor
countries have led to a reduction in bi-lateral aid. A decline in living standards
and worse socio economic indicators in many developing countries have led to
calls for stricter accounting of foreign aid. Top down, multi-lateral donors such
as the World Bank and the International Monetary Fund have come out strongly
against.
(a) Impact of Corruption on Development:- the idea of the three utilities of
corruption: economic, political and managerial. Of the utilities of corruption,
Klitgaard notes that they refer to the benefits from specific corrupt acts, not
from systematic corruption pervading many or most decisions and the
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assumption that if the prevailing system is bad, then corruption may be


good. Other scholars also see more costs than benefits. They agree that though
corruption may be beneficial in isolated instances, the its cumulative effect in
the long run is detrimental to development. In fact, corruption diverts public
resources from their intended purposes to private pockets and distorts the
composition of government expenditure. Empirical evidence based on crosscountry comparisons does indeed suggest that corruption has large, adverse
effects on private investment and economic growth. Regression analysis shows
that a country that improves its standing on the corruption index from, sabeing
the most corrupt, 10 the least) will experience a 4 percentage point increase in
its investment rate and a 0.5 percentage point increase in its annual per capita
GDP growth rate. In addition, cross- country analysis shows that corrupt
governments spend less on education and health, and probably more on public
investment. If corruption negatively affects economic growth due to deterred
private investment, what are the precise factors that make private investors
nervous? Generally, domestic and foreign investors want to be assured of a
politically stable and economically predictable environment in a country before
they commit their resources. The rule of law, transparency and accountability in
the public sector affect not only the economic development but also play a
critical role in the governance of a nation. Given this tendency, how can the rule
of law, transparency and accountability in the public sector be improved to
combat corruption in developing countries. Some fairly robust statistical
evidence has now been furnished showing that higher corruption is associated
with (i) higher (and more costly) public investment; (ii) lower government
revenues; (iii) lower expenditures on 15 operations and maintenance; and (iv)
ensuing lower quality of public infrastructure. The evidence also shows that
corruption increases public investment, by making it more expensive, while
reducing its productivity. A recent study by the Peruvian economist Paolo
Mauro (1995 and 1998) found that a corrupt country is likely to face aggregate
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investment levels of approximately 5 percentage points less, than a relatively


incorrupt country. The evidence from India is particularly stark. If corruption
levels in India were reduced to that in the Scandinavian countries, investments
rates could increase annually by some 12 percent and the GDP growth rate by
almost 1.5 percent each year (Gandhi 1997). Corruption also acts as an
additional tax on investment by lowering the potential return to an investor on
both the initial investment and on subsequent returns. In India, current
corruption levels mean that the implicit corruption tax on investment. The
impact of corruption on the quality of public infrastructure is all too clearly
visible in the towns and cities of India. The Public Works Department and the
State Electricity Boards which are largely responsible for the maintenance of
roads and management of power distribution respectively, are among the most
corrupt government departments in India. In the capital city of Delhi itself the
transmission and distribution losses in the power sector are estimated to be over
50% out of which almost 30% is attributed to theft which is done with the
Connivance of the electricity board employees.
(a) Corruption under development:-in short, corruption raises the cost
of development it breeds in efficiency in departments to produce in
inferior quality of goods-roads, water works, sub standard houses built
by the (PWD), etc.it also reduces the realization in the form of tax
revenue to the government and thus it lower the capacity of the
government to reduce the budget deficits. It equally true that
corruption creates black or parallel economy, but black economy has
its own dynamism to perpetuate corruption.
For the growth of healthy society ,it is
vitally important that corruption should be eliminated or considerably
reduced so that the phenomenon of black money does not destroy the
vitals of the society .the real problem in identifying corruption
,however has been highlighted by katuliya in the following words :ECONOMICS

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It is also dealing with the government fund not to taste .at least a litlle
bit ,of kings wealth .just as fish moving under the water cannot
possibly be found out either as drinking or not drinking water,so
government work cannot be found out while taking money for
themselves.
Measurement taken by government for the law, corruption and development
The Indian Government and its regulatory bodies during the course of last year
have introduced various legislations and regulations having a direct and indirect
bearing on corruption, corporate frauds and questionable practices being
followed by the private sector companies. Some of the important ones are as
follows:
Consent Orders: Countrys capital market regulator Securities and
Exchange Board of India (SEBI)2 came out with an important circular on
Consent Orders. What it meant in practice was that the person who had
committed a violation could go the regulator, accept his guilt and get rid
of past sins by paying a monetary penalty, proposed by him and agreeable
to the regulator.
Although the very concept of Consent Orders involves ethical issues, one
may appreciate that it would substantially reduce the workload of the
overworked the SEBI and at the same time help individuals, companies
and firms to get petty violations resolved by payment of a penalty termed
as consent fee.
Unfortunately, the provisions are being used by large corporate houses
and brokers to wash away bigger sins like involvement in the Ketan

Security and exchange board in india

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Parekh securities scandal, the initial public offer (IPO)3 scam and even
violation of insider trading norms of the SEBI.
If the scope of Consent Orders is not narrowed down, they will only
encourage private companies and habitual offenders to become bolder,
take advantage of the loopholes and make money at the cost of ordinary
investors.
The extent to which these Consent Orders should be used could be a
matter of debate, but no useful purpose would be served if everyone starts
taking advantage of the provisions freely and frequently.
Countrys

apex

court

Supreme

Court

of

India,

stayed

the

operationalisation of the vital provisions of the Act and asked the


government to amend the law. The government after much deliberations
and delay amended the Competition Act in August 2007, as assured to the
Supreme Court during the course of arguments.
In addition to advocacy role, which the Commission is performing even
today, it will be able to check corporate malpractices like abuse or misuse
of dominance and cartelization. It will also have the powers to inquire
into mergers and acquisition and prevent formulation of conglomerates to
the detriment of consumers
Measurements by the development: - Developing Code of Corporate
Governance. Working together with civil societies, government and
private sector to develop and disseminate anti corruption messages..
Regional and international initiatives provide a forum for private sector,
public sector, and civil society actors to come together with a common
goal of reducing vulnerability to corruption .India is a signatory to

Initial public offering

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UNCAC4 and UN5 Convention against Transnational Organized Crime


but not yet ratified. We are pushing the Government for it and we need
your support. Finally, attitudinal change is necessary. By changing our
thoughts, we can change our attitude and thereby change our behavior,
which can change our lives. The quality of our thoughts equals the
quality of our lives. Let us all work towards changing our attitude
towards corruption. Lets say No to corruption
Corruption perception index
It was noted that Indias rank in CPI6 slipped to 71 among 102 countries
surveyed in 2002 whereas it was 88 among 158 countries surveyed in 2005.its
score decline from 2.9 in 1998 to 2.7 in 2002 and rose again to 2.9 in 2005 and
further to 3.5 in 2007. For the year 2010 this index has further decline to 3.3 this
is not a healthy development
Country

(CPI)

rank among 180 countries

United nation convention against corruption


United nation
6
Corruption perception index
5

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1.newzeland

9.3

2.sweden

9.2

3.united kingdom

7.1

20

4.india

3.3

5.indonesia

2.8

6.pakistan

2.3

7.bangladesh

2.4

87
110
143
143

(CPI perception index for selected index for selected countries (2010)
In given CPI index table the index of corruption of India id 3.3 and thus it is far
behind the level of achievement by Newzeland , Sweden and Switzerland with
CPI above 9 .at the other end of the spectrum Pakistan, Indonesia and
Bangladesh can be classed as very highly corrupt countries .while India has
performed somewhat better than this latter group of countries .the Indian
government should initiate measure to improve its CPI closer to the levels
achieved by countries such as newzeland and Sweden .decline in corruption
perception index for India in recent years is a matter of concern

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The law deals with the corruption and development


THE PREVENTION OF CORRUPTION ACT, 1988:(a) "election" means any election, by whatever means held under any law for
the purpose of selecting members of Parliament or of any Legislature,
local authority or other public authority;
(b) "public duty" means a duty in the discharge of which the State, the public or
the community at large has an interest;
Explanation.-In this clause "State" includes a corporation established by
or under a Central, Provincial or State Act, or an authority or a body
owned or controlled or aided by the Government or a Government
company as defined in section 617 of the Companies Act, 1956.
(c) "public servant" means- any person in the service or pay of the Government
or remunerated by the Government by fees or commission for the performance
of any public duty; Any person in the service or pay of a local authority ; any
person in the service or pay of a corporation established by or under a Central,
Provincial or State Act, or an authority or a body owned or controlled or aided
by the Government or a Government company as defined in section 617 of the
Companies Act, 1956; any Judge, including any person empowered by law to
discharge, whether by himself or as a member of any body of persons, any
adjudicatory functions; any person authorised by a court of justice to perform
any duty, in connection with the administration of justice, including a liquidator,
receiver or commissioner appointed by such court; any arbitrator or other
person to whom any cause or matter has been referred
(D)

Power to appoint special Judges :- (1) The Central Government or the State

Government may, by notification in the. Official Gazette, appoint as many


special Judges as may be necessary for such area or areas or for such case or
group of cases as may be specified in the notification to try the following
offences, namely: (a) Any offence punishable under this Act; and
(b) Any conspiracy to commit or any attempt to commit or any abetment of any
of the offences specified in clause (a).
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(2) A person shall not be qualified for appointment as a special Judge under this
Act unless he is or has been a Sessions Judge or an Additional Sessions Judge
or an Assistant Sessions Judge under the Code of Criminal Procedure, 1973.
(E) OFFENCES AND PENALTIES:- Whoever, being, or expecting to be a
public servant, accepts or obtains or agrees to accept or attempts to obtain from
any person, for himself or for any other person, any gratification whatever,
other than legal remuneration, as a motive or reward for doing or forbearing to
do any official act or for showing or forbearing to show, in the exercise of his
official functions, favour or disfavour to any person or for rendering or
attempting to render any service or disservice to any person, with the Central
Government or any State Government or Parliament or the Legislature of any
State or with any local authority, corporation or Government company referred
to in clause (c) of section 2, or with any public servant, whether named or
otherwise, shall be punishable with imprisonment which shall be not less than
six months but which may extend to five years and shall also be liable to fine.
Explanations.(a) "Expecting to be a public servant." If a person not expecting to be in office
obtains a gratification by deceiving others into a belief that he is about to be in
office, and that he will then serve them, he may be guilty of cheating, but he is
not guilty of the offence defined in this section.
(b) "Gratification." The word "gratification" is not restricted to pecuniary
gratifications or to gratifications estimable in money.
(c) "Legal remuneration." The words "legal remuneration" are not restricted to
remuneration which a public servant can lawfully demand, but include all
remuneration which he is permitted by the Government or the organisation,
which he serves, to accept.
(d) "A motive or reward for doing." A person who receives a gratification as a
motive or reward for doing what he does not intend or is not in a position to do,
or has not done, comes within this expression.
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(e) Where a public servant induces a person erroneously to believe that his
influence with the Government has obtained a title for that person and thus
induces that person to give the public servant, money or any other gratification
as a reward for this service, the public servant has committed an offence under
this section.
(f)

INVESTIGATION INTO CASES UNDER THE ACT: - Notwithstanding

anything contained in the Code of Criminal Procedure, 1973, no police officer


below the rank,(a) In the case of the Delhi Special Police Establishment, of an Inspector of
Police;
(b) in the metropolitan areas of Bombay, Calcutta, Madras and Ahmadabad and
in any other metropolitan area notified as such under sub-section (1) of section
8 of the Code of Criminal Procedure, 1973, of an Assistant Commissioner of
Police;
(c) Elsewhere, of a Deputy Superintendent of Police or a police officer of
equivalent rank,
Shall investigate any offence punishable under this Act without the order of a
Metropolitan Magistrate or a Magistrate of the first class, as the case may be, or
make any arrest therefore without a warrant:
Provided that if a police officer not below the rank of an Inspector of Police is
authorised by the State Government in this behalf by general or special order, he
may also investigate any such offence without the order of a Metropolitan
Magistrate or a Magistrate of the first class, as the case may be, or make arrest
therefore without a warrant:
Provided further that an offence referred to in clause (e) of sub-section (1) of
section 13 shall not be investigated without the older of a police officer not
below the rank of a Superintendent of Police.

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CONCLUSION:
Those norms that are intended to ease the application of the regulations. Such
norms include the provisions governing the declaration of the secondary income
of public officials. It can also be stated that, with care and proper interpretation,
premature assumptions about contradictions with other international standards
can be shown to be invalid. The law develops and changes and must be adapted
to new circumstances. The degree of flexibility that is normally assumed to be
Implicit in a provision of general application is perhaps also permitted in respect
of the presumption of innocence. Common sense for example dictates that the
prosecution should not be required to shoulder the virtually impossible task of
establishing that a defendant does not have a licence when it is matter of
comparative simplicity for the defendant to establish that he or she has one.
To me .the Indian public was suffering. According to me the corruption is the
major problem for the Indian public and they were harass by the bureaucracy
and their offices members but important problem is faces towards the corruption
over by the Indian people. And Indian government has made the laws for
preventing the corruption and the development corruption raises the cost of
development it breeds in efficiency in departments to produce in inferior quality
of goods-roads, water works, sub standard houses built by the (PWD), etc.it also
reduces the realization in the form of tax revenue to the government and thus it
lower the capacity of the government to reduce the budget deficits.

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REFRENCES:
K .sudarshan and v. pandit on corruption and development,indian economic review ,vol
ix,new series number 2,october 1976
Government of india, ministry of finance, report on the committee control subsides, may
1979
s.gurumurthy, bribery and capital flight, financial express, July 26, 1987
Datt & sundharam, indian economy, 63nd revised edition, new Delhi
Dewitt k.k, modern economic theory , New delhi,2004

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