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should have known that it was his idealism which sowed the seeds of corruption. In a world of scarcity and
allocation by government, corruption was essential for transaction of any business. Any government official
who stood as door keeper to a ration or a permit was easily corrupted. Admissions to elite colleges, licence
to increase output of your factory could only be secured by bribing a babu or a neta.
The mild degree of corruption during Nehru’s days multiplied during Indira Gandhi’s reign. Many industries
got nationalised, each being an opportunity for politicians to help themselves to spoils — the worst being the
banks which fuelled corruption massively. Congress socialism, whatever the noble intentions behind it, was
The so-called neo-liberal reforms did not dismantle the socialist structures. They just enhanced the value of
the assets the government could allocate. So, in addition to licences or permits, politicians had assets to sell
which they did not own. Remember the mobile telephony scandal.
Narendra Modi is serious about attacking corruption. The Prime Minister is a moralist. For him, tax evasion,
sending money abroad, black money in its various forms, are not just illegal activities; they are treasonable.
He would like to root out all corruption, and that was his top priority at the BJP national convention rather
Corruption is morally indefensible, but may be economically efficient. So, in an economy used to such
illegality, it is costly to remove corruption. We are told that for SMEs, the GST has been a shock. They
made their small profits from tax evasion as they bought and sold. Now, with the GST, they have to declare
every transaction and incur the tax along the way. Black money hoards represented the profits of a thriving
private economy. Eliminating corruption effectively means reducing the profits of doing business in an
Investment has been drying up in India over the last three years. One reason for this I have heard mentioned
is that potential investors are worried that questions may be asked as to where they got their funds.
The real issue which the Prime Minister has to face is that the entire economic system built up over the last
70 years of socialism is designed to encourage tax evasion and corruption. If you want to remove corruption,
you would have to dismantle the socialist structure. Every restriction on the movement of goods under the
pre-GST system was used to bribe and cheat. Remove it by the GST, and growth will be hit, hopefully just
temporarily. Wherever there is government regulation of business, there is scope for bribery. Even the
subsidy for kerosene was manipulated to sell the kerosene on black market. The PDS system has been
admitted to be corrupt even by its champions. People compete even for the job of a peon because they can
The Prime Minister has no programme of deregulation or de-nationalisation. He has to face the fact that
corruption cannot be eliminated without changing the system root and branch. He will face a setback to