‘But cumbersome anti-graft apparatus can delay decisions'

With a slew of scams vitiating the government's policy-making environment and holding up reforms, the Economic Survey 2011-12 on Thursday advocated need for a ruthless crackdown on corruption, but cautioned that a large and cumbersome anti-corruption bureaucracy could impact decision-making.

“While we need to ruthlessly crack down on corruption, it must, at the same time, be recognised that the fear of a large and cumbersome anti-corruption bureaucracy can be detrimental to risk taking and may hamper legitimate activities in public institutions,” it said.

In particular, civil society activism could lead to delay in the process of final decision-making by civil servants, it said, while pointing to the country's GDP (gross domestic product) growth data, which showed a consistent decline from 7.8 per cent in the first quarter to 6.1 per cent in the fourth quarter this fiscal.

Without referring to the Anna Hazare campaign for a Lokpal to look into corruption cases, the Survey said: “Increased awareness of high-profile corruption scandals in different part of India and welcome civil-society activism” has resulted in “a sense of caution among civil servants in taking the final decision … this would cause a slowdown in decision-making.”

The Survey sought to blame coalition politics and federal considerations in this regard.

The United Progressive Alliance government had to keep in abeyance its decision to permit foreign direct investment (FDI) in multi-brand retail following stiff opposition from many parties, especially its key ally, the Trinamool Congress.

Fear of prosecution

Citing a research paper (authored by A. Banerjee, S. Cole and E. Duflo) on the Indian banking sector, the Survey observed that fear of prosecution for corruption resulted in reduced lending in an affected branch of a public sector bank and its neighbouring branches for about two years. “In essence, smart policy design needs to be distinguished from mere procedural tightening and bureaucratic expansion, since the latter, if not properly thought out, can increase inefficiencies and wastage in public expenditure and in service delivery,” it said.

Chief Economic Adviser Kaushik Basu, as chief architect of the Survey, noted that the issue of corruption has to be fought, but cleverly. “You see [to fight] corruption, you put in regulation and create a cadre of people who go and try to control that kind of corruption ... Once you create another group of bureaucracy to control that corruption, you would probably create another level of different kind of corruption,” he said and went on to argue that to “tackle corruption you will have to think [of a] clever way, where you are not making use of very heavy bureaucracy but little change in regulation, little changes in rules of regulation, which creates less propensity for corruption.”

The Survey also underscored need for political leaders and policy-makers to become “role models” of honesty and integrity, as market economy cannot function if people are totally self-serving. “If the political leaders and policymakers act as role models in terms of ... qualities of honesty, integrity, and trustworthiness, that can set the ball rolling [for better governance],” it said.

Noting that non-economic facets of life do not get adequate attention, the Survey said: “We ... know that a market economy cannot function if people are totally self-serving.” Although self-interest is a major driver of economic growth, “it is important to recognise that honesty, integrity, and trustworthiness constitute the cement that binds society.”

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