Corruption and its effects on development for countries like India
Corruption is derived from the Latin word “corruptus” which means corrupted. In legal term it means abuse of trusted position to obtain benefits for themselves or for others using judicial, political or organizational powers.
Corruption has been followed from such long years that it is mentioned as a sin in the bible, which says: “Do not accept a bribe, for a bribe blinds those who see and twist the words of the innocent.” Under the Roman law, the criminal offense of corruption was defined as giving, receiving or claiming benefits in order to influence an official in connection with his work.
Corruption not only affects individuals, it has effects both on the economy and on the society of any country at large. Individual or groups indulge in corruption to achieve their goal by misusing the power in the form of money or authority. They use illegal, dishonest and unfair ways to get their work done.
Corruption is a major issue that badly interrupts every country’s economy and disturbs the activities of local, state and central government organizations. It not only resists the growth of the economy, but also slow down the country’s developments.
The World Bank quotes, the average income in countries with a high level of corruption is about a third of the countries with low levels of corruption.
The most common causes for corruption in India is due to the interventions by political leaders and government servants. They forget their professional ethics and morality and indulge in corruption. Few other causes can be habits, customs, traditions followed by the citizens to get their work done easily. Thus corruption slows down economic growth and affects business operations, employment and investments.
Government and its supporting servants have an unrestricted power of generating unnecessary bills and payments from general public and companies in the way of tax. The public contracts in India is chosen through auctions, where the specific government department shares their requirements and it chooses a specific date to conduct auction. Any contractor who has the experience and interest can participate in the auction by submitting their proposal to the specific department. But these auctions are not run ethically and the project is given to contractors who indulge in bribing. This happens both at the central and state levels. Because of this country’s infrastructure and quality of workmanship goes down.
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No country is free from corruption but, the level of corruption in emerging countries like India is high compared to developed countries.
KPMG, the worlds largest auditing company have found plenty of problems that motivates corruption. The report advices excessive government regulations and high level of tax rates are the major cause; countries like India have many regulating bodies and high marginal taxation rates with the authority to stop any business or citizen from their daily activities. This power of government organization or authorities to examine and question individuals have created an opportunity for regulating body officials to extract bribes. A business or an individual decides if the cost of delay and effort needed for due procedure is worth paying demanded bribe. Offering bribes to corrupt officials to evade tax is the major way of corruption in countries like India.
The causes of corruption differs from country to country, there are few common driving forces for all the countries.
Here are a few common causes of corruption:
- Countries generating low income
- Countries with low literacy rate
- Countries with Closed Economy
- Influence of Religions
- Countries with Low Media Intervention
Corruption is generally very high in under developed countries and moderately high in developing countries or countries in transition. Regardless of the above causes, corruption cannot be measured with a single or a common cause for it.
Here are a few causes why citizens of India indulge in corruption:
- Monopoly of certain goods and service providers
- Lack of penalties on people indulging in corruption
- Bureaucracy by few powerful leaders
- Complicated Taxes and Licensing system & policies
- Lack of Transparency and Accountability Laws
- Excessive Regulations and Authorization
These causes makes both the giver and the receiver to indulge in corruption.
One major factor that comes into the picture when we discuss about corruption is “Black money”. Money which is unaccounted in the books of records, which is hidden from taxation and is earned in black market is called black money. Tax-evaders, criminals, smugglers, hoarders, and other anti-social activists will accumulate black money and use it to perform illegal and unethical activities.
In 2018, it was revealed that Swiss Bank and other Offshore Banks have an estimated ₹90 lakh crores ($1500 billion) of unaccounted money of the Indians.
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One of the important reasons for larger accumulation of black money in India is due to lack of strict punishments and laws. Criminals are hardly ever punished by the law as they indulge in bribing the Income Tax officials to wave off their corrupt/illegal activities. The major invaders of tax include businessmen, big politicians, cricketers and film stars.
There are a few Government Officials, Politicians and Political Organizations who take bribes or commissions in order to approve grants, licensing etc. Especially when foreign companies approach them they try to charge even higher, which makes those companies to think about whether to invest or not. This slows down the growth and development of the country.
Here are the major effects of Corruption on a country like India:
- Unemployment
- Lack of faith and trust in the government
- Decrease in Foreign Investment
- Delay in Growth or Lack of Development
- Differences in Trade Ratios
- Fall in Currency Value
- Lack of Justice
- Poor Quality in Goods and Services
- Poor Health and Hygiene
Here is an example of how the government of India planned to stop “Black Money.” On the night of November 8th, 2016, Prime Minister Narendra Modi decided to announce the ban of 500 and 1000 rupee notes and exchange them with new 500- and 2000-rupee notes. This was planned to reduce the black money. Financial analysts and economists believed that major percentage of black money was being held in cash. By this the government wanted to bring down large cash held by the citizens. They even wanted the citizens to transact everything online, this way all the mainstream transactions happens through banks, over a period of time this would strengthen economic growth. Furthermore, the secondary reason to plan for the ban was to cut down the funding on illegal activities and terrorism.
Increase in corruption and black money results to:
- Decrease in economic growth (GDP growth, Foreign Direct Investments, Foreign Institutional Investments, Trade, IMF Borrowings etc)
- Decrease in quality of education
- Inefficiency of Public Administration
- Increase in violence, breaking laws and rules
- In some cases personal freedom, economic freedom, freedom of speech, freedom of the press, etc can also collapse.
It’s seen that corruption is present in almost all the countries. But the countries with emerging economies like India is suffering from high level of corruption, this inturn slows down the overall development of the country. As a result of this the entire society is being affected. It’s very important for us as responsible citizens of India to pay tax and fight against corruption and be a part of the change for the betterment of the society.