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BW Businessworld

Gagging Corruption

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The bygone year will probably be best remembered in future as the year of mega scams. In sheer numerical terms, public funds stolen - in the Commonwealth Games (CWG), 2G spectrum sale, auctioning of rights to natural resources, selling of land -- were mind boggling. Suspected participants came from different strata ranging from political leadership to the fourth estate. Media in the country, just like in any other vibrant democracy, relentlessly communicated inside stories behind these scandals to their readers and viewers. If the pattern of voting in the next election reflects opinions regarding the state of governance within the nation, the role of media will be vindicated and our democracy would become all the richer for it. And competition between print and electronic media organisations would have a big role in it.

But media, though interested in gathering information about scandals and corruption involving powerful people tends to go by its saleability tag. Hence, there is a tendency to skip news of corruption which involves a large number of people but where the money stolen is negligible in each case, irrespective of the fact that it could be large in aggregate and inflict a huge cost to the society as a whole.

Let's start with a concrete example on this. It is well known that ever since the Indian economy embarked on a steady growth path with booming tax collections, the current government at Centre allocated a huge sum of money for social sectors with the aim to alleviate poverty of the masses. Normally, most of the funds allocated for this purpose are spent through a decentralized system where bureaucrats, panchayats, state government officials and NGOs assume responsibilities for delivery mechanisms. Take the case of NREGA, the Government's flagship programme that seeks to ensure at 100 days of job entitlements for the poorest via statutory means. A recent work by Professor Paul Niehaus and Professor Sandip Sukhtankar reveal that corruption in this scheme takes place by over-reporting by the officials the number of days worked by the poor and under-paying the wage rate. For example, if a worker has worked for 10 days in month for Rs 50 and if the local officials report 20 days work and declare a payment of Rs 60 per day , then the difference is pocketed by the official and the increased budget of Rs 700 is cost of the exchequer .

The authors, in a detailed and rigorous study at some districts in Orissa, found out the prevalence of theft of the budget by officials involved in the disbursement of NREGA funds. To be fair, they also found out that the level of such corruption has a tendency to decrease with the increase in wage rate. The NREGA is a huge programme with a budget of almost Rs 200 billion and is run throughout the country. Stealing of budget by a single officials (Rs 700 in the above example) is not newsworthy story but if we aggregate such stealing all throughout the country and add other programme for poor,  the amount of leakage will be an astonishing number, yet is very unlikely that it will grab a headline.

Another real life example is perhaps worth narrating. The Government in one of the north eastern states chalked out a plan to disburse goats to the residents of a number of villages in the state. Since goat is a capital good for a poor herdsman, the government thoughtfully chalked out a depreciation allowance (fund for daily meal of goats), an insurance scheme (money for the veterinary doctors in case goats falls sick) and also earmarked funds for good upbringings of goats' off springs. How much more detailed can one expect a plan to be?  In practice, only 10 per cent of the fund had been spent for the purpose and the rest has been expropriated by officials who had supplied many old and second hand goats ( costs less money and thus covers a large number of residents with ''lemon'' goats). On paper, everything looks fine because officials made it sure that the total expenditure on this scheme has the legitimate stamp of auditors. It did not make a newspaper item but one of my colleagues who were a part of the inspecting team divulged the story to me. The NREGA corruption or blatant malfeasance in the supply of goats to the needy are not isolated events. These incidents occur everyday, yet go unnoticed while the poor starve.

Here, of course, primary responsibility lies with the Government to stall such corruptions which bleed the nation almost daily. True, the government also has limited resources to counter all forms of corruption and thus it needs to prioritise its goals for checking corruptions and differentiating between the types of corruptions that are daily occurrences. The first one is simply a redistribution of wealth from one group to another but value neutral. The other type destroys value of wealth directly.  A poorly-built dam or road or an ill-fed poor or an ill-gotten goat directly destruct the nation's wealth by reducing quality and quantity of factors of production and here corruption is not a mere redistribution from one group to another. A hungry person can barely afford education to his kids and thus bequeath the nation with less productive human beings.  Hence, money stolen from his job is a direct robbery of nation's future wealth. The government should allocate more resources to deal with this sort of corruption that eats up a nation's current and future wealth.

Second, a more imaginative way to reduce the dependence of the middleman in this delivery mechanism is to empower the poorest of the poor through direct means. An excellent example of this mechanism is the idea of food coupon that Professor Kaushik Basu has floated in recent years. In this scheme, a poorer person will be entitled to receive coupons and can directly cash it from the market and does not have to depend on the rations shops. It is alleged that many such shops buy food at a cheaper rate from the Government in the name of serving the poor and then sell the items to open market and pocket the profit, depriving the poor of his due. In fact, tying UID directly to individual recipients of Government's various welfare enhancing programme can easily ensure the poor of his entitlement of food, job etc. in a direct manner.

 This would also help the Government to reduce the manpower on vigilance towards corruption and other forms of extortions and will directly benefit poor and will help the nation to build up human capital. A little imagination in thinking, taking a clue from the current trends in information economics of policy deliverance and a judicious use of technology can go a long way in saving our nation from daily corruption. However, it also requires changes in the mindset of the government so that it is capable of thinking out of the box. So, will the Government tread where the media dares to venture? Judging by the current trend, one cannot be too optimistic on this. 

The writer teaches at Essex Business School.