Thoughts on economics and liberty

The Iceberg of Indian Corruption

The following diagram depicts the iceberg of Indian corruption. The diagram shows that a small portion of India’s corruption is ‘visible’ to us, the vast bulk being hidden from view; ‘below water’.

 The diagram shows that corruption is of three types:
1) Visible Corruption
The visible tip of the iceberg is corruption experienced by ‘common’ people. It comprises many types such as transactional, prioritizational and avoidance.
  • Transactional corruption is where the people have to pay a bribe over and above the government-established charge to get a service which they were entitled to get without the bribe. This form of corruption is relatively easy to fix, being driven by defects in the design of governance systems, defects which leave open areas of information asymmetry and discretion, which can then be arbitraged by government functionaries through non-transparent and unaccountable decisions. Where information technology has been cleverly used, such forms of corruption have reduced; for example, when the Indian Railways computerized its ticketing system the previously rampant corruption in ticketing dropped precipitously.
  • Prioritizational corruption is where people get ‘out-of-turn’ favours through ‘speed money’. Such corruption was more relevant in the past where government interventions had resulted in shortages of telephone connections, cars and so on. This kind of corruption has significantly reduced after liberalization. Obtaining gas cylinders now doesn’t require bribing a host of people any longer.
  • Avoidance corruption is where people pay a bribe to avoid a fine or wastage of time. This is still quite prevalent when people bribe a police constable to avoid a speeding ticket, a tax avoider pays a bribe to an income tax officer, or the truck driver avoids a detailed inspection from the police by handing over Rs.100 at each check post in India.
As a result of some improvements in governance coupled with liberalization, most of us do not face visible corruption to the extent we used to. In any event, the bribe of a few rupees taken by a lowly government functionary – no matter how deplorable – is the least of our problems in India.
2) Hidden Deep Corruption
Below the visible corruption is an absolutely mammoth amount of possibly increasing, hidden corruption. This is where the bulk of the ‘money’ is made by politicians, in amounts that run into thousands of crores of rupees each year. The malaise of hidden corruption goes very deep into the vitals of India and provides evidence of its existence from time to time in frightening ways, as it festers for a long time and then erupts. We can’t easily ‘see’ it. But we know it exists when trains smash into each other, roads fall apart, millions of illegal migrants from Bangladesh swamp the country, police perpetrate major crimes and operate as organized criminals at night, and soldiers and farmers commit suicide. Corruption by ministers of police and defence has driven a deep knife into the heart of our security forces. Our border protection and possibly general security are in shambles. It is possible that India’s security could collapse one fine day like a termite-riddled house that has been chewed up, if deep corruption is not checked. We see this termite-like, hidden infestation at work in all government institutions such as public works departments, rural development programmes, public distribution system, education and health services. No major file, no appointment, no contract moves without such deep, fully institutionalized corruption.
3) Hidden Policy Corruption
But there is an even worse, more insidious and dangerous form of corruption not even thought about by most people. Policy corruption, or policy neglect on account of our political leaders devoting their entire waking energy to making money, saps the foundations of our country. Ministers of education spend most of their time in transfers and appointments of school teachers, for a fee. Other ministers consort with tenderers who bid for government contracts with a view to finding out who will pay them the most dakshina. That is the ‘regular’ deep corruption stuff. What happens with all this is that they are able to spend less than 20 per cent of their time on policy making and are forced to delegate policy and strategy to career bureaucrats. Not only are our bureaucrats blissfully ignorant of the world’s best practice in policy, their interests are often at cross-purposes with the interests of India. Many of them are focused primarily on wangling a stint in international organizations through their political contacts, when not making money on the side – which is the primary occupation of a large number of them now. Delegating policy to bureaucrats, namely our IAS officers, is a recipe for total disaster for India on a scale unimaginable by those who haven’t worked for decades within the government and don’t know all about what really happens! I have never seen more shoddy policy analysis than analysis which emerges from Indian government departments.
Ministers display a singular lack of excitement at the great opportunity they have to make a difference to the country. Our representatives simply do not care to question why things are not working and don’t care for finding out effective solutions. Policy-making is not why they joined politics in the first place; they joined politics only to make money. No minister I worked with ever asked any intelligent question on the strategic direction of his portfolio, or guided me on overall policy direction. I was on my own. And if, as a diligent officer, I did bring up such policy matters, there was bemusement when I explained various options through professional analysis. The damage done to India by chronic policy neglect by both ministers and bureaucrats, neglect which I call policy corruption, is far more devastating in impact than ‘regular’ corruption. This corruption leads to colossal damage – there are major policy errors such as investing our money in the wrong things, undertaking the wrong activities, not establishing systems to plan cities and infrastructure, non-functioning services and justice, non-existent schools, non-functioning law and order. No society can prosper, even if it has free markets, if its leaders are dishonest to the core and completely disinterested in good policy.
We therefore need to review our democratic system’s incentives to find out what it will take to attract some of our best people to politics. If we are to be only led by our most mediocre and corrupt people, then we had better get reconciled to perpetual mediocrity. The greatest barrier to entering politics is at the first gate itself – our electoral system. Tall barriers meet honest candidates who want to represent us, barriers deliberately designed to block out all good and competent people. The good news first – it is possible to remove these barriers, since they are all man-made. The bad news is that  existing politicians will never remove these barriers, for that would mean the end to their opportunity to make quick money! 
[This is an extract from my book, Breaking Free of Nehru]
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5 thoughts on “The Iceberg of Indian Corruption
  1. Seema

    Came across your blog post -"the iceberg of indian corruption" on – its an apt classification of corruption under indian scenario.  Good idea given to put an end too.  But practically it is highly impossible because india is corrupted to the core.  Only a miracle should happen or politicians and other bureaucrats change on their own. But your articles are very interesting and some where or the other having tinge of patriotic feeling. 

  2. Rajesh

    Very interesting perspective on corruption sir. What according to you is the most practically implementable solution to this menace of society called corruption? Not a theoretical or ideal one, i mean something that can really be done maybe in a period of 5 to 10 years.
    I found the start of a good retribution against corruption at
    I feel black money has been the greatest nail in what will be the coffin of India soon. It is high time that more people like them took this issue up seriously.

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