CORRUPTION in India is now a major concern for all patriotic citizens because of scams galore such as Satyam, IPL, CWG, and 2G Spectrum etc, etc. By all objective criteria, India today has by far one of the most corrupt governance. It is fuelled by greed and single-minded adherence to materialism.
Corruption generally is any inducement, or bribe, to do or not to do anything that the bribe giver wants from the bribe taker who otherwise will not do or will do. By this broad definition even dowry payments is corruption. We are, however, concerned here with misuse of public office for private gain either for oneself, family or friend. This represents a governance failure and hence of primary national concern.
Corruption is, therefore, inherently bad for the efficient functioning of any economic system. It blurs the incentive to perform and discourages relying on merit as a means to success.
It is prosecutable in India under the Prevention of Corruption Act which was re-casted in 1988, or Money Laundering (Prevention) Act, which any citizen can set into motion subject to some safeguards such as Sanction. A more drastic law sought by the civil society at large, to be known Lok Pal Act obviates the requirement of Sanction, and institutes an independent prosecutor who can order a CBI inquiry without government permission.
Corruption under the case laws of the Supreme Court is also sue-able such as under the Doctrine of Public Trust, for malfeasance in office.Hence, attach or confiscate the properties public officials once they are convicted of the crime.
However, India although is a signatory to the UN Convention Against Corrupt adopted by the General Assembly in October 2003, it has not yet ratified the Convention. The Convention, however, came into force on December 14, 2005 when the 38 countries ratified it. Its asset recovery provision is very appealing, and yet the Indian government is not yet moved to ratify the Convention. Switzerland was, therefore, compelled to enact a law called Restitution of Illicit Assets Act(2010) especially of “Politically Exposed Persons”. It was by this Act that Egypt’s Mubarak’s and Libya’s Gaddafi’s accounts in Swiss Banks were frozen.
An international watchdog committee conducted a study on the illicit flight of money from India, perhaps the first ever attempt at shedding light on a subject steeped in secrecy, and concluded that India has been drained of $462 billion (over Rs 20 lakh crore) between 1948 and 2008. The amount is nearly 40 per cent of India’s gross domestic product.
One of the worst problems with corruption in India is the creation of “black money,” i.e., money that is used in such transactions which is neither taxed nor is spent openly. It travels to and from secret bank accounts abroad, or, worse, is used by the corrupt to indulge in gross luxurious consumption and bribery.
Black money also funds elections and there is no proper accounting. It tempts the receiver to stash and salt away part of the campaign funds. Since elections leads to political power of those thus funded and enriched, future governments become bribe-compliant and therefore protect the crooked.
This money enables politicians and business persons to carry cash around the world for pleasure, and sometimes even be caught with it. For example, on September 27, 2001, Rahul Gandhi and his live-in girlfriend were arrested by the FBI at Boston’s Logan airport with $ 160,000 in cash, for declaring it to the US Customs. US law requires cash at hand of more than $10,000 to be so declared. But he was let off after nine hours in FBI custody at the intervention of the then BJP- led government, which for some mysterious reason had played guardian to Ms Sonia Gandhi and her family throughout their tenure.
2 Impact of Corruption
Corruption impacts on economic development of a nation in five dimensions:
(1) Decisions taken for corrupt motive sub-optimises the allocation of scarce national resources and hence in the long run lowers the rate of growth in GDP. It also encourages buccaneers and robber barons to flourish instead of innovative entrepreneurs.
(2) By the use of bribe money which escapes the tax net and is mostly stashed away in banks abroad or in trunks in safe houses, is deployed in luxury goods purchase, ostentatious life, splurging in five star hotels, real estate, and on partying. This raises demand for luxury production and services, and in turn distorts investment priorities. In India 70 per cent of the investment goes directly or indirectly to sustain the luxury sector.
(3) Unaccounted bribe money is lent to hoarders and speculators who then cause artificial shortages and thus inflation and property bubbles.
(4) Since the most in corrupt activities would be in public office, they enact laws to not only to safeguard the booty by lax criminal investigations and prosecutions, but to enable earning interest or return on the bribe money. The invention of Participatory Notes (PNs) and the Mauritius Tax and Capital Gains exemption treaties is aimed at that sordid objective (see below).
(5) Corruption enables beneficiaries to involve foreign governments seeking influence and criminal gangs resident abroad to launder money and provide protection.
‘Hence, as a country becomes industrialised, its governance and corruption challenges do not disappear. They simply morph and become more sophisticated: It becomes a complex phenomenon than just transfer of a briefcase stashed with cash in a Swiss bank. The formation of shell companies in tax haven islands, for example, makes the tracing of the money trail very difficult.
Now subtler forms of “legal corruption” also exist eg, an expectation of a future job for a regulator in a lobbying firm, or a campaign contribution with strings attached. In many countries this may be legal, even if unethical. In industrialised nations undue influence is often legally exercised by powerful private interests, which in turn influence the nation’s regulations, policies and laws.
2. Subversion of the Indian Financial System by Corruption
As I have pointed out in my earlier writings, the Participatory Notes (PN) which account for 55 per cent of the foreign funds into the Stock Market in India have no requirement to comply with even the SEBI disclosure rules, and are obviously meant for laundering black money of politicians, industrialists and even including those of terrorists. Even after Tarapore Committee ridiculed the PNs, the SEBI had to keep silent because the then Finance Minister P Chidambaram favoured P-Notes to launder ill-gotten money of his own and of his political masters. The lack of ethics and patriotism thus appears maximum inside the government today.
Investments through the P-notes route are believed to be largely responsible for sudden, unexplained fluctuations in the stock-market indices, including the huge falls which have even resulted in suicides in Dalal Street. The Finance Ministry however has failed to answer why this special exemption to P-Notes is being provided. The Ministry has refused to publish the list of P-note holders, along with their details and the amount of investment, on its website, or on the website of SEBI, or anywhere else. The Finance Ministry does not track the names of the owners/promoters of beneficiaries of that company. Hence company using P-notes in the BSE could well be promoted or funded by an Osama bin-Laden, a Dawood Ibrahim or the late Velupillai Prabhakaran?
Corruption as a Grave National Security Threat
In his address to the 43rd Munich Conference on Security Policy on February 11, 2007, MK Narayanan, the National Security Advisor to the Government of India, listed out the various ways by which terrorists in India were funded. He admitted: “Instances of terrorist outfits manipulating the stock markets to raise funds for their operations have been reported. Stock exchanges in Mumbai and Chennai have, on occasion, reported that fictitious or notional companies were engaging in stock market operations. Some of these companies were later traced to terrorist outfits”. This is a truly shocking admission.
Thus, the Government of India is well aware that terrorists are parking funds in Indian ventures. Yet the Finance Ministry has done nothing about the system of P-notes, which gives terrorists the additional benefit of anonymity while making hefty investments in the Indian market, which could later be used to fund terrorist activities against the Indian people in India!
According to conservative estimates, there are over Rs 2,50,000 crore rupees worth of P-notes issued abroad by FIIs and brokers being actively traded in the Indian market! At present P-Notes fuels about 53 per cent of all foreign investments in the stock markets of India.
While an Indian citizen in India has to provide his/her address proof, photo ID proof, PAN details, etc to open even an ordinary savings bank account in a local bank, foreign investors can hide their identity under a sub-account by making use of Participatory Notes to route their investments, often running into hundreds of crores in a single transaction. In one transaction about the time the 2G spectrum licences were given, Ms Sonia Gandhi had issued a single certified cheque of Rs 18,000 crores to Ketan Parikh at his London Office to buy P-Notes! The main reason thus for the popularity of a P-note is in fact the anonymity it provides to crooks and terrorists.
Indians have about $ 0.5 trillion to $ 1.5 trillion in Swiss banks alone, not to mention Liechtenstien, Isle of Man, Cayman Islands, Macao etc, etc.. They are the largest deposit holders in Swiss Banks! In 1991 the respected Swiss magazine Schweitzer Illustrate published the by-product revelations of the Marcos investigation from which, Sonia Gandhi, it can be seen had been a legatee of Rajiv Gandhi’s assassination to Rs10,000 crores (in 1991 exchange rate) in illegal Swiss bank deposits. Earlier, this money used lie in the Swiss Bank vaults, but now thanks to Participatory Notes(PNs) and the Mauritius route, this money is returning to India and in the BSE to earn windfall profits.
All this money can be brought back by legal methods within two months, but the UPA government has shown its brazen determination to block that by dragging its feet in the Supreme Court or by brutally beating the satyagrahis at the Swami Ramdev gathering in Ramlila grounds.
Then what is the cure ? In the short run of course, prosecuting and convicting the corrupt big fish of society is the way of curbing the greed by setting these crooks and traitors as examples. But the cure for the long run is that we must imbibe Hindutva by a national movement and political churning, and without hesitation or obfuscation.
Long years ago, Deendayal Upadhyaya had in his seminal work: Integral Humanism had warned the nation of this greed driven materialistic society. He said that our cultural values are based on Sanatana Dharma, thus embodied as Hinduness or Hindutva. This means that while we pursue material growth it has to be harmonised with our spiritual values to prevent it lapsing into greed. Greed legitimises corruption because then acquisition of wealth becomes an end objective of life.
Such a life can never assure happiness as now many rich Americans converting to Hindu faith are declaring openly. The richest and famous Oscar winning Hollywood actress Julia Roberts recently converted with her husband and children to Hinduism, and declared that in seeking personal contentment, Hindu values showed her the way. This why our Swamijis are attracting so many rich Westerners to their ashrams.
In a society based on Hindutva, wealth cannot determine a person’s social status. It is vidya and tyaga leading to vairagya that merits the highest social status. Even wealthy persons by philanthrophy can get social status. Rishis Bhrigu and Bharadwaja thus devised the Varna system of society which regrettably now has degenerated into a birth-based vested interest of communities. Thus, Hindutva renaissance culled from Vedanta is the cure for greed and of corruption in the long run. This should be every patriotic Hindu’s battle cry for the coming war against corruption.