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03 January, 2011

The Lesson of the Decade

BRP Bhaskar
Gulf Today

The United Nations had designated the first 10 years of this century as the “decade for a culture of peace and non-violence for the children of the world.” However, it is unlikely that anyone in India will see it as a time when children found themselves in a congenial environment. Chroniclers are calling it the decade of scams.

Three major financial swindles were reported in 2001, the first year of the decade. The biggest of them involved the Unit Trust of India, a mutual fund organisation set up under an act of Parliament nearly four decades earlier. The financial loss was estimated at Rs48 billion.

Every passing year since then threw up at least one major scam involving the Central government or one of the state governments. The last year, 2010, was the worst with large-scale irregularities in the grant of telecom licences, conduct of the Commonwealth Games, allotment of land in Maharashtra and Karnataka and sanction of loans by the state-owned LIC Housing Finance Limited coming to light

The telecom scam, currently under investigation, resulted in an estimated loss of Rs1,760 billion to the exchequer and is described as the biggest single swindle in the country’s history. Unofficial sources have put the total cost of all known scams at Rs73,000 billion.

A commentator has pointed out that the scam money is 27 per cent more than the gross domestic product of Rs53,000 billion and that this was enough to give the 400 million Indians living below the poverty line a cash subsidy of Rs182,000 each.

Businessmen, bureaucrats and politicians are the beneficiaries of the scams. Many of them have invested the ill-gotten money in land or parked it abroad. Indians are reportedly holding an estimated Rs71,000 billion in secret Swiss bank accounts.

Many of the scams can be linked directly to the big developmental effort set in motion by the economic liberalisation policy and the globalisation process which got under way in the 1990s. The shady stock market deals and corruption in the grant of licences fall in this category.

Corruption in a fast developing economy is not unusual. England went through such a phase as money flowing in from newly established colonies, notably India, fuelled industrial growth. The spread of corruption in China after the opening up of the economy in 1978 is well known.

Both England and China came down heavily on corruption. Robert Clive and Warren Hastings who looted India were tried by Parliament when they returned home. Chen Liangyu and Chen Xitong, who were both members of the powerful Politburo of the Communist Party of China, are now serving long prison terms on corruption charges.

In India, central and state ministers belonging to many political parties have attracted charges of corruption and some have been forced to step down but no one of consequence has been sent to jail. Biased investigation, inept prosecution and tardy court proceedings have helped the accused to get away.

When former Kerala chief minister K Karunakaran died last month, the corruption case registered against him two decades ago had not reached the trial stage. Madhu Koda, who allegedly amassed about Rs40 billion during 2006-08 when he was chief minister of Jharkhand, has been in judicial custody since November 2009 but there is no knowing when the case against him will come up in court.

Observers of a later period may not view the developments of the past decade in the same way as contemporary chroniclers. They may focus on the developmental activity of the period instead of the corruption that it generated. The 40 per cent growth in the telecom network in 2010 may interest them more than the big loot by politicians, officials and businessmen.

The decade saw Indian companies mopping up a staggering Rs2.09 trillion through public issues. Coal India, a big public sector undertaking, and Reliance Power, a big private corporation, made the biggest hauls.

Nine companies entered the capital market in the first three years of the decade and raised about Rs25 billion. Investors were shy at that time as a couple of stock market scams had just come to light. As the memory of the scandals receded, the market became buoyant.

Looking beyond the scams, the lesson of the decade is that if a reasonable level of accountability can be established the pace of development can be accelerated.--Gulf Today, Sharjah, January 3, 2011.

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