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International Journal of Academic Research ISSN: 2348-7666; Vol.3, Issue-3(1), March, 2016 Impact Factor: 3.075; Email: [email protected] Dr. A. Guravaiah, M.A.,M.A.,LL.M.,Ph.D., Senior Faculty in Law, Andhra Christian College of Law, Guntur, A.P The economy of India was under socialist-inspired policies for an entire Corruption was a social cancer generation from the 1950s until the late eating into our institutions of 1980s. The economy was characterized by governance. The educated youth had extensive regulation, protectionism, and major roll to play in sensitising the people public ownership, policies vulnerable to about the ill effects of corruption on the pervasive corruption and slow growth. In society and the indiduals. Corruption is 1960s, Chakravarthi Rajagopalachari one of the major burning problem for suggested License Raj was often at the developing countries like India. In 1970 core of corruption. in Hongkong had very much corruption, today Hongkong one of the most honest The Vohra Report, submitted by governance machinery. The government the former Indian Union Home of Hongkong appoints independent Secretary, N.N. Vohra, in October 1993, commission against corruption (ICAC). studied the problem of the There is no damnation authority on that criminalisation of politics and of the commission the anty corruption nexus among criminals, politicians and commission exercise the all the powers bureaucrats in India. The report without any problem. contained several observations made by official agencies on the criminal network In 17th century, during India's which was virtually running a parallel colonial era, corruption had become a government. It also discussed criminal serious issue. The British parliament gangs who enjoyed the patronage of witnessed numerous debates on bribery politicians of all political parties and the and corruption particularly in the East- protection of government functionaries.1 India Company. International Journal of Academic Research ISSN: 2348-7666; Vol.3, Issue-3(1), March, 2016 Impact Factor: 3.075; Email: [email protected] Corruption in India is a major issue and certain goods and services delivery, and adversely affects its economy. A 2005 the lack of transparent laws and study conducted by Transparency processes. There are significant International in India found that more variations in level of corruption as well as than 62% of Indians had first-hand in state government efforts to reduce experience of paying bribes or influence corruption across India5. peddling to get jobs done in public offices successfully. In its 2008 study, Transparency International reports In a 2011 report on Corruption in about 40% of Indians had first-hand India, one of the world's largest audit and experience of paying bribes or using a compliance firms KPMG notes several contact to get a job done in public office2. causes that encourage corruption in India. The report suggests high taxes and In 2011 India was ranked 95th excessive regulation bureaucracy as a out of 178 countries in Transparency major cause. India has high marginal tax International's Corruption Perceptions rates and numerous regulatory bodies Index.We should recheck this 95th with the power to stop any citizen or because each and every public service business from going about their daily sector corrupted and private sector works affairs. This power to search and on commission basis and it is are same. question creates opportunities for corrupt Some of the largest sources of public officials to extract bribes; each corruption in India are entitlement individual or business decides if the effort programs and social spending schemes required in due process and the cost of enacted by the Indian government. delay is worth not paying the bribe Examples include Mahatma Gandhi demanded. In cases of high taxes, paying National Rural Employment Guarantee off the corrupt official is cheaper than the Act and National Rural Health Mission. tax. This, claims the report, is one major Other daily sources of corruption include cause of corruption in India and 150 India's trucking industry which is forced other countries across the world. In real to pay billions in bribes annually to estate industry, the high capital gains tax numerous regulatory and police stops on in India encourages large-scale its interstate highways3. corruption. The correlation between high real estate taxes and corruption, claims Indian media has widely the KPMG report, is high in India as well published allegations of corrupt Indian as other countries including the citizens stashing trillions of dollars in developed economies; this correlation has Swiss banks. Swiss authorities, however, been true in modern times as well as for assert these allegations to be a complete centuries of human history in numerous fabrication and false4. cultures. The desire to pay lower taxes The causes of corruption in India than those demanded by the state include excessive regulations, explains the demand side of corruption. complicated taxes and licensing systems, The net result is that the corrupt officials numerous government departments each collect bribes, state fails to collect taxes with opaque bureaucracy and for its own budget, and corruption grows. discretionary powers, monopoly by The report suggests regulatory reforms, government controlled institutions on process simplification and lower taxes as International Journal of Academic Research ISSN: 2348-7666; Vol.3, Issue-3(1), March, 2016 Impact Factor: 3.075; Email: [email protected] means to increase tax receipts and reduce the private marginal product of capital causes of corruption6. and investment rate. Levine and Renelt showed that investment rate is a robust In addition to tax rates and determinant of economic growth. regulatory burden, the KPMG report According to the neoclassical growth claims corruption results from opaque model, institutional variables contribute process and paperwork on the part of the to determining steady-state per capital government. Lack of transparency allows income levels and speed of convergence to room for maneuver for both the its steady state, hence affecting its demanders and suppliers of corruption. growth rate9. Whenever objective standards and transparent processes are missing, and Bureaucratic inefficiency also subjective opinion driven regulators and affects growth directly, such as through opaque/hidden processes are present, the misallocation of investments in the conditions encourage corruption7. economy. Additionally, corruption results in lower economic growth for a given Vito Tanzi in an International level of income10. Monetary Fund study suggests that in India, like other countries in the world, corruption is caused by excessive If corruption levels in India were regulations and authorization reduced to levels in the developed requirements, complicated taxes and economies such as the United States, licensing systems, mandated spending India's GDP growth rate could increase programs, lack of competitive free by an additional 4 to 5 percent, to 12 to markets, monopoly of certain goods and 13 per cent each year. C. K. Prahalad service providers by government estimates the lost opportunity caused by controlled institutions, bureaucracy, lack corruption, in terms of investment, of penalties for corrupt behavior by growth and jobs for India is over US$ 50 public officials, and lack of transparent billion a year11. laws and processes. A Harvard University study finds these to be some of the causes The level of corruption varies in of corruption and underground economy different parts of India. In a July 2011 in India8. report, The Economist for example, claims the state government of Gujarat has kept red tape to a minimum, does not According to a report by KPMG, ask for bribes, and does not interfere "high-level corruption and scams are now with entrepreneurial corporations. The threatening to derail the country's state, the article claims, has less credibility and economic boom". corruption, less onerous labour laws and effective bureaucracy. With growth rates matching some of the fastest growing Corruption may lead to further economic regions of China, Gujarat bureaucratic delay and inefficiency as continues to outpace growth in other corrupted bureaucrats may introduce red Indian states12. tape to extract more bribes. Such inadequacies in institutional efficiency could affect growth indirectly by lowering International Journal of Academic Research ISSN: 2348-7666; Vol.3, Issue-3(1), March, 2016 Impact Factor: 3.075; Email: [email protected] throughout India, consisting of municipal and other government officials, elected A 2005 study done by politicians, judicial officers, real estate Transparency International (TI) in India developers and law enforcement officials, found that more than 50% of the people acquire, develop and sell land in illegal had firsthand experience of paying bribe ways15. or peddling influence to get a job done in a public office. Taxes and bribes are common between state borders; Transparency International estimates A 2006 report claimed state- that truckers pay annually 22,200 funded construction activities in Uttar crores (US$ 4.5 billion) in bribes. Pradesh, such as road building, were Government regulators and police share dominated by construction mafias, which in bribe money, each to the tune of 43% are groupings of corrupt public works and 45% respectively. The en-route officials, materials suppliers, politicians stoppages including those

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