Wednesday, June 05, 2019

It depends on the definition, doesn't it?

R Jagannathan has a word of advice for the new Finance Minister Nirmala Sitharaman, which is that she should advise her boss to de-emphasize "an obsession with corruption and tax compliance". Since the liberalization of the Indian economy in 1991 the construction sector has created 35.74% of all new jobs. This boom in construction was largely financed by black money, which is earning on which no tax has been paid. On 8 November 2016, the Prime Minister Narendra Modi suddenly withdrew all Rs 1,000 and Rs 500 banknotes from circulation to catch people with black money. It was assumed that most of the black money was held in high value notes and, since people would not be able to deposit this in banks for fear of getting caught, the Reserve Bank (RBI) would be able to pay a dividend of Rs 3 trillion to the government. That did not happen as all the money returned to banks because people did not keep cash at home but invested undeclared income in real estate, which is why real estate and construction sectors are stagnating without black money. According to Samuel Huntington, "both the rich and poor tend to be corrupt in developing countries. While the poor sell their votes to buy economic benefits from the state, the rich provide financing to political parties to tilt policies in their direction". This happened under the previous government but Modi "stamped hard on such tendencies. But he probably went too fast, and with too tough an agenda." Jagannathan does not understand that corruption comes in various colors. The government did not pay Rs 693.94 billion for food subsidies to massage the fiscal deficit. Deceiving the people is corruption. Bank fraud has risen steeply to Rs 715 billion in 2018-19, compared to Rs 101.70 billion in 2013-14, the last year of the previous government. The way of calculating our GDP was corrupted to  show higher growth during this government's tenure. P Bhattacharya explained how wrong figures and dubious assumptions were used to inflate GDP growth. Donation to political parties was made completely opaque by allowing anyone to buy election bonds anonymously. In the last 5 years the Modi government has seriously damaged every institution set up to fight corruption, wrote Bhardwaj and Johri. The anti-corruption bill passed last year punishes anyone paying a bribe with 7 years in prison but protects civil servants who take bribes by forbidding investigation of any civil servant without permission of the government. India fell to 138 in the Press Freedom Index and is now at the same level as Syria and Somalia in violence against journalists, wrote R Burman. Those who can are leaving India, ironically to countries where the rule of law is strictly enforced. But, perhaps the greatest corruption is how intelligent people like Jagannathan have tamely accepted a new definition of honesty. 

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