Corruption is an issue that adversely affects India's economy of central, state and local government agencies. Not only has it held the economy back from reaching new heights, but rampant corruption has stunted the country's development. A study conducted by Transparency International in 2005 recorded that more than 92% of Indians had at some point or another paid a bribe to a public official to get a job done. In a study conducted in 2008, Transparency International reported that about 50% of Indians had first hand experience of paying bribes or using contacts to get services performed by public offices.
Transparency International's 2017 Corruption Perception Index ranks the country 40th place out of 180 countries.
The largest contributors to corruption are entitlement programs and social spending schemes enacted by the Indian government. Examples include the Mahatma Gandhi National Rural Employment Guarantee Act and the National Rural Health Mission. Other areas of corruption include India's trucking industry which is forced to pay billions of rupees in bribes annually to numerous regulatory and police stops on interstate highways.
The media has widely published allegations of corrupt Indian citizens stashing millions of rupees in Swiss banks. Swiss authorities denied these allegations, which were later proven in 2015–2016. The Indian media is largely controlled by extremely corrupt politicians and industrialists who play a major role by misleading the public with incorrect information and use the media for mud-slinging at political and business opponents.
The causes of corruption in India include excessive regulations, complicated tax and licensing systems, numerous government departments with opaque bureaucracy and discretionary powers, monopoly of government controlled institutions on certain goods and services delivery, and the lack of transparent laws and processes. There are significant variations in the level of corruption and in the government's efforts to reduce corruption across different areas of India.
See also: Booth capturing
Corruption in India is a problem that has serious implications for protecting the rule of law and ensuring access to justice. As of December 2009, 120 of India's 524 parliament members were accused of various crimes, under India's First Information Report procedure wherein anyone can allege another to have committed a crime. Many of the biggest scandals since 2010 have involved high level government officials, including Cabinet Ministers and Chief Ministers, such as the 2010 Commonwealth Games scam (₹70,000 crore (US$11 billion)), the Adarsh Housing Society scam, the Coal Mining Scam (₹1.86 lakh crore (US$28 billion)), the Mining Scandal in Karnataka and the Cash for Vote scams.
Sole philosophy pages on all norms and guidelines to clear mess, but now placed below plates.
A 2005 study done by the Transparency International in India found that more than 92% of the people had firsthand experience of paying bribes or peddling influence to get services performed in a public office. Taxes and bribes are common between state borders; Transparency International estimates that truckers annually pay ₹222 crore (US$34 million) in bribes.
Both government regulators and police share in bribe money, to the tune of 43% and 45% each, respectively. The en route stoppages at checkpoints and entry-points can take up to 11 hours per day. About 60% of these (forced) stoppages on roads by concerned authorities such as government regulators, police, forest, sales and excise, octroi, and weighing and measuring departments are for extorting money. The loss in productivity due to these stoppages is an important national concern; the number of truck trips could increase by 40%, if forced delays are avoided. According to a 2007 World Bank published report, the travel time for a Delhi-Mumbai trip could be reduced by about 2 days per trip if the corruption and associated regulatory stoppages to extract bribes were eliminated.
A 2009 survey of the leading economies of Asia, revealed Indian bureaucracy to be not only the least efficient out of Singapore, Hong Kong, Thailand, South Korea, Japan, Malaysia, Taiwan, Vietnam, China, Philippines and Indonesia, but that working with India's civil servants was a "slow and painful" process.
Land and property
See also: Illegal housing in India
Officials are alleged to steal state property. In cities and villages throughout India, groups of municipal and other government officials, elected politicians, judicial officers, real estate developers and law enforcement officials, acquire, develop and sell land in illegal ways. Such officials and politicians are very well protected by the immense power and influence they possess. Apart from this, slum-dwellers who are allotted houses under several housing schemes such as Pradhan Mantri Gramin Awaas Yojana, Rajiv Awas Yojna, Pradhan Mantri Awas Yojna etc., rent out these houses to others, to earn money due to severe unemployment and lack of a steady source of income.
Tendering processes and awarding contracts
A 2006 report claimed state-funded construction activities in Uttar Pradesh, such as road building were dominated by construction mafias, consisting of cabals of corrupt public works officials, materials suppliers, politicians and construction contractors.
Problems caused by corruption in government funded projects are not limited to the state of Uttar Pradesh. According to The World Bank, aid programmes are beset by corruption, bad administration and under-payments. As an example, the report cites that only 40% of grain handed out for the poor reaches its intended target. The World Bank study finds that the public distribution programmes and social spending contracts have proven to be a waste due to corruption.
For example, the government implemented the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) on 25 August 2005. The Central government outlay for this welfare scheme is ₹400 crore (US$61 million) in FY 2010–2011. After 5 years of implementation, in 2011, the programme was widely criticised as no more effective than other poverty reduction programmes in India. Despite its best intentions, MGNREGA faces the challenges of corrupt officials reportedly pocketing money on behalf of fake rural employees, poor quality of the programme infrastructure, and unintended destructive effect[clarification needed] on poverty.
Hospitals and health care
In Government Hospitals, corruption is associated with non-availability/duplication of medicines, obtaining admission, consultations with doctors and receiving diagnostic services.
National Rural Health Mission is another health care-related government programme that has been subject to large scale corruption allegations. This social spending and entitlement programme hoped to improve health care delivery across rural India. Managed since 2005 by the Ministry of Health, the Indian government mandated a spending of ₹2.77 lakh crore (US$42 billion) in 2004–2005, and increased it annually to be about 1% of India's gross domestic product. The National Rural Health Mission programme has been clouded by a large-scale corruption scandal in which high-level government appointed officials were arrested, several of whom died under mysterious circumstances including one in prison. Corruption, waste and fraud-related losses from this government programme has been alleged to be ₹1 lakh crore (US$15 billion).
Science and technology
CSIR, the Council of Scientific and Industrial Research, has been flagged in ongoing efforts to root out corruption in India. Established with the directive to do translational research and create real technologies, CSIR has been accused of transforming into a ritualistic, overly-bureaucratic organisation that does little more than churn out papers.
There are many issues facing Indian scientists, with some, such as MIT systems scientist VA Shiva Ayyadurai, calling for transparency, a meritocratic system, and an overhaul of the bureaucratic agencies that oversee science and technology. Sumit Bhaduri stated, "The challenges of turning Indian science into part of an innovation process are many. Many competent Indian scientists aspire to be ineffectual administrators (due to administrative power and political patronage), rather than do the kind of science that makes a difference". Prime minister Manmohan Singh spoke at the 99th Indian Science Congress and commented on the state of the sciences in India, after an advisory council informed him there were problems with "the overall environment for innovation and creative work" and a "war-like" approach was needed.
Income tax department
There have been several cases of collusion involving officials of the Income Tax Department of India for preferential tax treatment and relaxed prosecutions in exchange for bribes.
Preferential award of mineral resources
See also: Illegal mining in India
In August 2011, an iron ore mining scandal became a media focus in India. In September 2011, elected member of Karnataka's legislative assembly Janardhana Reddy, was arrested on charges of corruption and illegal mining of iron ore in his home state. It was alleged that his company received preferential allotment of resources, organised and exported billions of dollars' worth of iron ore to Chinese companies in recent years without paying any royalty to the state government exchequer of Karnataka or the central government of India, and that these Chinese companies made payment to shell companies registered in Caribbean and north Atlantic tax havens controlled by Reddy.
It was also alleged that corrupt government officials cooperated with Reddy, starting from government officials in charge of regulating mining to government officials in charge of regulating port facilities and shipping. These officials received monthly bribes in exchange for enabling the illegal export of illegally mined iron ore to China. Such scandals have led to a demand in India for consensually driven action plan to eradicate the piracy of India's mineral resources by an illegal, politically corrupt government officials-business nexus, removal of incentives for illegal mining, and the creation of incentives for legal mining and domestic use of iron ore and steel manufacturing.
A study conducted between 2004 and 2005 found that India's driver licensing procedure was a hugely distorted bureaucratic process and allows drivers to be licensed despite their low driving ability through promoting the usage of agents. Individuals with the willingness to pay make a significant payment above the official fee and most of these extra payments are made to agents, who act as an intermediary between bureaucrats and applicants.
The average licensee paid Rs 1,080, approximately 2.5 times the official fee of Rs 450, in order to obtain a license. On average, those who hired agents had a lower driving ability, with agents helping unqualified drivers obtain licenses and bypass the legally required driving examination. Among the surveyed individuals, approximately 60% of the license holders did not even take the licensing exam and 54% of those license holders failed an independent driving test.
Agents are the channels of corruption in this bureaucratic driver licensing system, facilitating access to licenses among those who are unqualified to drive. Some of the failures of this licensing system are caused by corrupt bureaucrats who collaborate with agents by creating additional barriers within the system against those who did not hire agents.
Professor Bibek Debroy and Laveesh Bhandari claim in their book Corruption in India: The DNA and RNA that public officials in India may be cornering as much as ₹921 billion (US$14 billion), or 1.26 per cent of the GDP through corruption. The book claims most bribery is in government delivered services and the transport and real estate industries.
Bribery and corruption are pervasive, but some areas tend to more issues than others. A 2013 EY (Ernst & Young) Study reports the industries perceived to be the most vulnerable to corruption as: Infrastructure & Real Estate, Metals & Mining, Aerospace & Defense, and Power & Utilities. There are a range of specific factors that make a sector more susceptible to bribery and corruption risks than others. High use of middlemen, large value contracts, and liasioning activities etc. drive the depth, volume and frequency of corrupt practices in vulnerable sectors.
A 2011 KPMG study reports India's real estate, telecommunications and government-run social development projects as the three top sectors plagued by corruption. The study found India's defence, the information technology industry and energy sectors to be the most competitive and least corruption prone sectors.
CMS India claims in its 2010 India Corruption Study report that socio-economically weaker sections of Indian society are the most adversely affected by government corruption. These include the rural and urban poor, although the study claims that nationwide perception of corruption has decreased between 2005 and 2010. Over the 5-year period, a significantly greater number of people surveyed from the middle and poorest classes in all parts of India claimed government corruption had dropped over time, and that they had fewer direct experiences with bribery demands. Whereas in reality corruption has increased ten folds since 2010 and continues to grow relentlessly on a daily basis.
The table below compares the perceived anti-corruption effort across some of the major states in India. A rising index implies higher anti-corruption effort and falling corruption. According to this table, the states of Bihar and Gujarat have experienced significant improvements in their anti-corruption efforts, while conditions have worsened in the states of Assam and West Bengal. Consistent with the results in this table, in 2012 a BBC News report claimed the state of Bihar has transformed in recent years to become the least corrupt state in India.
Main article: Indian black money
Black money refers to money that is not fully or legitimately the property of the 'owner'. A government white paper on black money in India suggests two possible sources of black money in India; the first includes activities not permitted by the law, such as crime, drug trade, terrorism and corruption, all of which are illegal in India and secondly, wealth that may have been generated through lawful activity but accumulated by failure to declare income and pay taxes. Some of this black money ends up in illicit financial flows across international borders, such as deposits in tax haven countries.
A November 2010 report from the Washington-based Global Financial Integrity estimates that over a 60-year period, India lost US$213 billion in illicit financial flows beginning in 1948; adjusted for inflation, this is estimated to be $462 billion in 2010, or about $8 billion per year ($7 per capita per year). The report also estimated the size of India's underground economy at approximately US$640 billion at the end of 2008 or roughly 50% of the nation's GDP.
Indian black money in Switzerland
India was ranked 38th by money held by its citizens in Swiss banks in 2004 but then improved its ranking by slipping to 61st position in 2015 and further improved its position by slipping to 75th position in 2016. According to a 2010 The Hindu article, unofficial estimates indicate that Indians had over US$1,456 billion in black money stored in Swiss banks (approximately US$1.4 trillion). While some news reports claimed that data provided by the Swiss Banking Association Report (2006) showed India has more black money than the rest of the world combined, a more recent report quoted the SBA's Head of International Communications as saying that no such official Swiss Banking Association statistics exist.
Another report said that Indian-owned Swiss bank account assets are worth 13 times the country's national debt. These allegations have been denied by Swiss Bankers Association. James Nason of Swiss Bankers Association in an interview about alleged black money from India, holds that "The (black money) figures were rapidly picked up in the Indian media and in Indian opposition circles, and circulated as gospel truth. However, this story was a complete fabrication. The Swiss Bankers Association never published such a report. Anyone claiming to have such figures (for India) should be forced to identify their source and explain the methodology used to produce them."
In a separate study, Dev Kar of Global Financial Integrity concludes, "Media reports circulating in India that Indian nationals held around US$1.4 trillion in illicit external assets are widely off the mark compared to the estimates found by his study." Kar claims the amounts are significantly smaller, only about 1.5% of India's GDP on average per annum basis, between 1948 and 2008. This includes corruption, bribery and kickbacks, criminal activities, trade mispricing and efforts to shelter wealth by Indians from India's tax authorities.
According to a third report, published in May 2012, Swiss National Bank estimates that the total amount of deposits in all Swiss banks, at the end of 2010, by citizens of India were CHF 1.95 billion (₹92.95 billion (US$1.4 billion)). The Swiss Ministry of External Affairs has confirmed these figures upon request for information by the Indian Ministry of External Affairs. This amount is about 700-fold less than the alleged $1.4 trillion in some media reports. The report also provided a comparison of the deposits held by Indians and by citizens of other nations in Swiss banks. Total deposits held by citizens of India constitute only 0.13 per cent of the total bank deposits of citizens of all countries. Further, the share of Indians in the total bank deposits of citizens of all countries in Swiss banks has reduced from 0.29 per cent in 2006 to 0.13 per cent in 2010.
Domestic black money
Indian companies are reportedly misusing public trusts for money laundering. India has no centralised repository—like the registrar of companies for corporates—of information on public trusts.
2016 Evasion attempts after note ban
In Gujarat, Delhi and many other major cities, sales of gold increased on 9 November, with an increased 20% to 30% premium surging the price as much as ₹45,000 (US$690) from the ruling price of ₹31,900 (US$490) per 10 grams (0.35 oz).
Authorities of Sri Jalakanteswarar temple at Vellore discovered cash worth ₹4.4 million (US$67,000) from the temple Hundi.
- Multiple bank transactions
There have also been reports of people circumventing the restrictions imposed on exchange transactions and attempting to convert black money into white by making multiple transactions at different bank branches. People were also getting rid of large amounts of banned currency by sending people in groups to exchange their money at banks. In response, the government announced that it would start marking customers with indelible ink. This was in addition to other measures proposed to ensure that the exchange transactions are carried out only once by each person. On 17 November, the government reduced the exchange amount to ₹2,000 (US$31) to discourage attempts to convert black money into legitimate money.
As soon as the demonetisation was announced, it was observed by the Indian Railways authorities that a large number of people started booking tickets particularly in classes 1A and 2A for the longest distance possible, to get rid of unaccounted for cash. A senior official said, "On November 13, 42.7 million passengers were nationally booked across all classes. Of these, only 1,209 were 1A and 16,999 for 2A. It is a sharp dip from the number of passengers booked on November 9, when 27,237 passengers had booked tickets in 1A and 69,950 in 2A."
The Railways Ministry and the Railway Board responded swiftly and decided that cancellation and refund of tickets of value ₹10,000 and above will not be allowed by any means involving cash. The payment can only be through cheque/electronic payment. Tickets above ₹10,000 can be refunded by filing ticket deposit receipt only on surrendering the original ticket. A copy of the PAN card must be submitted for any cash transaction above ₹50,000. The railway claimed that since the Railway Board on 10 November imposed a number of restrictions to book and cancel tickets, the number of people booking 1A and 2A tickets came down.
- Municipal and local tax payments
As the use of the demonetised notes had been allowed by the government for the payment of municipal and local body taxes, leading to people using the demonetised ₹500 and ₹1,000 notes to pay large amounts of outstanding and advance taxes. As a result, revenue collections of the local civic bodies jumped. The Greater Hyderabad Municipal Corporation reported collecting about ₹1.6 billion (US$25 million) in cash payments of outstanding and advance taxes within 4 days.
Income Tax officials raided multiple branches of Axis Bank and found bank officials involved in acts of money laundering.
Business and corruption
Public servants have very wide discretionary powers offering the opportunity to extort undue payments from companies and ordinary citizens. The awarding of public contracts is notoriously corrupt, especially at the state level. Scandals involving high-level politicians have highlighted the payment of kickbacks in the healthcare, IT and military sectors. The deterioration of the overall efficiency of the government, protection of property rights, ethics and corruption as well as undue influence on government and judicial decisions has resulted in a more difficult business environment.
According to Transparency International[unreliable source?], Judicial corruption in India is attributable to factors such as "delays in the disposal of cases, shortage of judges and complex procedures, all of which are exacerbated by a preponderance of new laws". Over the years there have been numerous allegations against judges, and in 2011 Soumitra Sen, a former judge at the Kolkata High Court became the first judge in India to be impeached by the Rajya Sabha, (Upper House of the Indian Parliament) for misappropriation of funds.
Right to Information Act
Main article: Right to Information Act
The 2005 Right to Information Act required government officials to provide information requested by citizens or face punitive action, as well as the computerisation of services and the establishment of vigilance commissions. This considerably reduced corruption and opened up avenues to redress grievances.
Right to public services legislation
Main article: Right to Public Services legislation
Right to Public Services legislation, which has been enacted in 19 states of India, guarantee time bound delivery of services for various public services rendered by the government to citizen and provides mechanisms for punishing the errant public servant who is deficient in providing the service stipulated under the statute. Right to Service legislation is meant to reduce corruption among the government officials and to increase transparency and public accountability.
Anti-corruption laws in India
Public servants in India can be imprisoned for several years and penalised for corruption under the:
Punishment for bribery in India can range from six months to seven years.
India is also a signatory to the United Nations Convention against Corruption since 2005 (ratified 2011). The Convention covers a wide range of acts of corruption and also proposes certain preventive policies.
The Lokpal and Lokayuktas Act, 2013 which came into force from 16 January 2014, seeks to provide for the establishment of the institution of Lokpal to inquire into allegations of corruption against certain public functionaries in India.
Whistle Blowers Protection Act, 2011, which provides a mechanism to investigate alleged corruption and misuse of power by public servants and also protect anyone who exposes alleged wrongdoing in government bodies, projects and offices, has received the assent of the President of India on 9 May 2014, and (as of 2 August) is pending for notification by the Central Government.
At present there are no legal provisions to check graft in the private sector in India. Government has proposed amendments in existing acts and certain new bills for checking corruption in private sector. Big-ticket corruption is mainly witnessed in the operations of large commercial or corporate entities. In order to prevent bribery on supply side, it is proposed that key managerial personnel of companies' and also the company shall be held liable for offering bribes to gain undue benefits.
The Prevention of Money Laundering Act, 2002 provides that the properties of corrupt public servants shall be confiscated. However, the Government is considering incorporating provisions for confiscation or forfeiture of the property of corrupt public servants into the Prevention of Corruption Act, 1988 to make it more self-contained and comprehensive.
A committee headed by the Chairman of Central Board of Direct Taxes (CBDT), has been constituted to examine ways to strengthen laws to curb generation of black money in India, its illegal transfer abroad, and its recovery. "The Committee shall examine the existing legal and administrative framework to deal with the menace of generation of black money through illegal means including inter-alia the following: 1. Declaring wealth generated illegally as national asset; 2. Enacting/amending laws to confiscate and recover such assets; and 3. Providing for exemplary punishment against its perpetrators." (Source: 2013 EY report on Bribery & Corruption)
The Companies Act, 2013, contains certain provisions to regulate frauds by corporations including increased penalties for frauds, giving more powers to the Serious Fraud Investigation Office, mandatory responsibility of auditors to reveal frauds, and increased responsibilities of independent directors. The Companies Act, 2013 also provides for mandatory vigil mechanisms which allow directors and employees to report concerns and whistleblower protection mechanism for every listed company and any other companies which accepts deposits from public or has taken loans more than 50 crore rupees from banks and financial institutions. This intended to avoid accounting scandals such as the Satyam scandal which have plagued India. It replaces The Companies Act, 1956 which was proven outmoded in terms of handling 21st century problems.
In 2015, Parliament passed the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015 to curb and impose penalties on black money hoarded abroad. The Act has received the assent of the President of India on 26 May 2015. It came into effect from 1 July 2015.
Anti-corruption police and courts
The Directorate General of Income Tax Investigation, Central Vigilance Commission and Central Bureau of Investigation all deal with anti-corruption initiatives. Certain states such as Andhra Pradesh (Anti-Corruption Bureau, Andhra Pradesh) and Karnataka (Lokayukta) also have their own anti-corruption agencies and courts.
Andhra Pradesh's Anti Corruption Bureau (ACB) has launched a large scale investigation in the "cash-for-bail" scam. CBI court judge Talluri Pattabhirama Rao was arrested on 19 June 2012 for taking a bribe to grant bail to former Karnataka Minister Gali Janardhan Reddy, who was allegedly amassing assets disproportionate to his known sources of income. Investigation revealed that India Cements (one of India's largest cement companies) had been investing in Reddy's businesses in return for government contracts. A case has also been opened against seven other individuals under the Indian Penal Code and the Prevention of Corruption Act.
Civic anti-corruption organisations
A variety of organisations have been created in India to actively fight against corrupt government and business practices. Notable organisations include:
- [Bharat Swabhiman Trust], established by Ramdev, has campaigned against black money and corruption for a decade.[when?]
- 5th Pillar is most known for the creation of the zero rupee note, a valueless note designed to be given to corrupt officials when they request bribes.
- India Against Corruption was a popular movement active during 2011–12 that received much media attention. Among its prominent public faces were Arvind Kejriwal, Kiran Bedi and Anna Hazare. Kejriwal went on to form the Aam Aadmi Party and Hazare established Jan Tantra Morcha.
- Jaago Re! One Billion Votes was an organisation founded by Tata Tea and Janaagraha to increase youth voter registration. They have since expanded their work to include other social issues, including corruption.
- Association for Social Transparency, Rights and Action (ASTRA) is an NGO focused on grass-roots work to fight corruption in Karnataka.
- The Lok Satta Movement, has transformed itself from a civil organisation to a full-fledged political party, the Lok Satta Party. The party has fielded candidates in Andhra Pradesh, Tamil Nadu, and Bangalore. In 2009, it obtained its first elected post, when Jayaprakash Narayan won the election for the Kukatpally Assembly Constituency in Andhra Pradesh.
See also: Electoral reform in India
A number of ideas have been in discussion to improve the efficiency and effectiveness of electoral processes in India.
Factors contributing to corruption in India
In a 2004 report on Corruption in India, one of the world's largest audit and compliance firms KPMG notes several issues that encourage corruption in India. The report suggests high taxes and excessive regulation bureaucracy as a major cause; India has high marginal tax rates and numerous regulatory bodies with the power to stop any citizen or business from going about their daily affairs.
This power of Indian authorities to search and question individuals creates opportunities for corrupt public officials to extract bribes—each individual or business decides if the effort required for due process and the cost of delay is worth paying the bribe demanded. In cases of high taxes, paying off the corrupt official is cheaper than the tax. This, according to the report, is one major cause of corruption in India and 150 other countries across the world. In the real estate industry, the high capital gains tax in India encourages large-scale corruption. The KPMG report claims that the correlation between high real estate taxes and corruption is high in India as it is other countries including the developed economies; this correlation has been true in modern times as well as throughout centuries of human history in various cultures.
The desire to pay lower taxes than those demanded by the state explains the demand side of corruption. The net result is that the corrupt officials collect bribes, the government fails to collect taxes for its own budget, and corruption grows. The report suggests regulatory reforms, process simplification and lower taxes as means to increase tax receipts and reduce causes of corruption.
In addition to tax rates and regulatory burdens, the KPMG report claims corruption results from opaque process and paperwork on the part of the government. Lack of transparency allows room for manoeuvre for both demanders and suppliers of corruption. Whenever objective standards and transparent processes are missing, and subjective opinion driven regulators and opaque/hidden processes are present, conditions are ripe for corruption.
Vito Tanzi in an International Monetary Fund study suggests that in India, like other countries in the world, corruption is caused by excessive regulations and authorisation requirements, complicated taxes and licensing systems, mandated spending programmes, lack of competitive free markets, monopoly of certain goods and service providers by government controlled institutions, bureaucracy, lack of penalties for corruption of public officials, and lack of transparent laws and processes. A Harvard University study finds these to be some of the causes of corruption and underground economy in India.
Impact of corruption
Loss of credibility
In a study on Bribery and Corruption in India conducted in 2013 by global professional services firm Ernst & Young (EY), a majority of the survey respondents from PE firms said that a company operating in a sector which is perceived as highly corrupt may lose ground when it comes to fair valuation of its business, as investors bargain hard and factor in the cost of corruption at the time of transaction.
According to a report by KPMG, "high-level corruption and scams are now threatening to derail the country's its credibility and [its] economic boom".
Corruption may lead to further bureaucratic delay and inefficiency if corrupted bureaucrats introduce red tape in order to extort more bribes. Such inadequacies in institutional efficiency could affect growth indirectly by lowering the private marginal product of capital and investment rate. Levine and Renelt showed that investment rate is a robust determinant of economic growth.
Bureaucratic inefficiency also affects growth directly through misallocation of investments in the economy. Additionally, corruption results in lower economic growth for a given level of income.
Lower corruption, higher growth rates
If corruption levels in India were reduced to levels in developed economies such as Singapore or the United Kingdom, India's GDP growth rate could increase at a higher rate annually. C. K. Prahalad estimates the lost opportunity caused by corruption in terms of investment, growth and jobs for India is over US$50 billion a year.
Corruption in Pakistan is widespread, particularly in the government and lower levels of police forces. Transparency International's 2017 Corruption Perception Index ranks the country 117th place out of 180 countries Pakistan saw a significant improvement in its statistics in 2013 when its ranking improved by 12 indices compared to its previous rankings – 139 out of 174 in 2012, 134 out of 182 in 2011, 143 out of 178 in 2010, and 139 out of 180 in 2009.
While Pakistan has had a problem of corruption since it came into being. The change in regimes between military and civilian institutions due to three different successful coups have also weakened the anti-corruption institutions. This may also be noted that a significant improvement in corruption in Pakistan has not occurred either in civilian government or in military government. Recently, Pakistan has been doing better in eradicating corruption than previous years but still there's a long road ahead. In 2017, Pakistan's prime minister Nawaz Sharif was declared ineligible to hold office by supreme court of Pakistan according to the constitution of Pakistan due to corruption and illegal money stashed abroad by him which surfaced through the famous Panama Papers.
There is a growing need to reform accountability and anti-corruption policies at higher levels within the state government.
"Corruption is a curse in India and amongst Muslims, especially the so-called educated and intelligentsia. Unfortunately, it is this class that is selfish and morally and intellectually corrupt. No doubt this disease is common, but amongst this particular class of Muslims it is rampant."
6 May 1945
The Dominion of Pakistan was created as a result of the Pakistan Movement in 1947. Upon gaining independence, Pakistan inherited a strong bureaucracy and army from the British Raj. There has since been no major change in this bureaucratic set up since it was first implemented by British, albeit reforms were proposed by the Musharraf regime in 2007. This has led many to speculate that "corruption has seeped into the higher echelons of bureaucracy" where "corruption cases are [mostly] reported against irregular and ex-cadre appointments". It was by the late 1960s that the bureaucracy started being portrayed as an "instrument of oppression". In multiple reports published by the World Bank, the Pakistani bureaucracy was seen as being rife with corruption, inefficient and bloated in size with an absence of accountability and resistant to change.
Bureaucracy and secession of East Pakistan: 1954–1971
The bureaucratic influence was strong in the western provinces of Pakistan while the eastern province retained a majority of the population. On 22 November 1954, bureaucratic administrators moved a resolution to merge the four western provinces into a single unit called West Pakistan. This led to public outcry in East Pakistan who felt that they were being misrepresented and systematically marginalised by the land-owning Punjabi Muslim elites who enjoyed higher bureaucratic positions at the time. This led to the secession of East Pakistan into the separate nation state of Bangladesh and lay witness to the corrupt malpractices of the Punjabi elite in West Pakistan. Punjabis argued that East Pakistan's majority was a consequence of the high percentage of Bengali Hindus in the province who were not involved in the state's decision-making processes. Thus, the Punjabi landowners remained largely unrepentant of their desires to "[secure] their own hegemony" leading to the loss of the eastern province in 1971.
Nationalisation politicises economic planning: 1973–1977
After Zulfikar Ali Bhutto came into power in 1973, he introduced a planned economic system to revitalise the stagnant economy. This led to the introduction of the nationalisation programme bringing entire private industrial corporations under the government ownership. In 1974, Bhutto cancelled the fourth five-year plans bypassing the recommendations of the Planning Commission, focusing entirely on broadening government control over private business enterprises. In doing so, Bhutto's government began the politicisation of economic planning.
Political interference opened doors for corrupt political practices to seep into the nation's economic planning processes. The nationalisation programme badly affected the reputation of the Pakistan Peoples Party. Accumulated losses of up to Rs 254 million were reported with several instances of over-staffing and inefficient productivity in heavy mechanical industries. By 1976, the state had been hijacked by group and individuals trying to accumulate wealth by redistributing resources from public enterprises to private individuals. Public enterprises "became a device to extend political patronage to those that the regime favoured, to pay political debts, or to accumulate power".
Denationalisation and political favouritism: 1978–1988
Bhutto's nationalisation programme lost its appeal towards the end of his government's term and the demand for denationalisation gained more currency. The successive government of military chief and presidentMuhammad Zia-ul-Haq released a whitepaper that led to the creation of a commission under Pakistan Industrial Credit and Investment Corporation (PICIC) to reverse earlier nationalisation efforts. Not much was achieved in this regard and only three industries, including future prime minister Nawaz Sharif's conglomerate Ittefaq Group of Industries, were ever denationalised and returned to their owners. Many argue that Sharif was favoured in this process because he was a political protégé of the military dictator at the helm.
Unprecedented political corruption: 2008–2013
In 2012, Transparency International (TI) calculated that Pakistan had lost more than Rs 8.5 trillion (US$ 94 billion) in corruption, tax evasion and bad governance in the PPP-led coalition government from 2008 to 2013, and from 2013 to 2017 while Nawaz Sharif in power have severe allegations of corruption. Adil Gillani, an advisor for TI Pakistan observed that if Pakistan checks the menace of corruption and ensures good governance, it would not require a single penny from the outside world. The 2008–2013 PPP-led coalition government is criticised as being the most corrupt in the country's history. The free and powerful local media in Pakistan exposed various cases of corruption during the government's tenure including cases of bribery and corruption in government-owned enterprises like Pakistan International Airlines and Pakistan Railways.
On 29 March 2012, a civilian resident of Johar Town Lahore, Tariq Ahmed, filed a court petition in the Lahore High Court, seeking to hear the case of disqualification of prime ministerYousaf Raza Gillani. The plea was filed in the High Court in which the petitioner took the stance that "Fauzia Gillani— spouse of prime minister Gillani received loans of millions of rupees from the Agriculture Development Bank Ltd (ADB) and the National Bank of Pakistan for the two mega-corporations owned by the Gillani family of which Fauzia Gillani served both megacorporations as executive director. None of the loans of millions of rupees were paid back to the banks. When the disqualification petition was put to rest by the ruling of the Speaker of the National AssemblyDr Fehmida Mirza citing that the petition did not hold ground, Gillani was convicted on the charges of Contempt of Court. Gillani became Pakistan's first prime minister to be convicted while holding office and was later sentenced and disqualified. Gillani is prudently criticised for a prolonged era of stagflation, in which fundamental economic problems were ignored, government was mismanaged and corruption was endemic.
Prevention of Corruption Acts: 1947, 1950 and 1958
The Prevention of Corruption Act, 1947 implemented in the Dominion of Pakistan was enacted to make effective provisions for the prevention of bribery and corruption of public servants, particularly in the bureaucratic administration. The autonomous Princely State of Bahawalpur adopted its own version of the act, namely the Bahawalpur Prevention of Corruption Act, 1950.
In 1955, an accord was signed between Nawab Sadeq Mohammad Khan V and Lt Gen Ghulam Muhammad Malik which made the state of Bahawalpur a part of the province of West Pakistan. This geopolitical change meant that the original act needed amendments to include Bahawalpur and other regions which were originally left out of the act. Subsequently, in October 1958, an ordinance was passed to extend the act to the whole of the province of West Pakistan – this is known as the Prevention of Corruption Act (West Pakistan Extension) Ordinance, 1958. This ordinance extended the scope of the original to the districts of Karat, Kharan, Makran and Lasbela and also repealed the Bahawalpur Prevention of Corruption Act, 1950.
National Accountability Bureau Ordinance, 1999
On 16 November 1999, Ordinance XIX was passed which later came to be known as the National Accountability Bureau Ordinance. It called for the establishment of the National Accountability Bureau (NAB) as an autonomous federal institution building efforts to combat cases of corruption, financial crimes and economic terrorism in Pakistan. According to the ordinance, NAB was granted authority to launch investigations, conduct inquiries, and issue arrest warrants against individuals suspected in financial mismanagement, terrorism, corruption in private, state, defence and corporate sectors), and direct such cases to accountability courts. Individuals convicted under the National Accountability Bureau Ordinance are prohibited from holding political office for ten years.
Provincial legislation against corruption
The provincial governments of Pakistan are responsible for legislations in their respective provinces and since 2013, there has been several legislative efforts against corruption, primarily in the provinces of Khyber Pakhtunkhwa and Punjab. Following is a list of recent anti-corruption legislations:
Khyber Pakhtunkhwa anti-corruption legislations
The Khyber Pakhtunkhwa Right to Information Bill was passed in the provincial assembly on 31 October 2013. It was enacted throughout the province by the Governor of Khyber Pakhtunkhwa on 4 November 2013 as the Khyber Pakhtunkhwa Right to Information Act, 2013. The legislation makes way for provisions that add transparency to the various functions and departments of the government. It gives the citizens of the province the right to access any information or record held by a public body, except for the information that is sensitive to the security of the state.
Role of mainstream and social media
Before 2002, the electronic media was entirely dominated by state-owned institutions like Pakistan Television Corporation and Pakistan Broadcasting Corporation. This monopoly was thwarted, when the Musharraf regime regulated the electronic media allowing for private television channels to be operated independently. Since the liberalisation of the electronic media in 2002, it has served as a major force in exposing corruption-related cases and scams.
Following are a few of the major corruption scams and scandals reported and exposed in the mainstream Pakistani media:
- Rental Power Projects (RPP) scam: In 2006, the media reported on a case involving several instances of bribery in the Rental Power Projects (RPP) where top-level ministers were involved. Former prime minister Raja Pervez Ashraf was also allegedly involved in these cases of corruption but was later cleared by the NAB. His involvement in this case earned him the nickname "Raja Rental".
- PMDC fake registrations: In 2010, Dr Ahmad Nadeem Akbar, Registrar of the Pakistan Medical and Dental Council had cancelled fake registrations done by some PM&DC officials and had dismissed them from service as they were found to issuing fake registration of medical professionals, allowing for inexperienced personnel to take up important positions in medicine and play with lives of public.The Islamabad High Court in July 2014 and earlier the Supreme Court had upheld his actions and have ordered high power inquiries by NAB in this regard against culprits nominated by Dr Ahmad Nadeem Akbar Once this negligence was reported in the media, the Anti-corruption and Crime Wing of the Federal Investigation Agency took action and identified fake registrations for 40 doctors and 19 medical colleges. The case of registration of 19 medical colleges in one day was investigated by Honourable Justice Shabbar Raza Rizvi and report points towards corruption by the PM&DC Executive Committee member Dr Asim Hussain and Prof Massod Hameed Khan and the employees of the Federal Ministry. As of 2013, FIA had identified about 150 probable instances of fake registrations.
- Mismanagement of state-owned institutions: Pakistan's flagship airline Pakistan International Airlines (PIA) was reported to have been mismanagement by the executive authorities giving rise to a corrupt culture of bribery. Corruption in PIA led to losses of around US$ 500 million. Similarly, massive financial losses were reported for Pakistan Railways caused by embezzlement.
- Hajj corruption case: Media reported on an ongoing corruption scandal involving federal ministers extorting illegal payouts from travel agents involved in fleecing Hajj pilgrims to Saudi Arabia. The Minister of Science and Technology, Azam Khan Swati, identified and named the Minister of Religious Affairs, Hamid Saeed Kazmi, as being responsible for giving out these illegal orders. He revealed that he had already warned the prime minister about the scandal thereby making several leading members of the parliament accessory to these criminal offences.
- OGRA scam: One Adnan Khwaja brother-in-law of PPP Secretary-General Punjab was appointed as Chairman who was instrumental in the scam. The OGRA scam case is sub-judice and the ex-Chairman is being prosecuted but at snails's pace.
- NATO containers case: Media reported on 40 NATO containers that went missing on their way to the International Security Assistance Force (ISAF) in Afghanistan. It was later identified that the missing containers carried cargo that was considered contraband in Pakistan, including liquor to be sold in Pakistan.
- Pakistan Steel Mills scam: The mainstream media reported a major scam in the Pakistan Steel Mills involving Rs 26.5 billion. Once the scam was reported, the FIA initially took action but their progress turned sluggish due to which the Supreme Court issued a contempt of court notice to the interior ministerRehman Malik for hindering and interfering with the investigation.
- NICL corruption case: The National Insurance Company Limited scandal was first reported in the media in 2012 involving the purchase of 10 acres of land in Karachi by the company at "an exorbitant price" and the transfer of millions of rupees from the account of Zafar Salim, a cousin of the land seller Khwaja Akbar Butt into the joint accounts of Makhdoom Muhammad Ameen Faheem, his wife and his son.
- Ephedrine quota case: The Ephedrine quote case was a scandal involving prime ministerYousaf Raza Gillani's son, Ali Musa Gillani, who pressure officials of the Ministry of Health into allocating a quota (worth Rs 70 billion) of controlled chemical ephedrine to two different Multan-based pharmaceutical companies.
- The mediagate scandal: It was reported that Chief Justice of PakistanIftikhar Muhammad Chaudhry's son had allegedly taken money from Malik Riaz Hussain, a real-estate tycoon, to persuade courts to give decisions in favour of the latter. Renowned columnist and anchorperson Javed Chaudhry observed that the case against Malik Riaz proved that the media can hold itself and the judiciary accountable. He further added that this case along with the case for missing persons effectively establish the credibility and impartiality of media's fight against corruption.
In the wake of 2013 elections, massive electoral rigging was exposed through first-hand accounts of several members of the public via social networking websites. Specialised websites were set up to publish and archive material exposing corrupt malpractices throughout the many polling stations serving several constituencies, e.g., dhandli.com. Several leaked videos of persons caught in the act of rigging the polls went viral and caught the eye of the mainstream media becoming topics of discussion in days to follow. Even before the elections, social media served as an effective tool to hold the nation's to-be-leaders "accountable" for various issues like corruption and education.
Citizen journalism is emerging as a growing phenomenon and social media is being touted in Pakistan as an important tool that can be used to strengthen democracy. Adding to the mix, several prominent politicians have moved to the likes of Twitter to gather support and get prospective voters on board and analysts think that this can lead to a better and direct accountability of political leaders. Social media has also proved effective in identifying corruption in mainstream media, particularly in the case of the mediagate scandal.
Corruption by sector
See also: Judiciary of Pakistan
In 2002, in a report titled "Nature and Extent of Corruption in the Public Sector", Transparency International (TI) Pakistan reported that the highest amounts of bribery were spent on people affiliated with the judiciary. Later in 2010, TI Pakistan presented a breakdown of the various actors in the judicial system involved in corruption. A majority of the participants reported that they, or someone in their household, has been subjected to an act of corruption while interacting with someone from the judiciary. When asked of the actors involved, 33.62% people said court employees, 23.73% said public prosecutors, 14.12% said witnesses, 12.43% said judges, 8.19% said opponent lawyer, 4.52% said magistrates while 3.39% mentioned others.
In a 2011 survey, TI Pakistan identified judiciary as the most corrupt institution in Pakistan alongside police. Nevertheless, with the proceedings of some high-impact corruption cases against government officials, including the prime minister, the Supreme Court demonstrated its positive role in tackling corruption. Where the apex court was being hailed for its anti-corruption efforts in 2013, Mehmoodul Hassan, a member of the Sindh Bar Council, alleged that nepotism and corruption were still "rampant" in the lower judiciary, particularly high courts and the lower courts, where people were unlawfully promoted within the judiciary.
See also: Education in Pakistan
In the 2010, TI Pakistan reported that about 23.7% of those surveyed received admission in educational institutions through non-normal and alternate procedures. One of the biggest problems identified in the country is the presence of a non-uniform educational system. The private sector actively encourages western educational models such as the General Certificate of Secondary Education using this to justify unaffordable fees they charge ordinary citizens. Finding gain in such enterprises, the elite class amongst politicians, technocrats, bureaucrats and businessmen usually capitalise in this venture. These attitudes can also explain the deteriorating standards in the public sector educational institutes. On the other hand, state-owned public schools face several challenges including poor management and governance, and incompetence of consecutive governments in the education sector. Further factors for failing standards in state-run institutions include lack of funding, non-utilisation by elite classes, appointments of under-qualified faculty.
For a brief time during the regime of Pervez Musharraf, Pakistan received unprecedented investments in its higher-education sector – this funding faltered with the arrival of Zardari's government after 2008. In 2011, Dr Syed Abdul Aziz, director of Hamdard Institute of Education and Social Sciences declared education as one of the most corrupt sectors in Pakistan. According to 2013 findings by Transparency International, factor that contribute to this corrupt culture in the sector include embezzlement of development funds allocated by the government, thousands of ghost schools that appear only on paper, bribes taken to sell confidential material to candidates, poor or under-utilisation of funds and an inertia to change on the behalf of the education ministry.
See also: Health care in Pakistan
In 2010, 42% of surveyed individuals reported gaining access to hospital services by a method other than standard admission, and 48% reported either having to pay additional costs for essential services or being forced to utilize the services of a designated affiliate. Of the respondents who were asked to identify which parties orchestrated the corrupt acts, 61% reported hospital staff, 25% reported doctors, and 13% reported nurses.
Police and law enforcement
See also: Law enforcement in Pakistan
Corruption is found to be commonplace in the lower levels of police. Police was observed as the most corrupt sector in a 2013 survey by Transparency International (TI). This situation has persisted since the graft watchdog's July 2010 survey, in which it was noted that the major cause for corruption in this sector was due to a lack of accountability and merit, and low salaries. Payment of bribes in order to escape and avoid charges was also commonplace; 31% of 4,224 respondents reported paying bribes to the police. Citizen journalists upload instances of police officials taking bribes on social networking and video sharing websites like YouTube.
Ordinary citizens face challenges in reporting instances of corruption they encounter with the police. In 2005, Prime Minister Shaukat Aziz ordered an investigation into claims by a 23-year-old woman who alleged that, in retaliation for attempting to reveal police corruption, police falsely detained her for fifteen days and raped her.
Further information: Electricity sector in Pakistan
As of 2002, 96% of surveyed individuals reported corruption issues with electrical utility officials during the past year. The most common types of corruption were billing related. Some consumers admitted to illegally reducing their utility bills, while others reported being harassed with inflated bills intended to solicit bribes. Out of the pool of corruption-affirmative respondents, 71% reported that money was "demanded directly by the actor".
See also: Pakistan cricket spot-fixing scandal
In August 2010, reporters from News of the World orchestrated a sting operation which was able to identify three Pakistani cricket players – Salman Butt, Mohammad Asif and Mohammad Amir – and a bookmaker Mazhar Majeed of being complicit in a row over spot-fixing in the fourth England-Pakistan test match at Lord's. The cricketers each received 30 months, one year and six months jail term respectively while the bookmaker received two years and eight months jail term in a verdict issued by the Southwark Crown Court on November 3, 2011. Following these events, on 15 November 2011, the chairman of the Pakistan Cricket Board, Zaka Ashraf established an anti-corruption unit to prevent players from becoming involved in illegal betting practices.
Further information: Taxation in Pakistan
According to the 2002 study, 99% of 256 respondents reported facing corruption of taxation. Furthermore, 32% of respondents reported paying bribes to have their tax assessment lowered, and nearly 14% reported receiving fictitious tax assessments until a bribe was paid.
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