I write this post because every entrepreneur should understand why corruption is rife in India.
The biggest issue I have with a chunk of the ‘Social Society’ is that they behave like quack doctors who spot the disease in a patient, give out the wrong diagnosis and hence recommend the wrong medicine.
Just like fanatical and idealistic Marxism or Laissez Faire Capitalism, this stuff just doesn’t work in the real world. It just makes it worse.
This post is dedicated to all those people who really feel that Corruption in India is just wrong, because they need to know that the answer isn’t just tougher laws and better morals. The answer lies in economics.
The one amazing thing about India is its 365 days a year political churn. Unlike many other countries, there is no season of elections. They happen all the time. National, State, Municipal, Panchayat, College, By-elections etc… You name it, we have an election for it.
Now these elections cost money. Ever wonder where comes all the money for canvassing, getting thousands of people transported by trucks for speeches, helicopters, convoys of cars, feeding supporters, banners, salaries for the hundreds and thousands of party workers? And there are hundreds of parties with thousands of candidates campaigning almost every day.
Answer No. 1. Donations
There are lots of laws like The Companies Act 1956 which prohibits no more than 5% (recently recommended to 7.5%) of average profits of the last 3 years. Or the fact that parties need not keep a list of names of people who donate less than Rs. 20,000.
The joke is that many companies consider political donations as CSR since many declare it as donations to affiliate organizations of political parties. I wonder if the recent push to get companies to pay up a part of their profits as CSR had something to do with political parties arm-twisting these companies to give them white-legal money for their kittys.
In most of the cases, there is a mutual understanding between parties to allow the corporate to convert their black money into party contributions. Such arrangement also gives a leeway to hawala, untraceable and undeclared money transfer.
Donations are also non-taxable if above Rs. 20,000. Despite all the laws, most records are fudged or non –existent.
Answer No. 2 – Corruption
The reason why the commonwealth games, just like defence purchases, are under scanner is because they represent the single biggest contributor of funds to a political party in power. After all, they need to fight elections in states and a general one in a few years.
Contracts for roads, highways, public infrastructure go to the same big boys, because they are more than willing to pay a part of the contract (our tax money) to the political party who granted them that contract.
Unfortunately, to maintain profitability, most of these guys cut back on quality. And over time, due to lack of competition, this becomes the norm.
Major foreign investments not just bring in tax money and jobs, they also bring black money in chunks as ‘donations’ to political parties.
However, when people are greasing party coffers, they too are left with a little grease on their hands. That’s where they make personal fortunes.
And the real trouble begins…
A rule of organizations – “Great change always happens from within and mostly from the top of an organization. Conversely that’s where the rot steeps in”
Local politicians make money the way the Romans, Greeks and the Ottomans did. By selling offices. That’s why one hears of stories of cops being asked to cough up 30 lakhs for a favourable position, or of small time clerks paying up lakhs for their 10,000 a month salary.
This is where economics comes into play.
Since these officials have already paid up, they need to make back their investment somehow, so in collusion with higher ups, they involve themselves in the petty bribes that make it all worth their investment. Not to mention the fact that they must collect enough booty to get their sons into the system as well (in some cases).
Imagine entire government departments/arms collecting bribes just to be able to pay for our glorious and proud tradition of election and democracy.
And since there is no moral authority with politicians, judges or officials at various levels (especially the top), this just keeps going on and on.
So when you, as an entrepreneur, decide to set up your restaurant, and someone asks you to pay 20-50 lakhs for your bar license, rest assured that the money is going, atleast in part, to the political process.
My Point
If you want to solve the menace of corruption, then one has to understand and break the economic model. Only then will well meaning, moral, law abiding politicians, officials and judges (there are many) be able to enforce the multitude of laws, we already have against corruption.
If you still don’t believe me, then believe this. The max expenditure allowed per Lok Sabha Candidate per election is 25 Lakhs. The Cost of 3 Tata Sumos.
Startup Yapper 