India՚s Black Economy, Various Committees on Corruption, Lokpal Bill

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India՚s Black Economy

  • In late 2010 and early 2011 there was a huge outcry regarding India՚s black economy as news about secret foreign bank accounts of Indians started pouring in.
  • In addition, the Global Financial Integrity Report claimed that independent India had lost $ 462 bn due to illegal financial outflow
  • The government was pulled up by the SC to disclose the names of individuals who had funds stacked away in foreign banks
India՚s Black Economy
  • To deal with the issue, India inked Tax Information Exchange Agreement (TIEA) with five ‘tax-havens’ by March 2011. These are: Bahamas, Isle of Man, British Virgin Islands, Caymen Islands and Bermuda
    • Purpose of TIEA is to promote international cooperation in tax matters through exchange of information.
  • Wanchoo committee
    • 1971
    • Estimated the size of black economy
  • Reasons for Black money can divide it into pre liberalisation and post liberalisation
    • Structure of taxation
    • Price control policy
    • Quota and license system
    • Scarcity of commodities
    • General election
    • Share market
    • Real estate
    • International Activities
    • Privatisation
    • Police force
  • Impact of black money
    • May remain idle or often gets invested in unproductive activities
    • Deprives govt of the tax revenue
  • How to curb it
    • Special courts should be established to dispose the corruption cases
    • Pranab Mukharjee՚s five pronged approach: joining the global crusade against black money; creating an appropriate legislative framework; setting up institutions for dealing with illicit funds; developing systems for implementation; and imparting skills to the manpower for effective action

Devil՚s advocate

  • Some people argue that black economy also generates jobs and production
    • A lot of goods are bought in the market using black incomes, and that leads to increase in production and employment
    • Black economy generates informal sector employment and helps the poor
    • Some argue for bribes as speed money
  • There is some truth in these claims but the costs of black economy exceed its benefits.

Counterattack for those who justify black money

  • Speed money: In order to extract a bribe, the bureaucracy first slows down work and harasses the public. If work was automatically done, why would anyone pay bribes?
  • The administration becomes rundown since rather than devising ways to work efficiently, it is busy thinking of ways to make money by setting up roadblocks to efficient functioning.
  • Much of black economy in India is like ‘digging holes and filling them’ . Activity without productivity.
  • Because of the growing black economy, policies fail both at the macro-level and the micro-level.
  • The flight of capital lowers the employment potential and the level of output in the economy
  • The direct and indirect costs are of policy failures, unproductive investments, slower development, higher inequity, environmental destruction and a lower rate of growth of the economy
  • At the social level, the cost is a loss of faith in society and its functioning.

Various Committees on Corruption

  • 1956: Kaldor Report
  • 1964: Santhanam Committee
  • 1971: Wanchoo Committee
  • 1979: Dagli Committee
  • 1985: NIPFP Report
  • 2002: Kelkar Committee

Movements Against Corruption

  • 1972: Nav Nirman
  • 2011: Anna movement

Lokpal Bill

Major differences between the Lokpal and Jan Lokpal drafts

Table 1

Table of Differences between the Lokpal & Jan Lokpal Drafts
Jan LokpalLokpal
Selection PanelTwo elected politicians, four serving judges and two independent constitutional authoritiesSix elected politicians (five from the ruling establishment) , two serving judges and two officials.
Search committee this is a body to ensure countrywide search and co-option in a transparent manner of the best talents in the country10 members: 5 from former senior judiciary, CAG and CEC, and five to be co-opted from the civil societyNo such provision for accommodating the representatives from the civil society
InvestigationAfter a preliminary enquiry the accused is associated for questioning or interrogation as per the law – not prior hearings to share his defence or self-incrimination. He produces his defence before the judicial courts as is under the law.Enquiry - report to Lokpal -hearing of the accused - investigation - one more hearing before the final chargesheet.

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