[Assam] Fwd: [asom] Rising corruption, black money

Chan Mahanta cmahanta at charter.net
Thu May 10 07:24:51 PDT 2007


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>Date: Wed, 9 May 2007 08:33:44 +0530
>Subject: [asom] Rising corruption, black money
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>ARTICLE
>
>
>Rising corruption, black money
>
>Govt policies will fuel inflation
>by S. S. Johl
>
>THE World Bank has estimated cross-border flow of proceeds from 
>criminal activities, corruption and tax evasion between $1 trillion 
>and $1.6 trillion per year, half of which is from developing and 
>transition economies. The corruption money along with the bribes 
>received by public officials in these economies is estimated between 
>$20 billion and $40 billion per year.
>
>Alarmed by the huge volume of annual generation of black money and 
>its cross-border outflow, the bank has developed a strategy for the 
>recovery of these assets parked in foreign banks through "Stolen 
>Asset Recovery (STAR) initiative". The initiative is a 
>well-intentioned and highly needed one. Although the World Bank is 
>taking up this initiative in a collaborative mode with other 
>agencies concerned and believes that the recovery of even a portion 
>of these assets can go a long way in boosting the development of 
>these economies, its success will depend upon the willingness of the 
>international banks to open up and the national governments' 
>sincerity and will power to seek such information.
>
>Whatever it is, the bank has highlighted the menacing problem of the 
>parallel economy, specially in the developing countries. Unless this 
>unaccounted money stacked illegally and in circulation is brought 
>out, no economy can proceed on its optimal growth and development 
>path.
>
>It is extremely difficult to estimate this money accurately. This is 
>why the bank has estimated it within a very broad range. Yet, even 
>the lowest estimate is an exasperating figure. The extent of this 
>cancerous menace in India, stalling the inclusive growth and 
>development of the economy, can be easily put at double the level of 
>the white economy. The evidence is simple. Today not only in 
>metropolitan and major towns of the country, but also almost 
>throughout the country no property like a residential building and a 
>commercial site is registered through legal deeds at more than 30 
>per cent of its real value. It is an open secret and in the full 
>knowledge of political rulers and the administrative set-up of the 
>country.
>
>Buying a house in major cities and towns has gone out of the reach 
>of the honest middle class people. Yet, property prices of all kinds 
>have sky-rocketed and are still showing an uptrend. Builders are 
>mushrooming everywhere. Foreign firms are finding India a green 
>pasture in this respect. No one can today sell or purchase any 
>property in India in white money alone! Then, who is buying these 
>properties?
>
>It is the corruption money which is running a parallel economy and 
>fuelling an exclusive growth. India can very well plan for achieving 
>even double-digit growth, yet the inclusive growth, as is being 
>adumbrated to be the central theme of the Eleventh Five Year Plan, 
>cannot be achieved in the presence of monstrous amounts of black 
>money in the hands of not more than one-fifth of the population of 
>the country.
>
>It will remain a pipedream of the planners and policy-makers. With 
>the fast increasing population of the country, particularly of the 
>poorer segments of society, and their incapacity to provide 
>purposeful education to their wards that would enable them to have 
>gainful employment opportunities, the divide between the unduly rich 
>and the poor is increasing at an exponential rate. Fast coming-up 
>palatial mansions, mind-boggling conspicuous expenditure on 
>marriages and other social ceremonies, and luxurious possessions in 
>the face of at least one-third of the population not having one full 
>meal a day is an indelible evidence of acutely skewed distribution 
>of incomes in society. It is this skewed distribution of incomes and 
>more than two-thirds share of the black money in the hands of 20 per 
>cent rich population that is responsible for the high rate of 
>inflation, upsetting the budgets of the poor and middle class 
>segments.
>
>Thus, the so-called inclusive growth and development is bypassing 
>the large majority of the population and they are getting squeezed 
>under the weight of inadequate incomes and fast-rising prices. The 
>government action for taming inflation under these circumstance can 
>succeed to a limited extent only. The Reserve Bank of India's 
>monetary policy aimed at reducing liquidity in the economy affects 
>only about one-third of the money in circulation - white money. 
>Two-thirds money in circulation - the black money - is not affected 
>by these monetary policies. These measures, such as increasing the 
>cash reserve ratio, the statutory liquidity ratio or the bank rate 
>hurt the honest earners, white transactions and genuine borrowers. 
>Black money liquidity, which has a higher income multiplier, is not 
>affected by these measures. As a result, genuine borrowers and 
>investors suffer without much relief from inflationary pressures.
>
>Liberalisation of imports can help tame inflation only when the 
>prices of the commodities imported from the international market are 
>lower than the domestic prices. For instance, the government policy 
>of allowing duty-free imports of wheat on government account and by 
>private agencies in the post-harvest period of a bumper crop will 
>have a counter-affect because the world market prices are much 
>higher than domestic prices. This would encourage withholding of the 
>produce by bigger growers and stocking of the commodity by traders 
>and grain handlers.
>
>Further, the policy of banning exports and "futures trading" in 
>wheat would hinder the process of genuine price discovery in the 
>international market and the reference price in the domestic market. 
>Such a segmented domestic market goes against the interest of the 
>growers, and scuttles the process of risk management and rational 
>production and marketing decisions by producer-sellers. Yet, it 
>would not tame inflation; rather it can further fuel inflation in 
>the economy through high-priced imports and misplaced sentiments of 
>scarcity created by such imports. This would adversely affect the 
>efforts at promoting inclusive socio-economic development of the 
>country.
>
>Thus, the government policies aimed at moderating the rate of 
>inflation, promoting domestic and foreign investment, improving the 
>rate of growth and ensuring inclusive development are bound to hit 
>the rock because of increasing population, extremely skewed 
>distribution of incomes, gainful employment opportunities bypassing 
>the large majority of the population, rampant corruption, constantly 
>rising level of black money and an expanding parallel economy day by 
>day.
>
>Unfortunately, our political governance, the mindset of 
>policy-makers and the administrative system have adopted an 
>indifferent attitude towards effectively responding to these basic 
>constraints and negativities that are vitiating the development 
>environment and telling heavily upon the availability of financial 
>resources.
>
>The question is: if the World Bank and other international 
>development agencies have expressed their serious concern at the 
>volume and growth of crime with bribe and corruption money getting 
>stashed outside the developing and transition economies, and are in 
>action mode in the form of "Stolen Assets Recovery initiative", will 
>India also wake up and tackle this problem stalling the economy from 
>moving on to higher inclusive growth and development path?
>
><http://www.tribuneindia.com/2007/20070509/edit.htm#4>http://www.tribuneindia.com/2007/20070509/edit.htm#4
>
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