Arvind Subramanian
The Lok Pal Bill and the jailing of the suspects in the 2G scam mean that controlling corruption is back on the radar screen. Two questions merit particular attention today. Is controlling corruption important in India's current economic circumstances? And what can this prime minister, of unimpeachable personal credentials yet uncomfortably confronted with the recent scandals, do about it?
What Manmohan Singh can do about corruption
Image: Corruption rampant in India.
What Manmohan Singh can do about corruption
Image: Tamil Nadu has grown rapidly.And Tamil Nadu has grown rapidly under Jayalalithaa and Karunanidhi, wizards of equal stature in the dark art of malfeasance.
What Manmohan Singh can do about corruption
Image: Manufacturing boom in India.More controversially, one could posit that the Indian development model could be derailed because of corruption. How?
India's rapid economic growth since the 1980s has been based on defying rather than exploiting its comparative advantage.
India has used more intensively its relatively scarce factor of production, skilled labour, and underused its abundant factor, unskilled labour.
What Manmohan Singh can do about corruption
Image: Spectrum scam.Large-scale corruption in India occurs in transactions involving factors in fixed supply such as allocating spectrum, exploiting natural resources (coal) and, above all, acquiring land.
What Manmohan Singh can do about corruption
Image: Corruption could dampen investment.Both could dampen investment, not only in manufacturing but also in a large number of services sectors that require land as a significant input: construction, retail, educational institutions and hospitals.
Go back to the Indian development model, and add land as a factor of production. The pool of skilled labour is increasingly being depleted because of the poor state of higher education; the tax on unskilled labour has not been significantly relieved.
What Manmohan Singh can do about corruption
Image: Production costs rise.So tackling corruption should be a high priority because of its disproportionately large and adverse effect on land.
But economics has little to offer by way of prescription for this problem. Deregulation can help, but only up to a point. After all, the state has some functions that it needs to perform - and land use regulation is one of them.
What Manmohan Singh can do about corruption
Image: A protest against corruption.Photographs: Reuters.
So, a framework for this conversion must be established - and that is a responsibility of the state.
So, what can be done? Controlling corruption is related to the quality of public institutions, including democratic accountability, the bureaucracy, the police and the judiciary.
What Manmohan Singh can do about corruption
Image: 2G scam.The Lok Pal Bill under discussion will have limited impact, if any. Convicting and jailing the culprits in the 2G spectrum scam would certainly have some benefits, but, judging by the Indian record on convictions, the prospects for this are not bright. And broader reforms of the police and judiciary are, sad to say, pure fantasy.
So, what can the prime minister do? Not a whole lot. But two possibilities are worth considering, one very narrow and focused, and the other utterly symbolic.
What Manmohan Singh can do about corruption
Image: Corruption matters in India's development because of transactions involving land.In addition, a bipartisan political structure modelled on the Empowered Committee of State Finance Ministers that has been successful in mid-wifing the Goods and Services Tax (fingers crossed) could be created for deciding on important land cases.
The other course of action would rely on the prime minister himself.
What Manmohan Singh can do about corruption
Image: Prime Minister Manmohan Singh.The prime minister has to show that he is willing to stake his personal reputation - draw his Lakshman rekha - on the issues that are dear to him, including the prevention of any major looting of the public exchequer on his watch.
What Manmohan Singh can do about corruption
Image: A Raja behind the 2G scam.It has been sad to see the prime minister reduced to denying or defending his complicity in the 2G scandal. This government probably needs the legitimising cover of his personal reputation more than he needs to hang on to power.
So, rather than using his unimpeachable personal integrity as a defensive shield, the prime minister should wield it as a potent weapon. He will then not only reign but also rule.
The author is Senior fellow, Peterson Institute for International Economics and Centre for Global Development.
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