Innocenting the Corrupt

Context: Though India had improved on the graft front related to corruption, it is high time to apply game theory in policymaking to further reduce corruption.

Impact of corruption on economic growth:

• According to Organisation for Economic Co-operation and Development (OECD), corruption has significant negative effects on a host of key transmission channels, such as investment, competition, entrepreneurship, government efficiency etc…
• According to State Bank of India (SBI), Ecowrap analysis between 2012 and 2018, countries like India, Britain, Egypt, Greece and Italy that succeeded in reducing corruption levels have also achieved GDP growth.

State of corruption in India: Showcased through various indices -

• Corruption Perception Index by Transparency International (TI): It measures corruption as perceived by Indian businessmen. India improved from 94^th position in 2013 to 86^th in 2020. 
• TRACE Bribery Risk Matrix: It measures bribery risks foreign investors’ (and ignores domestic investors) face in different countries.
• India’s ranking improved from 185^th in the world in 2014 to 77^th in 2020. Far ahead of neighbouring countries like Bangladesh, Nepal, Pakistan and Sri Lanka.
• This means that foreign investors have benefited far more than domestic ones from reduced corruption.

Steps taken to reduce corruption:

• Introduced a scheme of electoral bonds: It aims at replacing black money with white in politics and improving corporate transparency. However, it acts as an institutionalized form of corruption -
  • Donations are secret, while 95% of the electoral bonds went to the ruling party.
  • Besides, GoI eliminated the earlier cap on corporate donations of 7.5% of average net profits and expanded the foreign entities that could make donations.
• Amended the Prevention of Corruption Act (PCA), 1988: To introduce new provisions, including criminalizing the act of giving a bribe in addition to taking it, putting in place an effective deterrence for such actions by individuals as well as by corporate entities.
• Leveraging technology and adoption of initiatives: Like e-tendering, e-procurement and reverse auction to bring about more transparency in governance. 
• As a result, the number of cases where action had been taken after the Central Vigilance Commission (CVC) had conducted its investigations is also declining.

Way forward: Apply game theory in policymaking to reduce corruption.