Monday, November 21, 2016

Cleaning up corruption in India - looking forward

One of the major reasons India has remained a poor country inspite of the natural riches it is blessed with is because most of us are corrupt. If we want to give our children a better future, we need to change that behavior . Getting corrupt people to become straightforward and honest is  not going to be easy , because changing behavior is hard and causes a lot of pain - especially when it is the rich and powerful who are the ones who are the most corrupt. This  is why the demonetization move is a step in the right direction. It has created fear in people's hearts , and they realise that they can't continue to get away with stashing their black money. If they do try , they will get into trouble - if not now, then further down the road, as the IT Dept tightens the noose. The demonetization is just the first step.

Now that people have felt the pain of watching their ill-gotten gains go up in smoke , they're going to think twice about doing this again. They've paid a heavy price, but hopefully have learned their lesson. Most would prefer paying their taxes , so that they can sleep better at night. Childbirth is painful, but it's well worth it because you want a baby. Yes, this move has also caused pain, but it will be worth it in the long run . The problem is that we've put up with rubbish for so long, that corruption and bribery have become ingrained in our habits . We don't even realise that we're cheating when we accept cash and don't account for it. It's become the accepted norm, so that the people who pay taxes honestly are considered to be fools, because they aren't smart enough to conceal their income .

Honest tax payers resented the way the crooked got richer by bribing bureaucrats and stealing from the Government.  However, they felt helpless . Everyone aspired to be a part of the charmed inner circle, where you could get away with borrowing thousands of crores from the bank because you had the right connections. Crony capitalism had made a mockery of democracy and merit.

Lots of political leaders are shedding crocodile tears over the " harassment and inconvenience " caused to the " poor honest villager " and housewife who was forced to stand in long lines for hours in order to withdraw money. They feel that the move has disrupted the life of the poor Indian citizen, and want it rolled back. This is the height of hypocrisy ! It is these guys who have kept Indians poor by siphoning off the nation's wealth. Fortunately, the poor have become much smarter and aren't getting carried away by their rhetoric.

Demonetisation was a brave step by someone who is bold, honest, and doesn't have any vested interest. It required a single person with courage to be able to pull this off. Critics are worried about the adverse affects this will have on GDP . They feel that cutting off the circulation of money - the lifeblood of the economy - will crimp growth and hinder progress. However, you don't need cash for money to circulate - electronic money ( in the form of NEFTs , e-wallets and credit card payments ) will do just as well.  In fact, the black money never contributed to growth because it was part of the parallel informal economy. The demonetisation has strangled this. Once this is shut off , it's place will be taken by white money, as a result of which the economy will boom.

It's great to see how the clever new FinTech companies have stepped in so  quickly and have helped small shopkeepers to accept electronic payments. Indians are resilient and will adapt quickly because they can see it's in their best interests to do so !

A common criticism is that this move is unlikely to help, because it is only a one-time step. With the introduction of the Rs 2000 currency notes, most people believe Indians will go back to their bad old ways of using black money to grease palms.  It's sad that most Indians have such a poor opinion about the honesty of other Indians - and this is partly because all of us are so crooked ourselves.  The fact that Indians who settle in the US don't bribe the IT officials and  police officers there is proof we can learn new habits and stop being corrupt !

It's true that similar  moves to clean up the system in the past did not work well. However, times have changed. Today, we have the technologic option of transferring money by using RTGS, NEFT, and other forms of electronic payments , which means people now have a viable option to using cash.  Transferring money using the mobile is going to become the norm in a few years  as the UPI ( United Payment Interface) changes the way we carry out financial transactions . We need to think of where we are going to be a decade from now, rather than remaining stuck in the past.

Carrying cash  will hopefully become obsolete, so that you no longer have the ability to bribe the cop who gives you a ticket for speeding. Once we stop offering bribes in our daily life, this will have a ripple effect, and we will start treating the giver of a bribe as a criminal as well - after all, the bribe giver is as much a crook as the bribe taker . My hope is that bribing people will become so increasingly hard that people will just stop offering money under the table !

Yes, things could have been done better, but that is true of any action.  It's easy to be wise after the event, and the government is taking steps to correct their errors . Let's stop being armchair critics please.  When you want to do something which needs such strict secrecy, you can't wait for perfection. After all, this was emergency surgery which was done to treat a festering abscess, so you can't complain that the operation was painful because  anesthesia wasn't given. When a patient is dying , anesthesia is the last thing you think about when performing life-saving surgery !


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