Financial Daily from THE HINDU group of publications
Thursday, Nov 11, 2004
Towards a corruption free economy
For the success of their macro economic polices, it is essential for governments to have control over the economy, so as to help them control inflation, unemployment and stimulate growth.
Systemic inefficiency is the main obstacle to a government's ability to drive change, resulting in the failure of successive governments with regard to policy and implementation.
Corruption and nepotism are the two chief stumbling blocks to the efficient functioning of the government. India as a culture has failed to evolve.
The amount of diversity, the lack of adequate funds and the want of resources lead to the distribution of funds on the basis of caste and patronage.
The grey economy in India is extremely large and is a growing cause of concern. The principal agent problem coupled with the problems of asymmetric information are crippling the economy.
The principal agent problem arises when a government employee has an informational advantage over the principal and harbours interests that run contrary to that of the organisation; while the government has the interests of the organisation at large, the employee is interested solely in his/her own development.
The Government wants the development of people, while the employee is interested in his own development.
Due to high "agency costs" it is impossible for the government to keep a tab on over the thousands of corrupt officials across the organisation.
Hence, it becomes very important to eradicate corruption, ensure transparency, curb the shadow economy, prevent black money and promote ethics.
Since all these are related and the government has to start somewhere, the best tactic from the government would be to curb black money.
The idea of introducing a new currency is wonderful in this context, since, it will provide an opportunity for the country to grow and start afresh.
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