Calling for ruthless crackdown on corruption, the government's pre-Budget
Economic Survey however warned that a large and cumbersome anti-corruption
bureaucracy could impact decision-making process.
"While we need
to ruthlessly crack down on corruption, it must, at the same time, be
recognised that the fear of a large and cumbersome anti-corruption
bureaucracy can be detrimental to risk taking and may hamper legitimate
activities in public institutions," said the Economic Survey 2011-12,
which was tabled in Parliament on Thursday.
Citing a research
paper by A Banerjee, S Cole and E Duflo on the Indian banking sector, it
noted that the fear of prosecution for corruption resulted in reduced
lending in an affected branch of a PSU bank as well as in neighbouring
branches for around two years.
"In essence, smart policy design
needs to be distinguished from mere procedural tightening and bureaucratic
expansion, since the latter, if not properly thought out, can increase
inefficiencies and wastage in public expenditure and service delivery,"
the document said.
The observation comes amidst civil society
seeking an anti-graft ombudsman, Lokpal, covering all central and state
government employees, judiciary and having investigating and prosecution
powers. The Congress-led UPA government had been against a single body
idea as it feels it would need a huge workforce.
Again citing a
research paper by O Bandiera and A Prat titled 'Active and Passive Waste
in Government Spending: Evidence from Policy Experiment', the survey said
that corruption and poor governance have been major problems in many
It, however, added that "often, attempts to curb
corruption are accompanied by increase in regulation and this may prove to
be counter-productive in terms of increasing the overall inefficiecy. The
document also cites example of corruption in public procurement where
price of the goods is inflated in lieu of bribe.
substantial differences in the average prices paid by different bodies and
these differences are correlated with the type of institution, the survey
said citing paper by O Bandiera and A Prat titled' Active and Passive
Waste in Government Spending: Evidence from Policy Experiment'. According
to an analysis of the paper, semi-autonomous bodies pay the lowest price,
regional government pays 21 per cent more and average ministry pays the
most at about 40 per cent higher.