Problems of developing India

1.A Presentation On Problems ofDeveloping India Presented By: Shwetketu Rastogi [email_address]

Population

Poverty

Unemployment

Corruption

How do the environmental impacts of a growing population of a developed country, the United States, compares to the undeveloped country of India?

Our world population is rapidly growing.

Today : Over 6 billion people and on the rise

Increased immigration / lack of migration (urbanization)

Lack of education and contraceptive use

Medical advancements

Leads toenvironmentalandsocial impacts.

Deforestation

Global Warming Natural disasters, sea level rising

Lack of natural resources

Lack of freshwater

Pollution

Diseases

India and United States may differ in demographics, etc. but the growing populations both result in similar environmental impacts.

We predict that a growing population will cause:

Higher rate of deforestation

Greater loss of freshwater resources

More pollution

Increased global warming

Strains of natural resources

Social issues

The differing nations will compare in that the trends will be the same, rates will differ.

We first searched to find what causes a growing population.

We then looked to see the effects of the growing population on the environment.

Stella and Excel were used to display the impacts of the population growth on:

Forest Area

Fresh Water Availability

We also compared the two different growing populations.

IndiaPopulation growth.

United StatesGrowth.

Effects on Environmental Resources:

Fresh Water Availability

Forest Areas

Effects of varying levels of these subcategories.

United States

Increased Immigration Rates

Better health care

Higher living standards

Abortion Laws

Unintended Pregnancies ~ 40% births

Teenage Pregnancies

Lack of Migration

Lack of Education

Desire for Male children

Fertility rate declining

Younger women having children

Freshwater Availability

Misconception of Oceans as freshwater

Human Bodies 60% water

Sewage deposited in water

Health problems

Per Capita Water Use

Forests Area

Urbanization more paved areas

Less parks and nature

Lack of Oxygen production

Increase Quantity of Carbon Dioxide (Greenhouse Gases)

Global Warming

Pollutionincrease in cars and emission of greenhouse gases into atmosphere

Deforestation increase in paved areas to house increasing population

Freshwater Availability increase in waste production and contamination of water

Natural Resources increase burning of fossil fuels, excessive use of coal

Global Warming overall increase in temperature and chances of natural disasters

Habitat Loss change in ecosystems affecting trophic levels

Stocks population, freshwater availability and forest areas.

Flows births and deaths; precipitation and water use; and forest regeneration and trees cut down.

Converters birth rate and death rate; deforestation rate; and per capita water use.

Population of India and US with no external pressures

Indiais increasing at a faster rate thanU.S .

This is worrisome due to the lack of resources and financial stability to support such an increase.

We only chose to model birth and death rate, but there are other limiting factors that encompass each, however they were not imperative to include in this research.

Comparing the Population of India and US with no external pressures

Both increasing.

India growth rateper year:

US growth rateper year:

Indiastarts at a greater population.

WHY DO THEY DIFFER?

Education

Immigration/ Migration

Population growth influencing water availability .

Water availability decreases because there is not enough fresh water available due to the increasing demand.

US per capita : 6932 m^3

India per capita : 1211 m^3

USconsumes more water at a faster rate due to its higher surface area and easier access to clean water, whereas India does not.

US s financial status permits usage of high-end technology to purify water.

Comparing Population growth of India and United States influencing water availability .

WHY DO THEY DIFFER?

Pollution rates

Technology

Surface Area

Financial Stability

Per Capita Water Use

Population growth influencing forest area

India The forest area started at ~67 million hectares, and continued at a steady deforestation rate of 0.0294 million.

United States There is a clear exponential decrease in the forest area, leading to its possible crash, which can result in major ecosystem changes if actions not taken.

Comparing population growth of India and United States influencing forest area

India , although with a higher population than theUnited Statesshows a steady decrease in its forest area, whereas theUnited Stateshas an extensive decrease due to its high immigration rates and urbanization, demanding more paved areas thanIndia.

Growing population puts pressure on forest areas because of urbanization and higher demands for wooden products.

Our models show that there are negative environmental impact related to population growth both in developed and underdeveloped countries.

For every scenario, there were increases in deforestation rate and water usage

Although the reasons for the growth differed, the results were similar

What Ifs

If we increase the number of people educated, then thebirth ratewould go down, resulting in a lowerdeforestation rate .

Decreasing theforest areawill prevent natural processes from occurring (photosynthesis, nitrogen cycle) andincreaseglobal warming, natural disasters, damage to ecosystems, loss of animal life.

Decreasingwater resourcesmay in fact bring down the population due todecreasingfood sources.

Increase education programs

Later marriages

Contraceptive use

Less of a need for urbanization (jobs)

Be energy efficient (wind/ solar)

Organic farming

Sustainable development (build vertically)

Plant more trees!

Have better governmental regulations for an improved economy

Because this is an inevitable problem we must raise peoples awareness and environmental stewardship to lessen the effects of overpopulation.

Focus on the present, but have in mind the future, thus we must start changing our actions now to foresee the future we want!

Redefining Poverty

India Case Study

80% of India does not have access to public health facilities.(Dr. Anbumani Ramadoss, Minister forHealth and Family Welfare)

47% of Indian children under the age of 5 years are undernourished.(Human Development Report 2005, UNDP)

71% of the children in 15-19 age group have not completed a secondary education, their fundamental right.(National Sample Survey on Education, 1999-00, NSSO)

57% of India does not have access to electricity.

(World Development Indicators 2005, World Bank)

70% of India does not have access to a suitable toilet.(National Sample Survey on Housing, 2004, NSSO)

49% of India does not have proper shelter.

(National Sample Survey on Housing, 2004, NSSO)

38% of India does not have access to a nearby water source.(National Family Health Survey, 1998-99, IIPS)

The present poverty line is a conveniently low threshold based largely on only caloric norms.

In fact, it should be called thestarvation line .

Itdoes not factor in norms for nutrition, health, clothing, housing, education etc.

Even worse is that the Planning Commission recognizes this shortcoming and yet doesnt do anything about it.

In 1999-2000, the poverty line defined by the Government of India was Rs. 327 and Rs. 454 per month per capita in rural and urban India respectively.

Adjusting for inflation, this now comes to Rs. 368 and Rs. 559.

ThusONLYthose who live below Rs. 559 a month in our cities (or Rs. 368 in our villages) are considered to be poor by the Indian Government!

The present line is based on the norm that the average person in rural India should consume 2400 calories a day and a person from urban India should consume 2100 calories a day.

The minimum cost of obtaining such nutrition (about 650 grams of grains) was calculated in 1979 when this line was formed.

All those who spent less than this amount on food were considered poor.

Since then, this amount was periodically updated based on inflation.

The definition is based on a caloric normthat is 3 decades old!

Research shows that even those who are currentlyabovethe poverty line do not meet the prescribed caloric norms.

Calories are anyway an insufficient nutritional norm as it does not include the need for minerals, vitamins, etc.

Most importantly, no norms for other basic needs such as healthcare, shelter, electricity, education have been factored in.

Even though there has been a decline in the number of poor in percentage terms the absolutes numbers remain quite high.

The absolute number of poor declined from 32 crores (out of the 58.4 crores population) in 1973 to 24.97 crores (out of 109 crores population) in 2004.

The annual decline is a mere 0.81%

The present inadequate definition of poverty has ensured that all policies aimed at alleviating poverty aim much too low.

They focus just on the elimination of hunger rather than on eliminating poverty as a whole.

If every starving person was given 650 gms of food grains daily it would cost Rs. 57000 crores a year.

Total wage bill of babus is over Rs. 220,000* crores.

The present NREGSguarantees one able-bodied member of each family work at a wage of Rs. 60 a day.

Therefore even if this person works on all 30 days of a month, he/she earns only Rs. 1800.

For a family of 5, that amounts to Rs. 360 per person, which is exactly what the rural poverty line is right now.

Therefore, this at best only ensures that each person in the family consumes a certain quantity of food grains. Moreover, the guarantee is only for 100 days in a year leaving the poor to fend for themselves for the rest of the 265 days.

We should aim to define poverty that visualizes it in a more human and humane way.

CPAS poverty line includes the cost of a nutritious diet, healthcare, clothing, etc.

We have also included those items that cannot be described monetarily such as access to water, housing, education, etc.

with this information and the prices of The National Institute of Nutrition (NIN) postulates what itconsiders is a nutritious diet for healthy living.

Along various food items (obtained from various official sources), one can calculate the cost of this diet.

Using the age-sex distribution information of the population, one can calculate that the per capita expenditure on food that provides for the recommended balanced diet for the average Indian person should be aroundRs. 573 per month.

Average monthly per capita healthcare cost can be calculated by multiplying the probability of requiring medical care with the actual cost of such medical care. This is called the expected value of healthcare expenditure.

The Universal Health Insurance Scheme* is a health insurance scheme targeted at the low-income group. As per this scheme, for a premium of Rs. 365 per annum, an individual can get insured for all in-patient medical care up to a sum of Rs. 30,000.

ThereforeRs. 365 per annum or Rs. 30 per month per capitais the expected value of health expenditure for the poor in India.

The minimum water consumption as per the World Health Organisation should be about 50 litres a day per person to cover consumption and hygiene needs.

However, as per the latest National Family Health Survey of 1999-00, 37.7% of households do not have access to safe water supply within 15 minutes of their home

You cannot put a price on this.

Detailed qualitative information about housing in India is hard to come by. However, there is information on the percentage of households living inpucca , semi- pucca or katcha houses from a nationwide survey on housing done in 2002

In rural and urban areas, 64% and 23%* of the households respectively do not have apuccahouse.

Thus a weighted average of 49% of all households do not have shelter that meets our minimum standards.

The condition of public sanitation is extremely poor in India. Even the most basic living standard demands that a dwelling unit should have access to a latrine that is either connected to a sewage line or a septic tank.

However, 89 per cent and 37 per cent of rural and urban India, respectively, or a weighted average of69.5 per cent of Indians, do not have access to such a latrine facility*.

Presently, about 57 per cent of Indian households do not have electricity.

Even in households that have an electricity connection, the supply of electricity is extremely erratic*.

With minimal fittings and reasonable usage, the monthly cost on electricity comes to Rs. 175 for a household**.

Considering that there are 4.99 persons to a household in India,the per capita monthly expenditure on electricity comes to Rs. 35.

Calculating the basic need of clothing is

difficult, as requirements vary considerably according to region, gender, age and culture.

We calculated the minimum amount of cloth required and its cost for persons by age and gender living in the plains.

The weighted average of the total costs came toRs 207 per annumon clothing.

About 71.16% of the people in the 15-19 year age group had not completed a secondary education(1999-00)*.

It should be the minimum responsibility of the State to ensure that each young citizen has access to cost-free schooling with adequate infrastructure and qualified teachers.

Moreover, such an institution should lie within a 2 km radius of each persons home so as to ensure not more than 30 minutes are spent walking to school.

Connectivity is probably the single most important factor guiding whether people of a particular region are being able to access their basic needs of education, healthcare, shelter etc.

Around 43% of Indian villages or over 2,70,000 villages are not connected by road*.

Furthermore, around 25% of villages that have a population of over 1000 are not connected by road** .

The total cost of obtaining the fourquantified variables namely nutrition, healthcare, clothing and energy consumption comes to Rs. 675 per person per month.

Apart from this there are miscellaneous expenditures

This paper includes expenditure under the heads of miscellaneous consumer goods, miscellaneous consumer services and durable goods.

The total monthly miscellaneous expenditure comes toRs. 164 per person .

37.7% of Indian households do not have access to a nearby water source,

49% do not have a proper shelter,

69.5% do not have access to suitable toilets,

85.2% of Indian villages do not have a secondary school and

43% of Indian villages do not have an all-weather road connecting them .

Summing up minimum costs for nutrition (Rs. 573), health (Rs. 30), clothing (Rs. 17), energy consumption (Rs. 55) and miscellaneous expenditure (Rs. 164);the poverty line in India should be about Rs. 840 per capita per month*.

* The actual sum is Rs. 839; we round it off for convenience.

A person is poor in India if he or she has a monthly per capita expenditure lesser than Rs. 840 OR does not have access to either drinking water; proper shelter; sanitation; quality secondary education; or an all-weather road with public transport.

Strategy:

Combating poverty

Empowering people

Using core competence in science & technology includingspace applications

Setting ecological integrity

On 1:50,000 scale digital at village/micro-watershed level

Marginal Agri. Land

For example, Assam with more than 25 % wastelands has got more than 45 % population below poverty line.

Similarly, Rajasthan is characterized by more than 30 % wastelands and 26 % incidence of poverty.

On the other hand, there are States like Punjab with just 4% wastelands and 11% population below poverty line, followed by Andhra Pradesh, Haryana, Kerala, Gujarat etc.

Self Employment Programme

Swarnajayanti Gram Swarozgar Yojana

Synergy and Convergence of (IRDP, TRYSEM, DWCRA and MWS)

Wage Employment Programme

Jawahar Gram Samiti Yojana (JGSY)

Employment Assurance Scheme

Infrastructure Development Programme

Indira Awas Jojana

Pradhan Mantri Gramadaya Yojana

Pradhan Mantri Gram Sadak Yojana

Rural Electrification

National Social Assistance Programme

National Maternity Benefits Scheme

National Old Age Pension Scheme

Annapurna

Micro finance- NABARD, SHG linkages

Almost all countries in the worldhaveemployment and unemployment problem.

A total number of 191.8 million persons wereunemployed in the year 2005 in theworld.Theunemployment rate was around 6.3% of thelabourforce

1.37 billion people though employed were earninglessthan US$2 a day.

520.1 million people though employed wereearningless thanUS$ 1 a day.

The problem therefore is of the order of 711.9million if at least one dollar a day is considered.

S.No. Item 2004-2005

Total Population as on Jan. 2005 1092.96Million

Total Labour Force 469.94 Million

Total Employment459.10 Million

Totalnumber of open10.84 MillionUnemployment

Unemployment rate as percentage Around

of total labour force 2. 3 %

Employment in Organised Sector(2004)26.4Million

S.No. Item 1999-2000

Employment in Unorganized 432.7 Million

Sector

No. of Jobseekers Registered with39.3 Million

Employment Exchanges (as on 31-12-2005)

No. of youth registered with Employment28.8 Million

Exchange as on 31-12-2004

Working Poor i.e. Persons working butAround 130 Million

living below poverty line (1999-2000)

Note:openly unemployed are those who did not carry out any gainful activity during last 365 days.

Sector WorldIndia

Agriculture40.1%58.5%

Industry21.0%18.1%

Services38.9%23.4%

Vast majority of workers in Agriculture

A significant proportion of them are below poverty line

Various countries are trying to address theproblem ofunemployment through variousmeans.

Developed countries are trying to have separateemployment policies.

Developing countries are relying on economicgrowth as well as special employment generationprogramme.

Export of labour force to other countries will notbeeasy unless labour force in developingcountries canclaim better skills.

Planning in India focused on economic growth.

Generation of employment was viewed as part oftheprocess of development and not as a goal inconflictwith, or to be pursued independently of economicdevelopment

Thus there is no employment policy as such andadditional employment generation is attemptedthrough growth process and through specialemployment generation programme

No substantial difference in age distribution between 1991 and 2001even for those in the age group 15-34.

Labour productivity (in terms of per capita output)isquite low($3.05), compared to the advancedcountrieslike USA($40.72),UK($30.92), Even China ($4.39)hasbetter labour productivity than that of India.

Economic development, productivity andemployment growth are still positivelycorrelated.Theextent of correlation varies from sector to sector.

While in services sector these have highcorrelation,the industrial and agriculture sector thecorrelation is low. (Continued)

Unlike in developed countries, in developingcountrieslike India where demand has not yetreached thesaturation point Productivityincrease had noretarding effect on employment.

Technological development in various sector hasnotyet reached to that level which leads toEconomicgrowth without any employmentgrowth.

(Continued)

Population growth and consequential increase in thelabour force. 10 to 12 million persons are entering thelabour force every year.

Productivity and income generation from employment are low.

Th ough, open unemployment is only2.3%(11 million)

the percentage of the population below the poverty line ishigh. The fact of being employed is obviously

no guarantee of escaping from poverty,which in our situationrefers to a very basic level of subsistence.

Out of around 470 million work force as many as 130millionare working poor. Therefore the problem is of the order of130+11=141 million.

Economy has the capacity to provide gainful employment to all the persons in the labour force

The workforce is not able to get decent work because of non availability of skill required in the labour market

Planned Initiative. Tenth Plan envisages creation ofaround 10 million jobs each year, around 6 million fromnormal growth process and around 4 millionthroughspecial employment generation programme proposed for sectors.

Economic growth and employment growth beingcorrelated attempts are made to achieve 8%growth rate of the economy so that anticipatedemployment generation takes place.

As against a target of 10 million per year around12million persons per year were providedemployment during 2000-2005

Provide skill training to the new entrants to the

labour force

Improving skill level of the work force.

Organize Skill training as per the market demand. Thatis, it should cater to the needs of both organized andunorganized sector.

Skill is acquired by the new entrants to thelabour force throughtwo channels namely:-

Formal skill training through various institutions run by Government and Private. Around 2.5 million through Government Institutions and few hundred thousand through private institutions(exact estimates are not available for private sector).

Informalmeans i.e through on the job training, learn while working, apprenticeship training, helping the master craftsman,etc. Majority of the work force acquire skill through this channel . Such skills arenot certified and their skill level not known and hence such workers suffer from mobility for betterment, up gradation of their skill and consequential improvement in their living.

Training is imparted in various trades designedprimarily to suit organized sector

Around 2.5 million get training each year throughvarious ministries/ departments of centralgovernment.

Industries are associated with training through

institute management committee.

Formal test conducted and certificate issued.

Continued

Skill acquisitions through informal means can not beavoided.

Skills thus obtained require testing and certification.( for construction industry it has been taken up. Forother industry it is beingworked out)

For those skills which are required and normally notobtained through informal channels/ not available insufficient numberspecial efforts are made to organisemodular practicaloriented course byutilizing existinginfrastructure( i.e ITI, polytechnics, schools etc) andmaster craftsman.

Continued

In the Institute of Excellence being developed it is aimedthat side by side with production of world class workmanmodular course will help them in self employment andengagement in informal sector.

Various Ministries and Departments also areaddressingthe needs of informal sector while designing skill trainingfor the sector dealt by them.

India ranks 85 out of 180 countries surveyed in Transparency Internationals 2008 Corruption Perception Index (CPI), with an integrity score of 3.4,an indicationthat in spite of some progress made, corruption continues to be perceived as rampant and endemic by the various CPI sources.

The 2007 World Bank Governance Indicators suggest little change over the years, with the country fairing poorly in terms of regulatory quality and control of corruption

Freedom House 2008 comes to similar conclusions, pointing out that government effectiveness and accountability continue to be undermined by close connections between crime and politics, weak state institutions and widespread corruption.

India Corruption Study 2008, conducted by TII indicates that BPL households paid Rs 9,000 million as bribe to avail basic and need based services .The percentage of respondents paying bribes to access services was especially high for the police, Land registration and housing.

A recent analysis of reports of bribery demands in India conducted by Trace International was published in January 2009 and provides an overview of the general patterns of corruption in the country. 96 anonymous reports about bribery demands were filed between July 2007 and October 2008 on the organizationsBusiness Registry for International Bribery and extortion (BRIBEline), a secure, multilingual, online tool for reporting bribe demands worldwide.

And finally, India is also perceived as exporting international corruption outside its borders. The country comes at the bottom of Transparency Internationals 2008 Bribe Payer Index ranking 19 out of 22 countries with a score of 6,8. This indicates that Indian firms are perceived by business people as very likely to engage in bribery when doing business abroad.

Corruption in the private sector affects public interest. It is the public that suffers in the end

In order to attract investment, it is important to ensure that business cost is low ; and corruption whether in private or public sector, increases business costs.

Private and public sectors are intertwined. As more and more government functions are outsourced to the private sector, many private companies are now performing functions that were once performed by the government.

Cases involving contracts or procurements of services or supplies

Cases involving corrupt offenders who supervise contractors or suppliers, for example, not checking on the quality of work or product delivered and overlooking deficiencies

There are those who are corrupt, and have access to sensitive data which they divulge to unauthorized persons in return for some award

Then there are those who are in a position of authority such as CEO or General Manager, who take bribe and grant approval for various matters in favor of bribe givers

In some cases corruption is mixed with other offences. For instance, the companys books might be cooked up to hide corrupt transactions or make fake invoices to reflect fictitious transactions.

Recovery Agents :

Recovery Agents:Perturbed over the way certain banks went overboard to provide advances and then used the services of recovery agents to recover the debts, the countrys banking regulatory Reserve Bank of India (RBI) came up with the guidelines for Recovery Agents.

It is true the borrowing and lending are the key elements of banking and the system will collapse if large number of debtors fail to repay the money. Prudence requires that one should not borrow more than ones capacity to repay. At the same time, it is also the job of the bankers to ensure that the borrowing person has the capability to service the debts. Ideally, the responsibility for successful conduct of banking services must rest with both, the bankers and the borrowers.

It so happened that some aggressive bankers, in their bid to acquire assets, started lending money to borrowers without doing due diligence. Instead of checking the credentials of borrowers, they started providing funds on the basis of signals received from their recovery agents.

In case of defaults, the recovery agents, who received hefty cuts, adopted abusive practices to recover loans. In several cases they impounded the vehicles of the borrowers, threw out persons from houses, beat up and abused defaulters in public etc. The worst was that even the police did not help the victims of violence.

Aggrieved persons went to consumer and higher courts and received relief. In several cases courts imposed heavy fines on the banks. The courts, as expected, generally held that banks should not go overboard and follow the lawful methods to recover debts.

In view of the gravity of situation, the RBI came out with a guideline on recovery agents prescribing a code of conduct and procedure for training.

Stock market fraud:

The country has witnessed various stock market frauds by brokers in collusion with corporate to cheat investors and hoodwink regulator SEBI. There were two major securities scam in the recent past Harshad Mehta securities fraud and Ketan Parekh scam.

The modus operandi was quite simple. Brokers pushed the prices of selected shares through artificial trade to attract retail investors and than suddenly withdraw from the trade. In several cases the shares of bogus and paper companies were raised to unreasonable levels. Once the scandal was exposed, the share prices collapsed resulting in huge loss to investors, especially those who invested their money on hearsay without ascertaining the credentials of the company. Herd mentality proved expensive for many. Having suffered huge losses, few investors even committed suicide.

Another aspect of the stock market fraud that came to light in recent years was the initial public offer scam IPO scam. In order to encourage participation of the small investors, SEBI devised a formula for allocation of shares. It is mandatory for the companies to allot shares to subscribers in public issues in accordance with that formula.

However, in order to corner the shares earmarked for small investors, some companies and brokers opened fictitious banks accounts in large numbers and made applications through them. The trick worked well till culprits and their modus operandi was exposed.

Insider Trading

The other corporate fraud, which prevails not only in India but also elsewhere in the world, isinsider trading.SEBI has been constantly trying to strengthen the guidelines to check insider trading. Cases of insider trading do come to light of and on and the companies are often fined and brokers are banned from dealing in securities for specified time depending on the gravity of offence.

Stock market frauds are not something new to India .It is the urge to make quick money, and not long term investment, that is attracting investors to the capital markets. The investors today do not care for dividend. They look for fast capital appreciation and play in the markets even with borrowed money.

Though individuals are free to do what they want with their money, the regulator must ensure that everyone plays by the rulebook. And more importantly, once a violation is detected it should not go unpunished. Secondly, the punishment shouldcommensurate with the crime otherwise it will have no effect either on the defaulter or deter others from adopting similar methods to make quick money.

Technical Education:

High economic growth has resulted in proliferation of technical institutions in the country. However, their conduct is not always overboard. Many of them, especially those managed by private individuals or trusts, tend to exploit the situation and fleece students by adopting unethical and coercive methods.

The institutes should ideally earn their revenue from fees charged for educating students and not through other means. Unfortunately, many institutes admit students much ahead of the academic session and charge full fee from them in advance. What is appalling is that they do not refund the fee if a student, before the beginning of the course, opts to join some other institute.

Often the institutes ask the students to deposit original certificates to prevent them from joining other colleges or institutions. As a result of such a coercive action, students get stuck with an institute, though they may qualify to study at better places.

Such practice has no justification and amount to trapping students and making unlawful gains by forfeiting full course fee that runs into lakhs of rupees.

In order to prevent exploitation of students by technical institutes, the regulator All India Council for Technical Education (AICTE) came out with a public notice asking institutes not to forfeit fee if a student decides to leave the institute before beginning of the course.

Similarly, the AICTE has asked the institutes not to keep original certificates of students to force retention of admitted students.

The public notice, which was issued with a view to checking commercial of technical education, would prevent institutes from adopting unethical methods to confiscate fees and force students to join a particular institute.

Cartelisation:

Scuttling competition is another kind of malpractice in which corporate indulge in their pursuit to maximize profits. They often form cartels bypassing laws and bending the rules of competition. Such practices become more widespread when the laws are unsettled and enforcement remains weak.

In order to encourage competition and prevent misuse of dominance, the government enacted the Competition Act in 2002. However, it is unfortunate that such an important commercial law could not be put into effect six years after the legislation was approved by Parliament.

With the initial glitches getting over, the Competition Commission is likely to become fully operational by the end of 2008 or early 2009. Thereafter, it would become easier for the government to check malpractices resulting from formation of cartels, economic dominance or predatory pricing.

The issue of cartelization assumed more significance with inflation touching the seven year high mark around May 2008. Apprehensions are often expressed that cement and steel manufacturers are behaving like a cartel to exploit the price situation and fuel inflationary expectations.

Corruption in the private sector has many dimensions and goes beyond the traditional practice of giving and accepting bribes for personal gains. You will find out more about corruption in the private sector in our Global Corruption Report of 2009 due for release in June.

For the larger contracts : Bidding cartels where there is

Agreement on prices

Agreement who enters lowest bid

Agreement to rotate bid of winning company

Compensation for bidding costs etc etc

Nearly always for a public sector agency, if fraud is well organized, its difficult for the procurement agency to detect.

SMEs are vulnerable to both private and public sector solicitation. Sometimes they have to

Pay to be on the bidders list

Required to pay kickbacks to procurement officials

Are under pressure to work with corrupt partners or agents who in turn demand bribes

Policies and procedures in private sector are comparatively less comprehensive and detailed than the public sector

Perceptionthat offences committed in public sector are more serious than the ones in private sector

Enforcement agencies for public sector more mature

Private sector and public sector are intertwined because private sector provides goods and services to public sector

Some of the above are challenges in curbing corruption in the private sector .

The Indian Government and its regulatory bodies during the course of last year have introduced various legislations and regulations having a direct and indirect bearing on corruption, corporate frauds and questionable practices being followed by the private sector companies. Some of the important ones are as follows:

Consent Orders : Countrys capital market regulator Securities and Exchange Board of India (SEBI) 1came out with an important circular on Consent Orders. What it meant in practice was that the person who had committed a violation could go the regulator, accept his guilt and get rid of past sins by paying a monetary penalty, proposed by him and agreeable to the regulator.

Although the very concept of Consent Orders involves ethical issues, one may appreciate that it would substantially reduce the workload of the overworked the SEBI and at the same time help individuals, companies and firms to get petty violations resolved by payment of a penalty termed as consent fee.

Unfortunately, the provisions are being used by large corporate houses and brokers to wash away bigger sins like involvement in the Ketan Parekh securities scandal, the initial public offer (IPO) scam and even violation of insider trading norms of the SEBI.

If the scope of Consent Orders is not narrowed down, they will only encourage private companies and habitual offenders to become bolder, take advantage of the loopholes and make money at the cost of ordinary investors.

The extent to which these Consent Orders should be used could be a matter of debate, but no useful purpose would be served if everyone starts taking advantage of the provisions freely and frequently.

Competition Act:Although the Competition Act 2was enacted by Parliament in 2002, it remained a non-starter because of the court cases filed by the lawyers mainly over the composition of the Commission.

Countrys apex courtSupreme Court of India , stayed the operationalisation of the vital provisions of the Act and asked the government to amend the law. The government after much deliberations and delay amended the Competition Act in August 2007, as assured to the Supreme Court during the course of arguments.

In addition to advocacy role, which the Commission is performing even today, it will be able to check corporate malpractices like abuse or misuse of dominance and cartelization. It will also have the powers to inquire into mergers and acquisition and prevent formulation of conglomerates to the detriment of consumers.

Integrity Pact :which is a tool developed by TI to help government , businesses and civil society intent on fighting corruption in the field of public contracting. It consists of a process that includes an agreement between a government or government department and all bidders for a public sector contract.

In specific contracting process, the IP is intended to accomplish two primary objectives :

To enable companies to abstain from bribing by providing assurance to them that their companies will also refrain from bribing, and

Government procurement, privatization or licensing agencies will undertake to prevent corruption , including extortion, by their officials and to follow transparent procedures

To enable governments to reduce the high cost and distorting impact of corruption on public procurement , privatization or licensing.

So far in India 32 companies have signed IP including Coal India, SAIL, BHEL, NTPC, Container Corporation of India etc. What is important is that IP have to be implemented in letter and spirit. Its is a tool to counter corruption. We would like to invite private sector to adopt and follow IP in letter and spirit.

Assessment of specific corruption risks of the business

Development of detailed anti bribery policies

Implementation of the policies

Self monitoring of the effective implementation of the policies

Public reporting on the policies and related programs

Independent assurance of the effectiveness of these efforts

Problems of developing India

Education

Transcript of Problems of developing India