Modi alone can't wipe out corruption in India: Rajan

“Corruption is a systemic issue. Ultimately, you have to change incentives in the system to fix it,” says Raghuram Rajan.

Raghuram Rajan, Governor of the Reserve Bank of India, has scoffed at the contention that BJP’s Prime Ministerial nominee, Gujarat Chief Minister Narendra Modi will be the knight in shining armour who will root out corruption in India.

Rajan, who was in Washington, DC last week for the fall meetings of the World Bank and IMF, during an interaction at the Johns Hopkins University’s School of Advanced International Studies, asked how accountable the UPA government to the exponential growth in corruption and how effective he believes Modi will be in eliminating this scourge, said, “Corruption is a systemic issue.”

Thus, he argued, “Ultimately, you have to change incentives in the system to fix corruption,” and added, vis-à-vis Modi as the panacea, “One shining knight doesn’t do it. Across the world, you have different examples of that. But how you fix it is really something that is harder.”

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Rajan said, “Singapore did it in quite a short period of time. Was it because they paid better salaries to government officials - the efficiency wage - or was it that they did something else? It is not clear.”

He said he believed that “Countries as they develop, corruption falls off, and no country is free of corruption,” but reiterated that “generally it tends to fall off and hopefully that will happen in India.”

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Rajan also observed that “the new tools that we have to deal with corruption - things like technology can for a long way. For example, if you look at new railway bookings, earlier you had to go to a booking office - a guy would have this fat ledger where he could make any kind of entry that he wanted, and so, you were at his mercy. Money had to change hands to get a booking, to get a seat on the train. Now it’s electronic.”

He acknowledged, “Now, of course, it would help if there was surplus capacity in which case corruption would completely die. Of course, because there is still scarcity of some routes, it is not completely eliminated but it has come down hugely because of the possibility of electronic bookings.”

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Rajan said, “Similarly, on air flights. In fact, now, there is no corruption in airline booking because it is freely available.”

“So, my sense is technology plus greater production and to some extent more transparency in government, which is a systemic thing will help,” he added.

Rajan noted that “even now in India, because of the scrutiny of the vigilance authorities, Supreme Court and the press, it’s becoming harder to get away with the blatant, large-scale action that are not transparent.”