IASbaba's Daily Current Affairs Analysis

IASbaba’s Daily Current Affairs – 7th Nov 2017

GOVERNANCE

TOPIC:General Studies 2:

Role of civil services in a democracy.

Important aspects of governance, transparency and accountability and institutional and other measures.

Solving the issue of “Criminalisation of Politics”

In news:

Recently, the Supreme Court asked the government about the status of criminal cases pending against elected ministers, underlining the issue of law-breakers becoming law-makers.
The Supreme Court recommended setting up fast-track courts to deal with the cases.

Criminalization of politics:

Criminalization refers to the use of criminal activities by politicians; either by direct malfeasance or by indirectly recruiting someone.
It is not a new phenomenon; the first instances of “booth-capturing” were reported in 1957, and involved hired goons who would mobilize or suppress turnout, or vote on behalf of disenfranchised voters.
In return for their work, politicians would protect these criminals from prosecution.
From such petty engagement with elections, goondas and gangs have come a long way to contest elections themselves.

Why political parties chose to field such criminals?

Despite the risk that criminality of the candidates could have brought bad press.
The corporate financing of elections was banned in 1969. This eliminated the most important legal source of campaign finance and pushed financing underground.
At the same time, the costs of contesting elections kept increasing due to a rising population, increasing political competition—the number of political parties increased from 55 in the 1952 general election to 464 in 2014—and the trend of giving freebies for votes.
This led parties to a competitive search for underground financing, and they played into the hands of criminals and racketeers who had the means to acquire and dispose of large amounts of cash without detection.
Thus, parties fielded tainted candidates because they could contest an election without becoming a burden on the party’s limited coffers.
Data from the last three general elections shows that the strategy was an electoral success as candidates with criminal cases were three times more likely to win than a “clean” candidate.

Why a candidate with criminal background is more likely to win?

The reason lies in the country’s poor governance capacity. On the one hand, India has excessive procedures that allow the bureaucracy to insert itself in the ordinary life of people; on the other hand, it appears woefully understaffed to perform its most crucial functions.

The density of allopathic doctors, nurses and midwives is 11.9% per 10,000 residents in India (2014), at half of the benchmark set by the World Health Organization (WHO). Furthermore, the density is ten times larger in urban areas than villages.
Despite internal security concerns—from Maoist violence to religious extremism and organized crime—there is a 30% shortfall in personnel of the Intelligence Bureau.
India has the lowest number of police officers per capita—122.5 per 100,000 people—of any G20 member state, and the vacancy rate stands at 25%. Vacancy rates are 37% for high courts and 25% for local courts.

This scarcity of state capacity is the reason for the public preferring ‘strongmen’ who can employ the required pulls and triggers to get things done—someone who can enforce contracts, deal with the police when they get into trouble, handle the government babus while procuring a licence or help get admission to a government hospital for treatment.
Criminality, far from deterring voters, encourages them because it signals that the candidate is capable of fulfilling his promises and securing the interests of the constituency.

Reforms required:

Fast-track courts are necessary because politicians are able to delay the judicial process and serve for decades before prosecution. But it is obvious that this will do little to break down the symbiotic relationship between politicians and criminals on the one hand, and the dependence of voters on strongmen.
The reform needs to change the incentives for both politicians and voters.

Bringing greater transparency in campaign financing will make it less attractive for political parties to involve gangsters.
Either the Election Commission of India (ECI) should have the power to audit the financial accounts of political parties, or political parties’ finances should be brought under the right to information (RTI) law.
Broader governance will have to improve for voters to reduce the reliance on criminal politicians.
That requires a rationalization of bureaucratic procedures and an increase in state capacity to deliver essential public goods like security of life and contracts, and access to public utilities.

Conclusion:

Standing alone, fast-track courts for politicians will be ineffective in cleansing Indian politics. An effective strategy to tackle criminalization of politics should include reforms to improve governance and bring transparency in campaign financing.

Connecting the dots:

Discuss the reasons behind criminalization of politics and the reforms required to resolve the issue

NATIONAL/ECONOMY

TOPIC:

General Studies 2:

Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

General Studies 3:

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Demonetisation and creation of formal jobs

Background:

The unemployment rate of 4.9 per cent in India is not a job problem but a wages problem. This diagnosis is important. And if our problem is wages then India needs the higher productivity that comes from structural change: Formalisation, industrialisation, urbanisation, skilling and deep financial
markets.

How demonetisation would help in formal job creation?

Demonetisation made India a better habitat for formal job creation for five reasons:

Demonetisation has reduced cash with citizens; bank deposits have increased. Demonetisation has created new lending capacity of about Rs 18 lakh crore. This will boost investment and formal job creation.
Demonetisation exploded the number of digital payments on UPI/Bhim from 1 lakh in October 2016 to 7.7 crore in October 2017. Prohibiting salary payments by cash and 50 lakh new bank accounts for labourers will fuel further adoption; digitisation is important for formalisation because it makes regulatory arbitrage and tax evasion difficult.
Demonetisation has catalysed a savings shift away from gold (imports are down 20 per cent over the last year) and real estate (the toxic gap between rental yields and borrowing rates is finally narrowing). Greater financialisation of savings creates a virtuous cycle for formal job creation because they deepen and broaden domestic capital markets whose institutions are more likely to fund entrepreneurs who create companies that are small and will grow rather than companies that are small and will stay small.
Lowering interest rates is a policy priority and banks had been only passing on 50 per cent of lower policy rates to customers; in the year after demonetisation this has risen to 100 per cent. Sustained formal job creation needs the lower interest rates that come from macroeconomic stability, fiscal discipline, muted inflation expectations and an Independent Monetary Policy Committee.
Demonetisation targeted a less-cash society because cash is the primary tool of corruption. Corruption enables transmission losses between how the law is written, interpreted, practised and enforced while India’s move to high productivity enterprises needs moving from deals to rules.
Demonetisation did not end corruption but raised its costs.

Conclusion:

Demonetisation is one of the other reforms — GST, bankruptcy code, RERA, FDI liberalisation, ease-of-doing business, competitive federalism, etc — that are making India a fertile habitat for formal, non-farm, job creation.

Connecting the dots: