ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Auction and Corruption

An auction process for sale of public assets will not be completely corruption-free but if properly designed and implemented it will actually minimise the likelihood of manipulation. Why then is a government headed by an economist worried about taking the auction route?

Economists have long argued in ­favour of liberal economic policies as instruments to contain corruption created by a maze of regulations and bureaucratic hurdles. Complex regu­lations can create substantial incentives for politicians and government officials to engage in graft. This is well ana­lysed and documented in a large number of academic and non-academic contributions. Many such allegations and subsequent economic problems finally led to the steps towards market-oriented economic reforms in the 1990s. It is now well recognised that Prime Minister Manmohan Singh, then the union ­finance minister, worked towards bringing about such a change in India’s economic policy. The policy environment of the economic system today is radically different from what we had in the three decades before the 1990s. Markets and competition have come to play their roles in the economic life of the nation with centralised planning taking a back seat.

One problem now is the relationship between acts of mega corruption in an otherwise economically liberated environment. Those who highlighted the pre­sence of a complex bureaucracy as the source of rent seldom cite cases of when the very process of implementing reform strategies could lead to massive acts of corruption. Such warning signals were not hoisted even after the Russian experience rocked the world, when public ­sector companies were sold to private ­interests at a price that made room for huge under-the-table payments. In fact, at the time a few well-known liberal economists came under the scanner as beneficiaries of such a process and eco­nomists who had prescribed such policies quietly moved into other domains as ­advisers.

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