A Detailed analysis of Corruption.

A Detailed analysis of Corruption.

“Corruption is the abuse of POWER or AUTHORITY whether private or public for selfish gains”.

Corruption is a vicious cycle.

1. Commodification

The society has been increasingly commodified. There has been sharp rise in consumption of consumer goods & it has now been largely associated to status.

So, in order to maintain status~ those who have money accumulate consumer products & those who don’t indulge in corrupt practices to acquire them.

2. Centralisation of Power

The problem is if one uses corrupt means to earn money one may be caught in & it may lead to legal actions.

There are several laws under which one can be booked for indulging in corrupt practices.

But execution & legislation of law requires power. So, in order to keep oneself safe, people go in for power.

## Where is the power?

Politics .

One has power (Power of influence) if one holds a position in a political party.

Another way is to content & win elections & hold power (Power of Office).

Bureaucracy works under the political executive.

Hence, there is always fight for power. But power corrupts.

》》Black Money. 

It is in two forms:

(i) earning through legal & fair means but non-payment of taxes

(ii) earning through illegitimate means

Let us dissect the Black Money into segments to further analyse the issue:

I. 10-15L p.a. of Black Money

Who could be involved in this possibly?

□ small businessmen

□ lower-level public servants

Would one be keeping it in cash?

No. Why?

– it is bulky~ storage problem

– inflation will lower its value over time 

– not safe ~ what if one is caught? 

So, one would prefer to invest it in investments which are:

– easily available

– easily convertible 

– less voluminous 

Think of such investments? 

Silver/Gold.

From where does the gold comes to India?

Via imports. So, buying more golds means spending more $. This increase the demand of $. Hence, the $ appreciates wrt INR. Therefore, devaluation of Indian Currency takes place. 

What else do we import? 

We also import crude oil from other countries. We require  $ for that. So, oil prices increase. This leads to transportation price increase. Hence, agricultural produce inflate  (due to increase in price of diesel as well as transportation). Therefore, it leads to Food Inflation.

Who shall be the worst hit?

ONLY the poors as it will be hard for them to buy food stuffs.

II. 1-3 Cr p.m. Black Money

This category will majorly include people from category I who either got promoted as a public servant or have expanded their business. 

Where would one park the black money now?

Gold. No. It is no longer a good choice. Because it is bulky & what if you are caught with so much gold?

Real Estate.

In New properties the Market Rate & the Circle Rate are approximately equal so there is no scope for parking the black money here, right now.

So, one would go for old properties where there is huge difference in Market Rate & Circle Rate (can be more than 50-60%).

One just needs to give 40-50% in white money rest can be given in cash (aka black money).

III. 10-20 Cr p.m. of Black Money.

In this category, there will be negligible new entrants. 

One cannot invest in Old Real Estate now as properties worth Crores ~ you cannot buy in white. Even 50% of Market Price is now in Crores. 

So, one would go for New Real Estate Properties.

One cannot buy a real estate but can use someone to buy properties  (Benami Properties).

It involves loyalists ~ whom one can show as self-employed & can get him/her apply for loan (~ repayment of loans in chunks in black money). The loan will be used to buy new properties.

Who are the worst sufferers?

ONLY the poor. Prices of the real estate go up. So, poor cannot afford house or land.

IV. 100 Cr p.m. of Black Money

The only way is to park the money outside of the country. This involves illegitimate Hawala transactions. Will pick up Hawala transaction in some other blog post. But it leads to illegal opium trade, returning of Black Money to the country via FDI (using shell companies), etc.

The same black money which was parked in foreign lands is used in elections. So, there is a complex nexus between political executive & legislative, businessmen & the bureaucrats (& hawala dealers) to help in converting the black money into white of such amount. So, it is kind of a complex network with which the task of converting the black money into white is achieved.

With Great Love,

Er. Amit Yadav

http://www.stayfoolish.in

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