Indians provided more tip-offs on fraud, manipulation and corporate disclosures to the United States stock market regulator than citizens of countries like France,
Singapore, Germany, Switzerland, Australia and Japan.
Tarun Jain, assistant professor of economics and public
policy, Indian School of Business-Hyderabad, says the
Indian government should encourage (or at least not prosecute) whistle-blowers who bring fraud, corruption and
waste to public notice.
You along with Klaus Abbink and Lata Gangadharan
from Monash University (Australia) and Utteeyo Dasgupta
from Franklin and Marshall College (Pennsylvania) recently
conducted an experiment to study how those giving the
bribe and those receiving it react. Could you tell us a bit
about the reasons behind this experiment?
When he was the chief economic advisor of India,
Kaushik Basu proposed that citizens should not be prosecuted when forced to give bribes after public officials “hold
up” delivery of services that citizen are anyway entitled to.
For example, imagine that your passport is ready and just
has to be handed over to you. Just before giving you the
passport, the official asks for a bribe. At this point, you
might be forced to give the bribe because not doing so
might mean losing your passport.
Basu’s argument was that not prosecuting citizens in such
cases would encourage them to report corruption, which
might increase chances of prosecution and therefore
decrease the likelihood that officials would demand bribes.
The proposal generated considerable debate among policymakers, in the media and among the public. Among the
critics, Jean Dreze, who campaigned for the Right to
Information Act, said Basu’s proposal ignored moral considerations (many citizens refuse to pay bribes even under
pressure) and did not account for low prosecution rates in
corruption cases. Others observed that officials might retaliate against citizens who report bribes, which could reduce
the effectiveness of the proposal.
These arguments back-and-forth were made without any
data on how citizens would actually behave when bribe-giving is legalized.
Since the effectiveness of the proposal depends critically
on actual behavior, Klaus Abbink and Lata Gangadharan of
Monash University, Utteeyo Dasgupta of Franklin and
Marshall College and I conducted an experiment. The
experiment with students in Hyderabad (many of whom
unfortunately had an experience
giving bribes) examined what
would happen if the rules for
bribe-giving by citizens (but not
bribe-taking by officials)
changed as Basu specified. The
experiment allowed citizens to
take a moral stand against cor-
ruption if they wished. The
experiment also examined what
happens if officials can retaliate
against citizens who report
them, and how much citizens are
motivated by monetary rather
than intrinsic rewards.
What were the major results of
The study found that allowing
legal immunity to the bribe-givers motivated citizens to
increase reporting of bribe
demands. Correspondingly, officials reduced the demand for
bribes. We also find that despite
significant costs, a substantial minority of citizens refuse to
pay bribes, indicating that the behavior of many of the participants in our experiment was driven by principles rather
However, Basu’s proposal by itself did not change the
moral authority of the law on citizen behavior and does not
have to be interpreted as a ‘license to bribe,’ which was one
of Dreze’s major concerns.
Implementing Basu’s proposal might face significant challenges, especially when officials are able to retaliate against
citizens who report bribe demands. In such situations, the
positive benefits (in terms of higher reporting and fewer
demands) of Basu’s proposals are wiped out.
Basu’s policy proposal can be a credible step towards
fighting harassment bribes if accompanied by additional
measures that reduce the power of officials, improve the
protection of whistle blowers and promote better prosecution of the accused.
Basu has said that for a class of bribes, the law should not
punish the bribe-giver. Do you think there should be different laws for bribe giver and taker?
In my opinion, the central lesson from Basu’s proposal
and the results of our study is that pol-
icymakers should encourage (or at
least not prosecute) whistle-blowers
who bring fraud, corruption and waste
to public notice. Insiders often have
the best knowledge of corrupt transac-
tions, and their testimony is critical for
Our experiment showed that protection from retaliation is very important.
In fact, anonymity may be an even
stronger motivation than monetary
rewards to whistle-blowers. Effective
anti-corruption legislation should
strengthen protection for those who
Broadly, in my view, we should
encourage and protect whistle-blowers
regardless of whether they are bribe-givers or bribe-takers, citizens or officials. And this might be true for corruption in government as well as corporate settings.
Why is there so much corruption at
all levels in India? Is it because of lax laws or is there more
Corruption thrives because of strong economic incentives.
Anti-graft laws typically outlaw specific behaviors, but these
behaviors are easy to hide or circumvent. The punishments
are toothless because prosecution itself is very difficult and
takes a long time.
The most effective anti-corruption measures target
processes by increasing transparency (such as the Freedom
of Information Act in the United States) and protecting
those who complain. The Right to Information Act was one
of the few measures to increase transparency, but it is disheartening to see attempts to dilute its provisions.
In India, we have witnessed cases (such as those of whistle-blowers Satyendra Dubey and Shanmughan Manjunath)
of retaliation against those who investigate or report corrupt activity. Despite this, the Whistle Blowers Protection
Bill has yet to be passed by Parliament. It is disappointing
that the bill does not cover the private sector when firms
themselves face large losses due to corruption.
Strong protections for whistle-blowers are critical for
The Punjabi community in California welcomed the Punjab government’s decision to organize a non-resident
Indian conclave this month, but it was
not sure how honestly the government
would keep the promises made.
In a statement the North American
Punjabi Association said the conclave in
Jalandhar January 10 and 11, soon after
the Pravasi Bharatiya Divas, was a posi-
tive step and would focus on issues over-
seas Punjabis faced back home.
“We are sure the government seems to
be clear and honest, but unfortunately
our system is rotten. It is not so easy to
find solutions to the problems of the
overseas Punjabi community,” Satnam
Singh Chahal, president, NAPA, said.
He added that last year the government
offered them a red-carpet welcome but
“we are skeptical of political promises.”
“There are hundreds of issues related to
land disputes, land grabbing, kidnapping,
He said unnecessary political interfer-
ence in many issues was responsible for
creating problems for overseas
Punjabis: “The government should not
divert from the main issue. We don’t
want a red carpet, but a corruption-free
The Punjab government should ensure
that the community’s lives and properties
are secured in the state, he said.
“This kind of assurance will help to
attract the Punjabi Diaspora to invest in
the state,” he added.
Bikram Singh Majithia, Punjab’s NRI
Affairs Minister, said over 438 delegates
from 19 countries had confirmed their
participation in the event.
‘Government should encourage, not
The Securities and Exchange Commission placed India as fifth among 55 nations from which it received tips in
2013. Professor Tarun Jain speaks to Faisal Kidwai about nurturing the whistle-blowing culture within India
‘Skeptical of political promises’