Arvind Subramanian in the Business Standard on India's leadership & corruption.
From the Article
Reform in economic governance and Prime Minister Manmohan Singh?s unimpeachable integrity could be the answer
The Lok Pal Bill and the jailing of the suspects in the 2G scam mean that controlling corruption is back on the radar screen. Two questions merit particular attention today. Is controlling corruption important in India’s current economic circumstances? And what can this prime minister, of unimpeachable personal credentials yet uncomfortably confronted with the recent scandals, do about it?
The relationship between corruption and development is murkier than economists would admit. Yes, in the very long run, institutions that provide good economic governance, which includes controlling corruption, deliver better economic development.
But the operative term is “very long run”. Over less lengthy horizons, the relationship is less clear. A lot depends on what form corruption takes. If corruption is just a low and fixed cost of doing business, it might be less harmful than, say, variable corruption that creates uncertainty for business decisions. Indonesia flourished for a long time under Suharto. Bangladesh has grown quite rapidly for a long period of time (as Shanta Devarajan of the World Bank pointed out) despite scoring very low on measures of governance. And Tamil Nadu has grown rapidly under Jayalalithaa and Karunanidhi, wizards of equal stature in the dark art of malfeasance.