High levels of corruption will have an adverse impact on growth: Raghuram Rajan

NEW DELHI: High levels of corruption will have an adverse impact on growth, chief economic advisor Raghuram Rajan has said decrying notions that some corruption could be good as it helped grease the wheels.

“Is some corruption good? Some people say so, I don't think so...we should try to reduce it as far as possible....Corruption exists...and it is not impossible to grow without some corruption...But high levels of corruption makes growth very difficult so we should try to reduce it as far as possible,” he said. The uproar over graft should be seen as glass half-full rather than half-empty and institutions were responding to the anti-corruption clamour, said Rajan, an academic best-known for predicting, way back in 2005, that excessive risk-taking in the financial sector could spark an economic crisis. The opportunity to become corrupt increased as growth picked up, Rajan, who has featured twice in Foreign Policy magazine’s annual ranking of the 100 most influential thinkers, said.

“...I think what has happened is opportunities for grand corruption has increased as growth has picked up,” he said while replying to a query on impact of corruption on growth at an event organised by Citi-MIT Sloan. “What is important is to make sure that the institutions of the country keep progressing...democratic process raises demand for less corruption...but response is underway,” he said.

“Our institutions are taking notice-...are paying attention... CAG is asking the right questions...the CVC is asking questions... the SC is asking the questions... that is forcing a change in institutions.”

The United Progressive Alliance government’s second term has been marred by allegations of corruption on an epic scale, notably over allocation of telecom licences and coal mines. Rajan pointed out that no country could boast of zero corruption. The historical pattern was for corruption to decline as countries became richer.