from Qruis (formerly The Indian Economist)

— this post authored by Ishita Misra

According to a research done by a State Bank of India (SBI) team, corruption and economic growth are intrinsically related. Data from around the world shows that a lower level of corruption corresponds to a higher economic growth rate in a country. The report claims that demonetization has had a positive impact on curbing corruption. Furthermore, lower levels of corruption have led to an increase in foreign fund inflows. However, even though corruption levels have decreased, it is still a rampant problem in India that needs to be weeded out to ensure economic growth in the country.

Source: Wikimedia Commons

Corruption ranking and economic growth

Transparency International, a global coalition against corruption, ranks countries each year on how corrupt their public sectors are. The SBI research paper draws parallels between these rankings and their respective economic growths.

The data also shows that countries which experienced a growth in corruption levels saw a drop in GDP growth rates.

While comparing the rankings of different countries between 2011 and 2016, it was seen that nations such as India, U.K., Portugal, and Italy succeeded in improving their overall ranks in the Corruption Perceptions Index. The paper points to the fact that these countries managed to achieve GDP growth despite slowdown in the world economy.

The data also shows that countries which experienced a growth in corruption levels saw a drop in GDP growth rates. Accordingly, low rankings of countries like South Korea, Turkey, China, Brazil, and Singapore were accompanied by lower economic growth rates. Out of these countries, GDP growth rate in Turkey fell by 8.2 percent as corruption increased by 14 points.

Impact of demonetization on corruption

One of the positive impacts of demonetization in India was the considerable increase in the number of income-tax returns filed. The e-filing of income-tax returns till August 2017 has already crossed the three-crore mark, displaying a year-on-year growth of 24 percent. A total of 5.28 crore returns were e-filed in the fiscal year 2017. It is about 22 percent more than the level in the fiscal year 2016. Even the number of companies registered with the authorities has risen. 46,536 companies registered for the first time during April-August 2017, with an authorized capital of ?9,350 crores.

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