Tuesday, November 23, 2010

2G Spectrum Scam: how much is Rs 1.76 lakh crore?

What could we do with Rs 1.76 lakh crore? A lot!
 Fund NREGA for 4 years, clean up a giant oil spill, stack of Mentos to the moon and beyond...

The media has been running a lot of stories about corruption lately.  Following all the CWG drama, there was the Mumbai housing scam, the paanwala in a Gujarat village who uncovered an alleged one crore NREGA scam, and fresh scandals in Karnataka.  These are all important and it's good to shine a light on rot wherever it may be.  But we have to make sure we don't lose track of the difference between corruption and what can better be described as massive loot and pillage of the public coffers.

This brings to mind the report recently released by an international watchdog saying that Rs 20 lakh crore (Rs 20,556,848,000,000 or $462 billion) in 'black money' was illegally transferred out of the country between 1948 and 2008.

Rs 20 lakh crore is a huge amount of money.  But it was taken out of the country over a sixty year period. According to the Comptroller and Auditor General (CAG), it apparently took just a year or two for the government to give away 1.76 lakh crore (Rs 17,60,00,00,00,000 or $40 billion) when it allocated rights to the 2G spectrum (that's second generation wireless bandwidth) to new bidders at giveaway prices. 

Just so we are clear: the airwaves, like the air, rivers, and most natural resources, are owned by the people of India--and it's the Government of India's job to make sure these resources are managed in the interest of the people.  So selling the airwaves at ridiculously low prices is a violation of the public trust.  It's like selling a public park to a developer for a pittance: most of us lose; only the developer gets rich.

Most of us read these stories and think, "Wow, 17,60,00,00,00,000 looks like a really big number!" But though we all understand that a pile of money just slipped out of our collective hands, most of us don't really have a sense of how big that pile is. That's because the human brain just can't deal with that many zeros. We need something a little more concrete.

So today, I'm not going to go into the political machinations that led up to this embarrassment or the billionaires who benefited.  I just want to shed a little light on what all those zeroes mean in real life?  What could Rs 1.76 lakh crore--or Rs 20 lakh core--buy?

It can buy quite a lot as it turns out. So in case the government wants to fix this problem and recover that lost money, here is a list of things they could spend it on. Yes, there would be tough choices, but I have no doubt they will be up to the task!

1. Three percent of nearly everything
Why not start big?  Gross Domestic Product (GDP) is a number which attempts to measure the value of all the goods and services bought and sold in a given year. That's every cup of tea, every grain of rice, every new car or DTC bus.  In 2009, India's GDP was something like $1.2 trillion. So the money lost in the 2G fiasco alone amounts to more than 3% of our yearly GDP. Put simply, that means that in one fell swoop, we gave away close to 3% of our yearly economy to a few telecom giants.  Think about that for a moment. By the way, all that illegal foreign black money is equal to just under 40% of our GDP!

2. Rs 1500 for everyone
Instead of giving all that money to a few billionaires, why not spread it around? Admittedly this would be logistically difficult. But don't dismiss the idea so quickly. See when you give money to billionaires, they send much of it abroad, in the form of investments, or by simply buying imported luxuries.  Poor people don't do that--they spend nearly all their money close to home, where it has maximum economic impact.  And we have a lot of poor people.  Rs 1500 would amount to a more than 20 percent raise in annual income for the 800 million Indians living on Rs 20 or less every day!  (If we recovered the foreign black money, we could give every man, woman, and child something like Rs 17,500.)

3. Rural jobs at a decent wage
When you hear people say that we can't afford to pay state-mandated minimum wages to workers under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), don't believe it.  The Union budget for 2010-11 allocates Rs 40,100 crore for the MGNREGA. With the money recovered from the 2G giveaway, we could fund rural employment for more than four years.(If we got back the overseas black money, we could fund rural jobs for 50 years!) If we kick in the money already budgeted for the program, we could vastly expand the wages and the reach of the program. And remember, all that extra money in the hands of rural farm labourers would fuel a boom in our rural economy, whereas extra money in the hands of billionaires too often ends up fleeing the country!

4. Double the Union budget for infrastructure spending 
The Union budget for 2010-11 calls for a total of 1,73,552 crore (US$ 37.57 billion) in infrastructure spending. The money lost in the 2G giveaway  (1.76 lakh core or $40 billion) is just a bit more than that. So if we added the 2G money to what's already budgeted, we could double the infrastructure budget for a year--or we could spread the increase over a decade. Being a green, I'd advocate putting the lion's share of that extra infrastructure money into buying clean water for all.  Then we could invest in trains, buses and other forms of sustainable public transportation. We might even think about converting T3 of the Delhi airport into a high speed rail terminus.

5. Cut the deficit in half
The central government borrows a lot of money every year, and this year is no exception. The net market borrowing of the Union government in 2010-11 is estimated at Rs.3,45,010 crore. If the GOI wants to make the deficit haters happy, they could use the money lost in the 2G giveaway to cut that deficit in half. (I wouldn't recommend it, but that's another story.)

6. Clean up the Gulf Coast
According to latest estimates, BP (or the US government) will have to pay $40 billion to clean up the Gulf coast and compensate oil spill victims. The lost 2G money is just about the perfect amount of money to pay for that!  Of course this move might be controversial with the survivors of the Bhopal disaster who would argue we should clean up their city first. They have a point.  But think of the 'big picture'; bailing out BP and the US federal government, might be enough to get us a seat on the UN security council! Or at least another visit from Obama.

7. Mentos to the Moon!
My son was helping me with this project, as you can see from the art work.  He asked, "So, how much candy could you buy with 1.76 lakh crore?" We worked it out with a packet of Mentos we had laying around, and here's what we found.  A packet of Mentos is about 13cm long, which means you need 7.7 of them to make a meter and 7,700 to make one kilometer.  According to my son, a pack costs about Rs 20.  So one km of Mentos will cost you Rs 1,54,000.  Rs 1.76 lakh crore would thus buy you 11.5 million km of Mentos.  Since the distance from the moon to the earth is only 3,84,403 km, you could buy enough Mentos to stack to the moon just about 29 times!  That doesn't include the cost of the Fevicol you would need to hold your pillar together, or the space suits and stuff.  But if you bought that much candy, you could probably get a pretty good discount.  And if we could get all that foreign 'black money' back, we'd be able to buy up enough Mentos to cross the distance to both Venus and Mars, if we timed it right!

For more on 2G, see our 2G/CWG page.

1 comment:

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