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Ethic--based management vs corporate misgovernance--new approach to financial statement analysis.


It appears from experiences that to-day's governance (Man-Management) has been degraded to such an extent that moral bankruptcy has become an integral part of day to day business activities--as evidenced by recent experiences --where righteousness is at a discount (account tampering, manipulation/falsification of accounts and frauds are rampant); truth has become rare, trickery is spreading and integrity is vanishing); and selfishness is growing alarmingly in all spheres of human activity. There is an urgent need to resort to the use of the proposed new and unique approach to financial statement analysis which, according to the Wharton School (University of Pennsylvania, USA) Corporate Finance economist, is an unique, novel and revolutionary approach.

Keywords: Ethic based management: Moral bankruptcy. Novel financial statement analysis.

JEL Classification. E65, G21, G33, M14, M41, Z12


The subjects of insolvency, bank and company failures; corruption; bribery; frauds like accounts manipulation, forging of letters of credit (LCs)/ bankers" receipts (BRs), etc.--the norms of present-day business--though very important, have received scanty attention-cure-analytical treatment by financial economists and practitioners. There is a human tendency to cover-up, and to assume that the future will be better and that everything will come right. The human mind has a great ability to deceive itself and direct itself along predetermined channels. Among the numerous diseases prevailing in the world, the disease of greed has grown beyond bounds. There is no worse disease than this as aptly pointed out by His Holiness Pope Benedict XVI:
   Profit is useful if it serves as a means towards an
   end ... once profit becomes the exclusive goal, if it is
   produced by improper means and without the
   common good as its ultimate end, it risks destroying
   wealth and creating poverty ... greed has brought about
   the worst economic downturn since the Great
   Depression. The economy needs ethics in order to
   function correctly--not any ethics, but an ethics
   which is people centered (1).

Corruption is rampant throughout the world. Empirical research shows that basically there are two causes of corruption namely: Greed and Need. While Needs can be met by reviewing pay packages, etc, no package can take care of the Greed which has no end. As an offshoot of moral bankruptcy and consequent devaluation of man--plaguing practically all countries (developing and developed) --there is an increasing tendency to channel funds (to get rich too soon) to maintain unproductive! non-performing assets (2).

The subject ethics: corporate business and government, has, of late, assumed great significance in theory and practice - as encoded in customer service manual and employees rule book of organizations and as a teaching subject: course in educational institutions and organizations. This relates to almost all countries of the world industrialized, developing countries and lately Russia and, in fact, the focus of the June 2, 2001 Congress of the Russian Association of Industrialists and Entrepreneurs held in Moscow, was on introduction of civilized rules (based on good ethics) for corporate governance in Russia (3).

Writing oil this revolutionary and new approach to financial statement analysis is a difficult assignment as aptly pointed out by renowned applied financial (accounting) statisticians-cum-corporate finance experts, Lusk, et., al. (of the Wharton School : The University of Pennsylvania, U.S.A.) in their seminal paper relating to 'Idiosyncratic Risk':

.... although most often social reaction to moral dilemma is to increase regulation, monitoring and sanctions, we wish to offer the creative alternative offered by Professor M. R. Kumara Swamy's Idea of Ethical Based Financial Statements ... This is a provocative idea (the first time that we have encountered such a revolutionary concept) in the sense that it is an attempt to use a moral or spiritual context for the development of financial statements (4).

Corruption and Moral Bankruptcy

It is true but a sad commentary that to-day's business world has been characterised by moral bankruptcy violating all norms of good business ethics which, in turn, has caused mounting financial problems due to frequent bank failures and/or insolvencies--the result of their engaging in fraudulent deals like currency and drug trafficking, smuggling, corruption, forged letters of credit and bankers receipts and manipulating accounts, etc.

Corruption as uniquely classified after detailed research by renowned financial management expert M. R. Kumara Swamy (5) as--

(i) Democratic Corruption, refer to illegal payment by the people, of the people and for the people:

(ii) Hierarchic/Anarchical Corruption, relating to bribery which must be compulsorily paid to get--political party-interested-cure-social utility -work, devoid of prudent financial management considerations, accomplished/executed with the blessings of the political party (Government) in power through the chain of middlemen (who may not belong to any political party) acting as agents, money laundering, fraud and allied issues are important issues and which have caused government collapse/instability,--have received scanty analytical treatment by financial economists.

In the words of Dr. Hilton Root of the Hoover Institution, Stanford University, U.S.A.:
   Corruption is a political problem that has far reaching
   economic consequences; opportunities are lost,
   innovation is deferred, entrepreneurialism and
   investment are aborted ... In a democracy, corruption
   is difficult to hide; instead, it is publicly debated,
   discussed and examined. The ability of an economy
   to encourage the investment needed to sustain long-term
   economic growth ultimately depends on the
   sustainability of political contracts. This, in turn,
   introduces uncertainty. If each new government or
   minister overturns the contracts of its predecessor,
   an economy will sustain only short-term investments
   and economic growth will be stifled (6).

In his epoch-making and brilliant Presidential Address to the 15th Annual General Meeting of the Pakistan Society of Development Economists, Professor S. K. Qureshi has made the following valuable points:
   Widespread corruption is one of the most obvious
   signs of poor governance. There is a vast and ever-increasing
   body of literature that documents the
   effects of bad governance, especially corruption in
   the economy. Numerous studies have found that
   corruption reduces public revenue and increases public
   spending. Thus, it contributes to larger fiscal deficits,
   making it more difficult for governments to run a
   sound fiscal policy. Studies also find that corruption
   is likely to increase income inequality because it
   allows well-positioned individuals to take advantage
   of the government activities at the cost of the rest of
   the population. Corruption also distorts markets
   and the allocation of resources ... corruption may
   slow down or even block the movement towards
   democracy and a market economy (7).

Corruption Misgovernance: Case Study

In this context, the thought-provoking research findings of financial management analyst-cum-advisor, Kumara Swamy are highly pertinent to quote:
   As an offshoot of moral bankruptcy and consequent
   devaluation of man--plaguing practically all
   countries (developing and developed)--there is an
   increasing tendency to channel funds (to get rich too
   soon) to maintain unproductive/non-performing
   assets; leading to. the emergence, save in exceptional
   circumstances, of a bogey of Scandalous manipulation
   of liquid assets--Cash (Mi) -through Broker-Authorised
   Dealers (banks through forged letters of
   credit (LCs)/banker receipts (BRs) creating artificial
   (illusionary) Money supply (Ms) via speculation
   which is colloquially known as SCAM.

SCAM [] through MONEY LAUNDERING [] overtime leads to [] FINANCIAL DISTRESS [] and ultimately to [] FINANCIAL BANKRUPTCY (8) (see Exhibit)

There is a human tendency to cover up and to assume that the future will be better and everything will come right. The human mind has a great ability to deceive itself and direct itself along predetermined channels. It is true, though unfortunate, that maintenance and financing of non-productive/ non-performing assets, deliberately hidden in the financial statements has become an established! accepted norm, on one hand. On the other hand, this serious financial mismanagement problem leads, overtime, to deliberate loan defaults and associated liquidity problems-cum-wiping out net worth leading to bankruptcy as evidenced by the following case study.

Black Money (Accepted Illegal) Business Transaction

It is a sad but a true commentary that black money transactions have become established business norms as facts of life everywhere in the world, more pronounced and glaring in developing countries. For instance in property dealings, i.e., house/apartment purchase from builders/contractors, it is mandatory that the protestor is obligated to pay 60 per cent of the cost of apartment in black (cash: [M.sub.1]) : accepted illegality and the remaining 40 per cent payment in white/cheque which represents the real 'sale deed' value of the flat/apartment (it may be noted that the purchaser) has no choice but to engage in this heinous transaction if he/she wants a dwelling place on ownership in a metropolitan city like Mumbai, India and no legislation can thwart this type of business practice as any transformation on the part of black money receiver and giver must come from within based on dharmic (righteous) principles of honest conduct of business. According to research studies conducted over the years by the National Institute of Public Finance and Policy, black money generated in India accounted for 15 per cent to 18 per cent of G.D.P. (1976 study); 18 per cent to 21 per cent of G.D.P. (1981 study) and roughly 10 per cent according to the 2012 study (9).

Case Study : Bangladesh (10)

The size of black money in Bangladesh was estimated be around Tk. 9,415 crores* and could even have exceeded Tk. 23,000 crores in 198586. These quatitative magnitudes, however, have only limited value in an intertemporal setting, although they shed important light on the state of the economy at a particular point in time. In Bangladesh, the methods of (a) avoidance and evasion of taxes on legal incomes and (b) generation of incomes from illegal economic activities appear to be widely in practice, The importance of the various components in the overall black Sector of Bangladesh can be seen from Table 1.

Research Findings

* Tax Avoidance/Evasion : Tax evasion is widespread and has reached an alarming proportion from the government revenue point of view. This also provides a direct source of compound black income: tax evasion was probably to the tune of Tk. 12,946 crores in 1985-86. Including non-tax revenue total black income generated from mainly legal activities in 1985-86 are estimated at around Tk. 13,157 crores.

i) Income Tax, Corporate Tax and Agricultural Income Tax: At present direct income tax by public officials including those in autonomous and semi-autonomous bodies are mere book transfers and are not depicted in the evasion figures. However, those engaged in the private sector in business, industry, construction, and services are reckoned to be chronic tax evaders. People engaged in a few subsectors, such as construction and building houses, film industry, private legal as well as medical practices, consulting firms and the indenting houses are widely believed to divulge only the tip of their income for tax purposes. Such is also the case with lobbyists speculators. Probably, the situation is somewhat better for corporate firms but manipulation with figures and defective accounting practices will often blur the picture. Insofar as agricultural income tax is concerned, the performance, as is well known, has uptil now remained quite disappointing.

ii) Customs Duties and Sales Tax: The picture relating to tax realisation from customs duties and sales tax is expected to be significantly better primarily because of better record keeping in this regard. Moreover, the goods have to cross international borders in the case of foreign trade and it is difficult to suppress facts relating to various items and their tariff rates. However, leakages also occur here mainly due to under-invoicing and over-invoicing practices and undeclared commissions retained overseas. This yield an estimated amount of Tk. 515 crores as tax evasion under these heads in 1985-86.

iii) Others: It must be realised that there are possibly wide variations in the performance levels of different items. For example, the unusually high systems loss with regard to electric power, particularly on non-technical accounts, can often be ascribed to outright thefts. There are also numerous illegal telephone lines being used primarily by indenters, transport owners, retailers, travel agencies, manpower exporters, import and export traders, contractors, etc. which has been depriving the country of a huge amount of revenue. Similarly, property tax, registration, estate duty, gift tax, etc. yield highly unsatisfactory revenue as compared to their potentials. On a combined basis all these tax and nontax evasions are calculated at around Tk. 465 crores for 1985-86.

* Black Income from Illegal sources : The important items under this head include, for example, bribery, smuggling, manufacturing of spurious and adulterated products, black marketing and hoarding, etc.

i) Bribery: Athough such cases often go undetected, bribery, illegal commissions and other forms of kickbacks probably generate and protect the bulk of black income in the country. It is recognised that in any rent-seeking society attempts to buy political and administrative patronages will be there.

The cumbersome administrative practices and bureaucratic red-tapsim also encourage the applications of grease money, must be stressed here that filling itself is quite a complicated job. For example, just to get an Import Registration Certificate, an individual has to submit ten different documents which have to be obtained from different offices, If he is issued with the Registration Certificate and a Pass Book, he has to submit another four documents to the nominated bank. Moreover, another seven types of documents are to be submitted by the private sector importers. No wonder then that to save the time and the botherations and also in order to receive a favourable decision many people will be willing to bribe. However, there is no evidence to concretise the size of black income--both in terms of local and foreign currency which may be flowing through this channel. There is a hunch though that in the case of business and industry bribery currently amounts to about 10 per cent of total profits. On this basis a crude estimate for bribe money in 1985-86 amounts to Tk. 212 crores.

ii) Smuggling: It has got media lime-light in recent times. The major items which are smuggled in by the sea ports- mainly from Singapore, Thailand and Hongkong--include cigarettes, electronics, carbon, ball pen, shoes and sandals, cosmetics, baby wear, vests, sugar, alcohol, narcotes, raw-materials for medicine, sulphur, mercury, motor parts including car air-conditioners, cordless telephone sets, spares for garments industry, nylon yarn, dyestuffs, etc. Between Myanmar (Burma) and Bangladesh the items which cross the borders illegally cover betelnuts, clothes, locks, lungi (short length wear), heroin and other drugs: from India, different manufactured items are smuggled in including sarees, imitation jewellery, cosmetics, sugar, cycle parts etc. In addition, spices, cattleheads and heroin also come to the local markets. From Bangladesh the items which are smuggled out include second-hand clothes imported from abroad: raw-materials for medicine, raw jute, fish, etc. (In India, the size of black money was officially estimated at around Rs. 80,000 crores, of which Rs. 40,000 crores was by way of gold smuggling.

The entry points to Dhaka used by the smugglers are usually Aricha, Fatullah, Narayanganj and Meghna ghats. While both the sea ports of Chittagong and Mongla are used, the former is known as the smugglers paradise. The various adjoining areas of the ports, such as Anowara, Patya, Kutubdia, Moheshkhali, Ram, Satkania, Potenga and Kumira have achieved particular notoriety in this respect; where organized gangs, often with the support of whole villagers, operate with the help of arms, cordless telephone, wireless and various other sophisticated gadgets.

iii) Others: These include such illegal activities as setting up unregistered firms to avoid fees and duties, ghost factories to obtain import licences for scarce materials which command a premium in the market and also borrowing funds from commercial banks and other development institutions with deliberate intentions to default. There are also factories which apparently are engaged in legal activities but in fact are depots for adulteration and production of spurious goods. A sizeable amount of black income is also generated by moonshining, hoarding and black marketing of scarce and contraband items. At times there may also occur disguised illegal corporate activities such as inside trading. As a customs official succintly put it, while the smugglers are running for their lives, for us it is at best a sport--a game-hunting which will be given up if the risks appear unnecessarily high. The risk will obviously be great if the customs have no wherewithals--no wireless, no walkie-talkie while at the same time have to chase smugglers by riding a boat with a speed of only six miles per hour (12).

In tackling these crucial issues of moral bankruptcy like corruptions, smuggling, black money, etc., the following points merit serious attention: With several selfish-oriented-cum-greed-based alternative funding proposals springing up and sprouting in the present scenario of global recession, tendencies-cum-financial crisis, morality-based business management act as a leverage to make the marriage between ethics and business management a happy and a lasting one recasting and reformulating the financial statement analysis based on ethical values.

Balance Sheet Based on Ethical Values: A New Approach to Financial Statement Analysis (Formulated by M.R. Kumara Swamy) (13)

Noted financial "accountants and analysts of the world-renowned Wharton School: The University of Pennsylvania, U.S.A., Professors Edward Lusk, et. al., writing on 'idiosyncratic risk' have opined that the alternative to the present global financial crisis offered by Professor M. R. Kumara Swamy's marvellous, novel and revolutionary concept of ethical-based financial statements is an attempt to use a moral or spiritual content for the development of financial statements (4).

Unless selfish management and fraudulent motives are eradicated in any country or organization, its success is short-lived and myopic. It is important that every manager in the organization becomes a selfless spiritual leader who is able to inculcate the dharmic (ethical) code of value so that money laundering, account manipulation and other heinous crimes become a thing of the past. The mere form of a human being is not significant -what is essential is the observation of human values. The mathematical significance of number 16 1/2, as enunciated by Divine Sai Baba of Shirdi (13).

Senses: 10, Body: 1, Speech: 1, Mind: 1, Intellect (Wisdom): 1; Egoism: l; Sense of thinking: 1, One's own nature: 1/2 (see Table 2).

If we keep senses under control, good sense would prevail and our discipline would be 100 per cent under control. If we follow senses, there would be ruins and breeds indiscipline (liabilities> assets). If senses are made servants, then discipline reins leading to a situation when assets exceed liabilities.

According to Divine Sathya Sai Baba:

Any number of zeros placed alongside the figure of one (primary number one which represents the Divine) will carry value--value increases manifold with its additional zeros. But without the number one, if one puts zeros, they carry no value of all. So Divine is the Hero and the rest are all zeros (14).


Righteous, conduct, peace, love constitute a single whole and not separate values like our hand which has five fingers and each of them has a specific duty assigned to it. All the five fingers work in unity and harmony while performing a task. If all these--the pillars of sound financial management--are adhered to equally, prosperity dawns; frauds, manipulations, time and energy wastage would be a thing of the past; and, each individual--by using available endowed resources in a righteous way making senses rule over mind and by rewriting the balance sheet based on moral values--would become a partnr in self-less economic progress for the happiness of the society. It is folly to expect good results from bad deeds. In every human being good and bad are co-existing. One should strive only to do good deeds which alone will lead one to liberation and prosperity. And, as rightly pointed out by writer James Cardinal Gibbons, reform must come from within, not from without. You cannot legislate for virtue (15).

Today money rules every aspect of human and economic life. Man has been enslaved by money. He lives a superficial, sorrowful and artificial life. This is indeed a great pity. In pursuit of money, man descends to the level of the beast by engaging in manipulative dealings like money laundering, falsehood, accounts manipulation and other crimes.


(1.) Charity in Truth (The Vatican, 2009)

(2.) i) Swamy, M. R. K., Focus on Benjamin Franklin Managerial Ethic: Sathya Sai Baba Code of Virtuebased Management--A Guide to Sound Financial Management, Journal of Financial Management and Analysis (January-June 2002)

ii) Morality as a Tangible Asset: Ethical Management Considerations, Journal of Financial Management and Analysis (January-June 1994)

(3.) Mezentsev S., The Ethics of the Oligarchs, Business in Russia (Moscow, 2001).

(4.) Lusk, E. J., Halperin, M. & Bern, M., Towards Reformulation of the Capital Asset Pricing Model (CAPM) Focusing on Idiosyncratic Risk and Roll's Meta Analysis, Journal of Financial Management and Analysis (1 : 2008)

(5.) Swamy, M.R.K., Financial Management Analysis of Money Laundering, Corruption and Unethical Business Practices: Case Studies... Journal of Financial Management and Analysis (January-June 2011)

(6.) Root, Hilton, The Economic Consequences of Corruption, The Times of India (Mumbai : September 20, 1997)

(7.) Qureshi, S. K., A Governance Perspective on Development Issues, The Pakistan Development Review: Papers and Proceedings of the Pakistan Society of Development Economists (Winter 1999)

(8.) Swamy, M. R. K., Non-Performing Asset-Led Growth via Money Laundering Causes Bankruptcy, Journal of Financial Management and Analysis (July-December 1998)

(9.) National Institute of Public Finance and policy, based on 1976, 1981 and 2012 studies (see The Times of India, Mumbai), (11.01.13 & earlier issues)

(10.) Government of Bangladesh : Ministry of Finance, Bangladesh Economic Survey : 1985--86

(11.) The Times of India (June 8, 1990)

(12.) Weekly Bichitra (May 20, 1987)

(13.) i) Gunaji, N. V., Shri Sai Satcharita--the Wonderful Life and Teachings of Shri Sai Baba : English translation from the original Marathi book by Hemadpant: 13th edition and Shri Sai Leela : Bimonthly Magazine (March-April 2006). Both published by Shri Sai Baba Sansthan Mumbai (Bombay), 1987

ii) Swamy, M. R. K., Value-Based Management versus Corporate Misgovernance Due to Moral Bankruptcy--A New Approach to Financial Statement Analysis, in Gramlich, D. & H. Hinz (eds.), Kapitalmarkt, Unternehmen Und Information: Festschrift fur Reinhart Schmidt Zum 65 Geburstag (Deutscher Universitats-Verlag Wiesbaden, 2005)

(14.) Sanatana Sarathi: Monthly Publication devoted to the moral and spiritual uplift of humanity, Prasanthinilayam (various issues)

(15.) Gibbons quote cited in De George R.T., Business Ethics (New York, 1986).

* one crore = 10 million; one lakh = 100000



The genesis of the collapse of India's private sector bank, Global Trust Bank and its take-over by a nationalised bank, Oriental Bank of Commerce is significant

Chronology of Significant Events

* Incorporated in 1993, the private sector Global Trust Bank (GTB) was promoted (in the wake of the country's economic liberalisation policies) by former CEO (Chairman RG) of one of the country's leading private banks, Vysya Bank--RG and his associates whose share contribution amounted to 40 per cent managed to rope in the International Finance Corporation and the Asian Development bank as the GTBs other major shareholders.

* Overtime, GTB, by violating all dharmic principles of running sound and honest banking business, advanced large amounts of loans to bull--(speculator-driven and stock market manipulator)--KP and his associated companies of questionable norms (practically every investment company of the KP group had an account at GTB and enjoyed generous funding by GTB) whose ways of doing business were: come what may, get rich too soon by loan diversion and misuse of sanctioned loans, manipulation, swindling and related unethical business practices. As a result of these unethical bank practices and with stock market seam in 2000, GTB landed itself in a position where GTB had a negative net worth of about Rs. 1500 crores (one crore = 10 million) with negative capital adequacy ratio.

* As a result, GTB-sanctioned loans turned into bad loans and wiped out its (GTB) equity and reserves by crossing the capital exposure limit. These unpalatable fraudulent events forced CEO of GTB to quit in 2001.

* Also, GTB along with UTI Bank had signed a merger proposal which was later withdrawn/cancelled after investigations by the Securities and Exchange Board of India revealed that GTB CEO and KP had colluded to inflate share prices for the merger ratio to be favourable to GTB

(i) In December 2003, the Securities and Exchange Board of India (SERI) debarred GTB promoter and associates from dealing in GTB in any manner for alleged manipulations in the Bank's shares until the SEBI completed the investigations;

(ii) The Annual Inspection of GTB by Reserve Bank of India in 1999-2000 had clearly documented irregular lending to KY and his associated companies and had pointed to large write-off of bad 1, ans, etc.--It had pointed to the fact that the KY-associated companies mobilised large sums of money by way of share application and convertible debentures and used that money to buy GTB shares;

(iii) Further, the Audit and Consulting Firms, Ernst & Young in 2001, in their review reports of some of the major accounts of GTB, had clearly pointed to the fact that loan accounts of KP-associated companies were diverted to a number of KP entities.

* Thanks to the 2000 stock seam, GTB as on July 24, 2004 was saddled with accumulated losses of Rs. 273 crores and non-performing assets of Rs. 915 crores--GTB needed Rs. 700 to 800 crores mainly to write-off bad loans in the Bank books.

Result: GTB-non performing asset-led bad loans amounted to Rs. 915 crores, wiped out its net worth (equity and reserves) and GTB went bust. In sum:

As analysed by financial management expert, M. R. Kumara Swamy:

GTB [right arrow] Formed [right arrow] With Bull (KP) [right arrow] Advanced Fraudulent Loans (Private Bank) (stock market manipulator) (running into crores of rupees) [right arrow] (COALITION) (COLLUSION)

Diverted such loans to KP-Associated Companies [right arrow] Ultimately to KP-Owned Companies [right arrow] with Stock Market Seam The KP-Associated Companies [right arrow] (COLLIDED) faced the wrath of steep fall in stock prices and rendered them unable to payback GTB loans Expressing great concern on the serious problems of bad debts plaguing the Indian banking system, India's former Finance Minister, Mr. Jaswant Singh stated :

Non-performing assets of Rs. 83000 crores (one crore=10 million) is loot and not debt (Finance Minister's Statement in the Rajya Sabha : Parliament : New Delhi : July 23, 2002)


(i) Analysis based on the The Times of India: August 2, 2004; The Indian Express: July 25, 2004; The Sunday Times of India: July 25, 2004

(ii) Foreword by Swamy, M. R. K., Journal of Financial Management and Analysis (July-December 2004).

Professor M. R. KUMARA SWAMY, M.A., Ph.D.


Om Sai Ram Centre for Financial Management Research

Mumbai, India

e-mail :

The author owns full responsibility for the contents of the paper.
(S. Reza's Empirical Research Findings)

IN BANGLADESH: 1985-86 (@)
(in crores Taka)

                               Estimates at   Evasion
Heads                          Receipts       of Tax

Income Tax, Corporation Tax
and Agricultural Income Tax    459.00         4,131.00
Customs Duties                 1,202.00       515.00
Excise Duties                  873.00         7,857.00
Sales Tax                      440.00         189.00
Estate Duty, Gift Tax and
Wealth Tax                     0.20           0.20
Land Revenue                   51.00          51.00
Stamps (non judicial)          125.00         125.00
Registration                   43.00          43.00
Taxes on Motor Vehicles and
                               24.00          24.00
Other Taxes and Duties         10.80          10.80

A. Total Receipts from Taxes   3,228.00       1,29,464.00

B. Non-Tax Receipts            845.00         211.00

A + B = Revenue Receipts       4,073.00       113,157.00

(in crores Taka)

Items                          Value

Bribery *                      212

Smuggling **                   2,740

Others ***                     500

Total                          3,452


(@) Estimates of Receipts from Government of Bangladesh, Ministry
of Finance, Bangladesh Economic Survey: 1985-86. Evasion of tax
figures are essentially guess works on the assumption that income
tax, corporate tax and agricultural income tax realised wiI I be at
best 10 per cent of the potential. The same figure for customs and
sales tax are put at 70 per cent of the potential. Excise duties
realised are assumed to be 10 per cent of the potential. The rest
of the revenue figures are calculated on a flat rate of 50 per cent
realisation basis. For non-tax, we assume a realisation rate of 80
per cent of potential. While these assumptions are based on
discussion with knowledgeable persons, they cannot, by definition,
be expected to be accurate. However, they hopefully provide some
rough indicative pictures. * Total GDP at current prices is Tk.
43,162.2 Deducting agriculture and public administration yields a
figure of Tk. 21220.2 crores. We assume that 50 per cent of this
value is generated in the private sector where bribery should be
more common. Assuming 20 per cent of private sector production as
profit and 10 per cent of profit a, bribery yields a figure of Tk.
212 crores, This is probably an underestimate because in
agriculture and government sector dealings also corruptions do
prevail. * Assuming that seized smuggled goods, on average, will be
about one per cent only of the actual value of illegal trading.
** This is an imaginary figure. Even if, however, it is
significantly different than what obtains in reality, it won't
affect the logic and findings.


1. Morgan, T., The Shadow Economics: Steps Towards Estimating
Their Size in Asian Countries, Asian Development Review:
Vol. 3 (1985)

2. Bhagwati, J. N. & Hansen B., M.A., Theoretical Analysis
of Smuggling, Quarterly Journal of Economics: Vol. 87 (1973)

3. Bhagwati, J. N. & Srinivasan, TN., Smuggling and Trade Policy,
Journal of Public Economics: Vol. 2 (1973)

4. Reddaway, W. & Rahman, M., The Scale of Smuggling Out
of Bangladesh (Bangladesh Institute of Development
Studies: Report No. 21)

5. Reza, S., The Black Economy in Bangladesh: Some Preliminary
Observations', Savings and Development Vol. X111 (1989)

6. Basic Statistics from Bangladesh, Economic Trends (July 1986)

7. Estimates of Receipts from Government of Bangladesh, Ministry
of Finance, Bangladesh Economic Survey: 1985-86.

(Formulated by M.R. Kumara Swamy) (13)

Available Nature-endowed
Resource as Postulated by His
Holiness Sai Baba (of Shirdi)
Resources       Abbreviation   Numerical   Alphabetical

Body *               B            12

Speech               S             1            19

Mind **              M             1            13

Senses               S            10            19

Intellect/           W             1            23
Wisdom ***

Egoism               E             1            5

One's own            N            1/2           14

One's own

(Sense of            0             1          15-10
Deduct Senses

Total                           16 1/2         100

Resources       Abbreviation       Assets         Liabilities

Body *               B          Non-violence        Violence

Speech               S             Truth           Falsehood

Mind **              M           Dedication      Irresponsible
                                                  Fraud, etc.)

Senses               S            Devotion          Laziness

Intellect/           W         Discrimination   Indiscrimination
Wisdom ***

Egoism               E              Love             Hatred

One's own            N           Discipline       Indiscipline

One's own

(Sense of            0              Duty             Shirk
thinking)                                        Responsibility
Deduct Senses

                               Righteousness    Unrighteousness

Total                             (Dharma)         (Adharma)

Notes : * The body is just an instrument. We eat to sustain the body.
We need food for the protection of the body and clothes for protection
from cold and heat. The body is a source of all diseases arising out
of desire--desire gives rise to attachment and hatred.
** As long as the mind is pure no evil can enter the heart, and the
mind should be the master and not the slave of the senses.
*** Though man is endowed with intelligence (intellect),
he is not able to master the senses.
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Author:Swamy, M.R. Kumara
Publication:Journal of Financial Management & Analysis
Article Type:Abstract
Geographic Code:9INDI
Date:Jul 1, 2012
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