1.after Independence the Nehru govt wanted to Nationalize all the private industries. india was 4th industrial nation in the world in 1947. due to stiff opposition nehru govt did not nationalize any private industry, instead nationalized the private ports, railways and airlines.

2. nehru govt wanted the means of production and distribution of goods and services to be in the control of the central govt, hence the public sector units, the public sector industries were set up through the govt budget.

3. to stop and hinder private industries from manufacturing and distribution of goods and services, many restrictions were imposed on private industries through the new industrial policy.

4. the new industrial policy imposed License and permits regime. a quota was fixed for production of goods and services for the private sector and the private industries were not permitted to produce beyond the specified limits. this policy of Licenses and Permits Regime was known as LICENSE RAJ.

5. along side small enterprises were also hindered from undertaking any wide range of business activity and internal trade activity in india. to curtail their business activity the INCOME TAX Dept was unleashed on them as a watch Dog.

6. the license Inspectors and Permit Inspector and Income Tax Inspector would visit the Industrial and Business units to verify and clarify and supervise the means of production and distribution of services and find violations invariably and impose heavy fines on Industrialists and Businessmen. to avoid huge fines and closure of manufacturing units, the Industrialists and Business men started to BRIBE the inspectors. so this way the regime of Bribery and Corruption began.

7. the Income tax Inspectors, the Foreign Trade Inspectors, the License Inspectors, the Permits and Quota Inspectors, would religiously raid the Industrial units, the Business units and the offices and inspect the Account books, visit the production centers and monitor the Industrial out put and find discrepancies in the modalities and impose heavy fines, arrest the owners and seize material, so to avoid these gruesome atrocities the Entrepreneurs and Industrialists would pay hefty Bribes and avoid court cases, jail terms and closure of industrial units.

8. the Bribe income of the Income tax dept officials and the Bribe Income of the License inspectors and permits inspectors started to spread to other departments of govt which would handle many welfare activities of the people and the govt servants started to demand bribes to issue i) Clearance Certificates, No Objection Certificates, Permits, Regulation certificates, Quota increase Certificates, Machinery Life Certificates, Labour Certificates, Employees welfare certificates.
ii) even municipal authorities started to demand bribes to issue, Birth Certificates, Death Certificates, Census Certificates for Passports, Caste certificates, service and experience certificates, salary certificates and god knows what all other certificates.

9. the direct dependency of every official work on the basis of production of every form of Certificates and cumbersome file work and movement of files and circulation of files in every govt dept resulted in payments of bribes to quicken the work and ease the stressed out citizen. CORRUPTION got manifested because people had to obtain every FORM/CERTIFICATE from the govt depts. the institutionalization of FILES work created bottle necks and delay in progress and growth of the economy. unable to bare this sort of restrictions a huge section of the talented pool of Technical Human resource migrated abroad which is know as the famed BRAIN DRAIN.