I had heard about Basu's position, but not read his paper (though I guess I should have hunted it down and done so!).
A relative sends it to me for my comments. The paper is at: http://finmin.nic.in/WorkingPaper/Act_Giving_Bribe_Legal.pdf
Here are the observations I sent him.
1. The spirit of his comments is closer to my proposals for abolishing black money in India than anything else I have seen by Indians or others
2. The mechanism he proposes has some merit
3. It does not address what I might call "long-term collusive bribery in the context of a network of relationships" but it could address what I call "individual transactional bribery"
4. However, it is extremely difficult to *prove* individual cases of bribery
5. In reality, the distinction between what he calls "harassment bribes" and other kinds of bribes is not easy to make; and other kinds of bribes are probably much more economically and socially significant
6. It is possible for a group of individuals to misuse the mechanism proposed in order to threaten even honest officials in a legal system such as ours where testimony can be included under proof
7. Most Indians are not literate; even literate Indians are not necessarily intellectually sophisticated; and even those, who are intellectually sophisticated, are often culturally disinclined to read and to get into abstruse detail. So there will be a widespread diffuse or general impression that "even bribery is legal now", which will further erode the will of Indians to resist *all* sorts of bribery. And when the first convictions start appearing under such a new law, there will be even further confusion in the country about what is legal....
My conclusion is that a moral renewal of our country is the only thing that will reduce corruption, and not this kind of economic calculation of where self-interest might or might not lead - which is why I focus so hard on the question of moral renewal.