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Corruption in India: bad or worse? December 1, 2010

Posted by southasiamasala in : Gordon, Sandy, India , trackback

Sandy Gordon

Corruption in India is, of course, nothing new.  But the recent accusations appear to put the country into the category of one of the worst African ‘cleptocracies’.  They have also paralysed the Indian parliament and gravely damaged the reputation of the hitherto successful Congress-led government of Manmohan Singh.

The following account of some recent cases gives a sense of the scale and cost of corruption in India.

Social audit of NREGA in Rajasthan, The Hindu, 17 August 2009

Former Mines Minister and Chief Minister of Jharkhand, Madhu Koda, is in jail on allegations of having syphoned off about US$1 billion, mainly from corrupt mining deals, during his short tenure.  By laundering funds through cronies, Koda allegedly managed to acquire hotels around the world and even a mine in Africa.  A recent Global Financial Integrity report alleges rich Indians launder a staggering US$19 billion per annum. Although India passed legislation to strengthen its anti-money laundering regime, the US Bureau of International Narcotics and Law Enforcement Affairs found in its 2009 report (quoted in the Financial Times) that illicit hawala transfers for incoming remittances amounted to US$13-17 billion alone, leaving aside the fact that the majority of hawala dealings probably relate to criminality and tax evasion transfers of outgoings.  According to an audit, the so-called 2G telecommunication licence sales of 2008 allegedly cost the Indian state US$39 billion in lost licence fees due to under-selling.  To the international shame of India, the administration of the New Delhi Commonwealth Games was replete with examples of corruption and incompetence. All payments for services are now frozen pending corruption investigations and legitimate providers, including some leading Australian companies, are incurring millions of dollars in losses, leaving India’s reputation in tatters and putting at risk the staging of future events.  Alleged tax evader Hasan Ali Khan (supposedly an associate of mobster Dawood Ibrahim) allegedly illicitly placed US$8 billion in UBS AB Zurich bank.  The government is attempting to suppress documents associated with German accusations concerning other Indians with Lichstenstein accounts in LGT Bank, the bank infiltrated by a German agent.   Audits of the giant rural work program, the Mahatma Gandhi National Rural Employment Guarantee Act scheme (MGNREGA) indicate that in some states only a small percentage of allocated funds is provided to intended recipients.  Even the military, hitherto relatively free of corruption, has recently been involved in several land scams, including the notorious Adarsh scam in Mumbai.  Smaller in scale, but if anything more excruciating for cricket-mad Indians, is the Indian Premier League scam, which claimed the scalps of several Congress luminaries.  A recent survey indicates widespread disillusionment with the Singh government over corruption. The shattering of Congress in the recent Bihar election probably in part reflected concern about corruption.  But it is not just Congress that is under the gun: in Karnataka the BJP Chief Minister is also caught up in an alleged land fraud and the BJP high command has refused to sack him.

These and many other cases illustrate what could be interpreted as a rapid decline in the state of governance in India.  If so, this in turn casts a shadow over future development and stability in the emerging Asian giant.  But is this an accurate depiction, or are there other, perhaps more hopeful, interpretations of what is occurring?

The emerging role of governance mechanisms such as audit, ‘social audit’ by India’s vigorous civil society sector, activism in financial and tax departments, judicial activism particularly in the Supreme Court and the activities of India’s vigorous and free media are discovering cases of corruption and seeking to impose justice.  While the exposure of such cases appears to indicate a system out of control, one could argue that unlike true ‘cleptocracies’ at least they are being exposed.  The enhanced role of various government audit, tax and financial regulation agents can also fill some of the gaps left by India’s somewhat etiolated and toothless anti-corruption mechanisms.  For example:

So at one level one could lament the apparent decline of public life in India and the breathtaking scale of corruption.  But at another, one could also note that so many illicit activities are now being exposed, that this is generating considerable disgust and political disillusionment, that various government instrumentalities are now starting to do their job and exposing graft and that the government itself has built in anti-corruption measures to some of its large activities such as NREGA.

In other words, one can either adopt a ‘glass half full’ or a ‘glass half empty’ view of corruption in India.  My guess is it that it was always there but now appears to have increased because it is more frequently exposed.   And surely this is a good thing.


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