An ’emerged’ India is still submerged in corruption

RASHMEE ROSHAN LALL November 26, 2010

By Rashmee Roshan Lall

The tale of one emerging economy and its three unfolding big-ticket corruption scandals is right out of Joseph Conrad’s eponymous account of the human heart of darkness.

Conrad wrote of the “intolerable weight…(and) unseen presence of victorious corruption”. That was Congo in the late 19th century. In India 2010, victorious corruption has resulted in a profound but powerless feeling of disgust. Meanwhile, international investors are perceptibly more watchful of the risks of buying into a high-growth market prone to every fiddle, fraud, hoax, scam, swindle or con possible.

Multiple corruption scandals of monstrous size and significance are playing themselves out in the Indian media. As a general rule, India gives a lot of publicity to those alleged to be corrupt, but rarely gives them much punishment. This is why there seems to be no real attempt underway to clean up, despite the fact that the three major stories currently splashed across every newspaper and TV screen concern theft, chicanery and crony capitalism on a staggering scale.

The biggest of the three scandals is the 2008 sale of licences to set up second-generation wireless mobile telephone networks. Andimuthu Raja, the minister responsible, is accused of offering peppercorn rates to his favourite companies, thereby preventing the Indian treasury earning a stupendous $40 billion, or nearly eight times India’s health budget. That’s also twice the cost of providing food security to all Indians. But the minister’s alleged criminal callousness towards the federal coffers has ended in nothing more than his resignation, while the main political parties argue about how best to investigate the matter.

The second significant corruption case on the front pages is a hangover from October’s Commonwealth Games, which became the world’s most expensive sports gravy train at $2.6 billion. A few officials have lost their jobs, there have been two arrests, but essentially, the staggering cost overruns, dodgy deals and sub-standard arrangements have been superseded by newer, larger scams.

Then there is a third, smaller but still peculiarly Indian corruption scandal commandeering column inches. In India’s infotech capital, Bangalore, the state chief minister is accused of making vast swathes of valuable land illegally available to his family and friends. When found out, his family gave the land back. The chief minister apologised, but defiantly continues in office.

Meanwhile, other corruption scandals intermittently consume the press and public, not least of which is another chief minister who spent his time in office fraudulently acquiring prime Mumbai property meant for war widows. That chief minister resigned. Public scrutiny moved on to the next sensational scam.

What does this fickleness mean for booming India, poised to become the world’s fastest growing economy by 2012, according to the British banking giant Standard Chartered?

While India may have thousands of ATMs, it also runs numerous “ATM ministries”, a local phrase layered with a wealth of bitter meaning. These ATM ministries are emerging India’s key economics and resources departments – steel, coal, petroleum, telecommunciations etc – and are anecdotally said to spew cash into the hands of the politicians who head them. The management guru CK Prahalad compares Indian politicians with venture capitalists, explaining the twisted logic of corruption in high office: “Given the risky nature of the investments in elections, politicians as venture capitalists, we can assume, will not settle for less than a 10-fold return.”

So, corruption is the spreading penumbra of an India growing at more than eight per cent per annum. This growth means little enough when India is ranked 87 of 178 countries in Transparency International’s Corruption Perceptions Index, with the UAE far up ahead at number 28.

It means even less when a new study by Global Financial Integrity, a Washington-based research and advocacy group, estimates that close to $1.5 trillion have been siphoned out of the Indian economy since independence, with India losing $16 billion per year on average between 2002 and 2006 on account of wealthy individuals and private companies shifting illicit money to offshore financial centres.

Even Indians who live below the poverty line have to pay more than Dh7 million in bribes just to avail themselves of the basic services they are supposed to get for free.

What does this mean for an emerging economy that was recently paid the ultimate compliment by the US president Barack Obama as having already “emerged”? In real terms, it means this: India still ranks a lowly 119 of the 169 nations annually surveyed on health, education and income levels by the UN Development Programme for its Human Development Index score. And that 20 of India’s 28 states are affected by the four-decades-old Maoist insurgency. Many recruits join the rebellion in regions because there is little sign of India’s so-called economic miracle and the delivery of basic services. The Maoists defend their actions as part of a wider struggle to end the increasing gap between the rich and the poor.

GK Pillai, India’s home secretary, one of the country’s two top civil servants, brands the rebels “the gravest threat to India’s national security”. But is that because they blow up government security forces and installations without remorse? Or is it because they signify a dreadful reality: that the Indian state, fattened by corruption, is unable to move fast enough and far enough to meet its people’s needs?

Rashmee Roshan Lall is a senior editor with The Times of India

World Report