At first glance, India is a country of incredible economic opportunity. India’s GDP is slated to continue to grow five (5) percent each year. It has the third biggest economy in the world, below the US and China.
India’s ranking is 92nd in the Transparency International’s Corruption Perception Index. Foreign investment in India is nearly $12 billion annually but has been falling in the last few years.
India is a stark example of how corruption can erode basic government functions. The government has been unable to work with the private sector to bring basic functions needed for the Indian economy and its defense.
India relies on the private sector to build roads, factories, cities and basic infrastructure. Corruption has suffocated India’s ability to provide basic services. Graft has not greased any wheels; instead, it has made sure the wheels do not turn.
The state-run banking system has suffered from loans to private entities with government contracts as companies have defaulted on one in ten loans. Power and road projects stand incomplete. Mining and other energy related assets stand idle. Graft has corrupted any sense of competition among qualified companies for public contracts, and instead led to contract awards to corrupt companies lacking in expertise and ability to complete important contracts.
Foreign investors recognize the problems in India and have been cutting back on plans to invest and expand into India. From a high of $17 billion, annual foreign direct investment is roughly $12 billion.
The Indian people know they are suffering from a major corruption problem. In a recent poll, over 95 percent of respondents said that corruption was holding back India’s economy. Just over 90 percent thought corruption was worse than five years earlier.
Fighting corruption continues to be a hot political issue in India. The head of the anti-graft party, Arvind Keiriwal, won in a Delhi state election, and then quickly targeted the national election set for May of this year. The current leader in the national election, Narendra Modi, has promised to purge India of corrupt officials. We shall see if this is just another political gimmick.
Anna Hazare continues his anti-corruption campaign, arguing for the establishment of an independent anti-corruption enforcement agency. The Central Bureau of Investigation is responsible for anti-corruption investigations, and has been criticized for moving slowly and responding to political demands rather than legitimate anti-corruption enforcement programs.
Hazare may soon get his wish since India is close to approving legislation creating the Lokpal independent agency to oversee a countrywide anti-corruption enforcement program, with local offices in each Indian state. The Lokpal will have broad investigation authority and reach in the Indian government.
In addition, Indian legislators have been focusing on anti-corruption tools needed to punish private company actors for bribing or attempting to bribe Indian government officials.
For all of this to make a difference, the Indian people have to rally behind the political forces committed to fight corruption. It is too early to tell how this will develop but, even if the Indian people are able to turn this ship around, it will take years for them to reverse the corruption trend.