"A large majority of the respondents in the survey, 94%, across all surveyed cities among the major cities like Delhi, Mumbai, Kolkata, Chennai, Bengaluru and Lucknow thought that the prospect of inclusive growth was getting damaged due to wide spread corruption charges as the government and senior bureaucrats are reluctant to take hard policy and administrative decisions to avoid getting into another round of corruption charges," noted Biswarup Banerjee, head of marketing communication, Ipsos in India.
India today has opened its economy after years of virtual closure and also is enjoying a relatively stable political climate and strong economic growth. Significant governance challenges are sustained, however, as India continues to struggle with substantial social, political, economic, and environmental problems which are aggravated by corruption as well as communal, caste and regional tensions. India's political system is characterized by deep-rooted patronage systems and also by bureaucracy with an interest of majorly maintaining discretionary policies. Corruption is reportedly spreading mostly to all the sectors of the Indian society and is entrenched at every level of public administration. A survey cited in a March 2012 BBC News article states that corruption in India has already cost USD billions and threatens to derail the country's growth for the future.
While there is no shortage of anti-corruption bodies and also the legislation, both Global Integrity 2011 and the Bertelsmann Foundation 2012 have noted that government initiatives to curb corruption at the institutional level has enormous implementation gap when it comes to their practical effects. Equally, there is also a basic lack of respect from political leaders towards legal efforts to end malpractices where our politicians in general are some of the most visible perpetrators. According to the Legatum Institute's Prosperity in-Depth India 2012, official corruption is served as the curse of the Indian society and pervades all levels of the government.
In recent years, corruption scandals in India have come into the international spotlight. One of the most notorious examples is the 2G telecoms scandal in 2008, which may have cost the government almost USD 40 billion in lost revenues. And then in October 2010, two senior officials were arrested in connection with a corruption scandal which was linked to the Commonwealth Games. According to a January 2011 article made by AFP, up to USD 1.8 billion of the money earmarked for the Games was reportedly misappropriated. Transparency International's Global Corruption Report 2008 stated that political corruption is not only confined to monetary transactions, but extends to making promises to secure votes, helping colleagues by awarding them with positions of authority, and manipulating the law to help interested parties.
Several International surveys have shed light on such issues of worrying level of corruption within the Indian business environment. For example, according to KPMG India Fraud Survey Report 2010, 75% of corporate respondents state that corporate fraud is increasing in India, while 81% of respondents perceive that financial statement fraud is the major problem. The same survey also indicates that 38% of respondents perception include that bribery is an integral feature of industry practices, and 37% state that most bribes are paid to obtain routine administrative approvals from the Government.
In November 2012, Wal-Mart suspended its chief financial officer and the legal team after they had allegations that Indian government officials were bribed to obtain various licences and approvals. In March 2011, KPMG released another survey on bribery and corruption in India, where responding business executives point out real estate and construction as the most corrupt sector in India, followed by the telecom sector.
The survey also shows that 68% of respondents agree that in many instances corruption stems from the private sector. All respondents in the survey have agreed that corruption distorts the playing field and tends to attract companies with lesser capability to execute projects, while 99% of respondents agree that corruption creates inefficiency and hence increases costs. Findings from Legatum Institute's Survey of Entrepreneurs 2011 showed that 55% of the surveyed entrepreneurs have been pressured to pay a bribe while 9% prefer not to answer. Moreover, 65% cite corruption as a serious problem for business and 80% believe that corruption has become worse compared to previous years. Furthermore, business executives surveyed by the World Economic Forum Global Competitiveness Report 2012-2013 confirm that corruption is a continuing obstacle to private sector development, ranking as the second most problematic factor for doing business in India, after inadequate supply of infrastructure. This perception is also highlighted by the US Department of State 2012, according to which, foreign companies report that corruption is among the obstacles to foreign direct investment, while local businessmen state that red tape and wide-ranging administrative discretion serve as a pretext to extort money. India ranks 19th out of 28 economies in the Transparency International Bribe Payers Index 2011, indicating that the perceived likelihood of Indian companies engaged in bribery abroad is relatively high.
Companies experience corruption in almost every sector of the Indian economy, but studies show that the experience and perception differs depending on where they are being operted. India has a decentralized federal government system which has regulatory requirements and corruption vary widely from area to area. According to Transparency International's Global Corruption Barometer 2010, a majority of the surveyed households perceive their business and private sectors on corrupt basis. The government tried to bring these malpractices to an end by making it compulsory for all companies to have their books and accounts been audited annually and for external auditors to report fraud committed by the companies they audit. Notwithstanding government efforts, a very much huge scandal in late 2008 involving India's fourth largest IT company, Satyam Computers, highlighted serious flaws in such a stringent system, which allowed the company to 'cook the books' for USD 1.5 billion, as reported by a 2009 news article by IPS.
In addition, Transparency International's Global Corruption Report 2009 stated that there have been cases of stock market fraud by brokers in collusion with corporations that aim to cheat investors and circumvent regulations. The Harshad Mehta securities fraud and the Ketan Mehta scam are two well-known scams in this regard. In both the instances, brokers pushed up the prices of selected shares through artificial trade to attract retail investors and then suddenly withdrew from the trade, causing huge losses for the investors. In order to mitigate the risks of corruption when operating in India, companies are recommended to develop, implement and strengthen integrity systems and conduct extensive due diligence. According to the World Bank, India has a poor rating on business climate. One of the reasons is related to bribery and corruption," it says. "It is difficult for foreign companies to operate in India without being touched by the issue in some shape or form. The pervasive weakness in governance today has bound to increase the risk faced by all companies, domestic and foreign, that they will also be impacted by corrupt practices."
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