Corruption: How it corrodes Brand India

For a civilisation that prided itself throughout its history on being rooted to dharma, the current state of affairs prevailing in the country is indeed appalling.

Within six decades of independence, it is indeed a 'remarkable achievement' that all three pillars of our Constitution -- legislature, judiciary and executive -- stand significantly corroded and their collective moral authority, considerably eroded.

It is this gross degeneration of morality in all walks of life that has brought India where she stands today in the comity of nations.

The net result: every department of the government viz., public work, health, sanitation, infrastructure, education, transport, power, law and order, social welfare, public distribution, rural development, State or Centre, are all involved in massive doses of corruption.

In fact, Indians more or less now believe that every in public policy formulation involving the Indian government -- external affairs or nuclear, fertiliser or capital account convertibility, Pakistan or China -- there would some specific private gain.

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In short, nothing moves without sleaze and by sleaze, you can move anything in India.

It is estimated by various historians that the 90 years of formal British rule between 1857 and 1947 resulted in the transfer of wealth of approximately $1 trillion at current market prices from India to Britain.

We seem to have done far better in sixty-odd years of self-rule, especially in the last thirty years. Various estimates demonstrate that our post-Independence rulers have achieved this target far more efficiently compared to what the British did with so much ado in 90 years.

Put pithily, if the British took 90 years to transfer $1 trillion of our wealth, various estimates suggest that our indigenous Swadeshi rulers have taken merely 30 years to transfer an estimated $1.5 trillion (Rs 7,000,000 crore) of our wealth abroad.

All these negative developments were hastened since the 1980s when the Indian economy underwent mild doses of reforms.

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Contrary to popular belief that liberalisation of the economy would prevent corruption, the deepening of the reforms process since the early 1990s is seen as having increased the opportunities for corruption.

The emergence of globalised corporations with huge financial and political powers disproportionate to the power of our local governments, manned by people without dharma, has provided an impetus for a very high level of corruption.

Perhaps, we began liberalising and globalising the Indian economy without adequate preparation of our men for the same.

Consequently, since the late 1980s, the nation has been a silent witness to massive doses of corruption. Procurement of armaments for our armed forces, imports and exports of various edible items, food for oil, licensing spectrum for our telecom companies are just a few cases in point, not to speak of massive evasion of taxes.

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The corruption involved in all these cases has been huge, so much so that despite the availability of overwhelming evidence, precious little has been done, lest the system becomes dysfunctional.

Scams have indeed become a way of life in India. In the process, scam is India's gift to the English language which suggests the following paradigm: one, that indicates massive levels of corruption; two, the availability of irrefutable evidence; and three, the impotency of the law enforcers.

What is traumatising the collective conscience of the nation is the fact that the judicial system has been unable to convict anyone from the ruling elite, despite overwhelming evidence available in such high-profile cases of corruption.

India, a country of scams?

Obviously, everything boils down to governance or the lack of it. Corruption is the abject manifestation of poor governance. It results in capital flight from an economy. Capital flight causes poverty, which, in turn, feeds on terror. Terror leads to chaos, crisis and calamity.

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Importantly, in such a diffused scenario, the corrupt, criminals and terrorists flourish. The net consequence of all these is the lack of governance in India that is increasingly engaging the attention of international players. And that is definitely reaching embarrassing proportions.

Commenting on this rather dismal scenario, Mohan Murti, former European director of the Confederation of Indian Industry, wrote a rather stunning article in The Hindu Business Line, May 31, 2010, titled rather provocatively but aptly, 'Is the nation in a coma?'

According to him 'Europeans believe that Indian leaders in politics and business are so blissfully blinded by the new, sometimes ill-gotten, wealth and deceit that they are living in defiance, insolence and denial to comprehend that the day will come, sooner than later, when the have-nots would hit the streets.'

In fact, the article itself was the fallout of the question and answer of a panel discussion in Frankfurt, Germany, organised by Euroforum and The Handelsblatt, one of the most prestigious newspapers in German-speaking Europe. That, according to him, was his 'moment of truth,' which according to Murti, 'turned into an hour of shame, embarrassment -- when the participants fired questions and made remarks on their experiences with the evil of corruption in India.'

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The questions, according to Murti, ranged from the corruption in the judiciary, the possible impeachment of a judge, the 2G scam to the money parked illegally in tax havens.

If one thought that this was an aberration, one would be sadly mistaken. Referring to a popular prime-time television discussion in Germany, Murti points out that the panelist, a member of the German Parliament, quoting a blog stated: 'If all the scams of the last five years are added up, they are likely to rival and exceed the British colonial loot of India of about a trillion dollars.'

Well, that is a telling comment of our times. Murti is not done yet in his article. He goes on to quote from some of the leading newspapers of Europe.

Accordingly: One German business daily, which wrote an editorial on India, said, 'India is becoming a Banana Republic instead of being an economic superpower. To get the cut motion designated out, assurances are made to political allies. Special treatment is promised at the expense of the people. So, Mayawati, who is chief minister of the most densely inhabited state, is calmed when an intelligence agency probe is scrapped. The multi-million-dollar fodder scam by another former chief minister wielding enormous power is put in cold storage.'

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An article in a French newspaper, titled 'Playing the Game, Indian Style', said: 'Investigations into the shadowy financial deals of the Indian Cricket League (sic) have revealed a web of transactions across tax havens like Switzerland, the Virgin Islands, Mauritius and Cyprus.'

In the same article, the name of Hassan Ali of Pune is mentioned as operating with his wife a $1-billion illegal Swiss account with 'sanction of the Indian regime'.

A third story narrated in the article quotes an Austrian newspaper pointing to the former chief minister of Jharkhand, Madhu Koda, on whom there were allegations of having funds in tax havens that were partly used to buy mines in Liberia. Unfortunately, the Indian public do not know the status of that enquiry.'

The article went on to conclude: 'In the nastiest business scam in Indian records (Satyam), the government adroitly covered up the political aspects of the swindle.'

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But do we realise the net impact?

There have been several other unambiguous references by the global media to the levels of corruption in India, sometimes even pointing out to the tacit complicity of the top authorities of the land.

If you believe that all these are references only to the corrupt practices within the government, you would be mistaken. Increasingly, the world believes that the success of corporates in India is because of their ability to bend and change the rules of the game.

To a large extent that dents the image of India, Indians and Indian enterprise. And that to me is the crux of the issue.

But that is not all. The gargantuan corruption in India takes us to the issue of money laundering and parking of it in tax havens. Estimates of India's wealth parked in these tax havens are varied, depending on the methodology adopted and the assumptions that characterised the methodology in the first place.

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It is indeed inexplicable that in a country where political parties of all hues have openly admitted to the existence of Indian loot in tax havens, there are no 'official' estimates by the Indian government of Indian wealth parked in such tax havens.

And in the absence of 'official' estimates, economists and analysts who were silent all these years when India's wealth was being laundered, instantly found fault with these estimates.

Of course, one can endlessly nitpick the methodology adopted or relied on by those who have put up the estimate in the first place. But there is no denying the fact that a substantial amount of our national wealth has been looted post-Independence and parked in various tax havens.

Do we realise the net impact of this corruption and its impact on the national economy and national security? Do we realise how corruption is gnawing at the vitals of our country?

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The issue unfortunately is not about the lack of political will in fighting corruption. Rather, it is all about absolute complicity of our political masters in these matters.

It is in this connection, I would also like to share the contents of an interesting e-mail sent to me by John Christensen, a resident of Jersey and an expert on the subject of money laundering and tax havens, in response to one of my articles on the subject on Rediff.com in 2008.

He writes: 'Last week I stood outside the Jersey branch office of Bank of India with a film crew and asked a simple question: Why does Bank of India have a branch in Saint Helier, Jersey? The branch manager told me that their branch provides treasury operations, but the truth is that there is no economic reason for using Jersey for such purposes, and in reality this branch is purely located in Jersey to facilitate capital flight, tax evasion and top end corruption. Very few people of Indian origin reside in Jersey (so there is virtually no need for domestic retail banking purposes), but huge amounts of trade and investment are routed through Jersey and the Isle of Man for tax avoidance or evasion purposes.'

PS: Do we realise that the 9 per cent growth is increasingly questioned?

Click MORE to read Part II: Why politicians don't want to fight corruption

The author is a Chennai-based Chartered Accountant. He can be contacted at mrv@mrv.net.in