Indian corruption: It’s easy to see why investors in India are running scared. Two top tycoons have been hauled in by investigators in connection with a mounting telecoms scandal, inflation is rampant and the government seems paralysed.
The Sensex index of leading stocks has dropped 11 per cent this year. And the shares of Reliance Communications, chaired by Anil Ambani, one of the two tycoons questioned by police, have been hammered: they are down 36 per cent. The other is Prashant Ruia, chief executive of Essar Group. Neither has been charged.
But endemic corruption, which is estimated to drag economic growth down by one-two percentage points a year, is an old story. What’s new is that there has been an outcry about it. The urban middle classes seem fed up and the media is hounding the story. The Supreme Court, meanwhile, has criticised Prime Minister Manmohan Singh for his slow response and put steel in the spine of the police, telling them to question even billionaires.
Singh now looks likely to agree to a cross-party parliamentary probe into the scandal which is estimated to have cost the government up to $39 billion in lost revenues. Weeks of public hearings would keep up the pressure for reform. Campaigners are also calling for the government’s proposed anti-corruption law, which many consider to be toothless, to be replaced by something stronger.
Of course, corruption isn’t going to be uprooted overnight.
There are too many factors entrenching it — not least, the need to divide up ministerial posts between different political parties to stitch together elaborate coalitions in this hugely diverse country.
And India has other problems that won’t just vanish. Singh’s government lacks oomph but there’s no quick way to improve on it. Meanwhile, inflation is being driven by a mixture of global commodity prices (which Delhi can’t influence) and structural rigidities (which would take years to solve even with dynamic leadership).
Nevertheless, the vigour with which anti-corruption probes are now being pursued offers the best chance, albeit no guarantee, of a catharsis which could ultimately boost India’s long-term growth potential.