Has the Anna Hazare movement and the proposed Lokpal Bill already had an effect on reducing corruption in India? Well, a recent survey by a global risk consultancy Kroll suggests so. Thanks to the media limelight that India's corruption scandals have attracted; a better ranking could be very impactful on investor appetite in the country.
The Global Fraud Survey covered 124 executives working with leading private companies across India. The survey states that the rate of fraud in India has fallen to 84% in 2010-11 from 88% a year ago. But, even while the rate of corruption has fallen slightly, levels of corruption in India are still among the highest in the world. China and India seem to both be on par when it comes to doing underhand deeds. However African nations rank far higher on the corruption scale.
But what worries us is how pervasive corruption is in India. About 78% of the Indian respondents said that their organisations are highly or moderately vulnerable to corruption and bribery. This compares dismally with a 47% figure globally and 63% figure in Asia. Thus a slight reduction in corruption levels does not mean much. A full-blown system overhaul would be of essence.
Over the past year India has lost face globally in light of scam after scam. 2G, CWG, etc cost the exchequer billions of rupees. The Satyam scam left its promoter in jail and led to the collapse of one of India's biggest blue chip firms. Investors globally are now wary of investing in India, in light of such large scale corruption.
'Facilitation payments' are widespread across various sectors in India. These are particularly prevalent in areas which involve negotiations or approvals from government agencies. Greasing the palms of officials has almost become the norm in India. These costs are simply a price attached to doing business in the country. Thus, for some this practice does not even seem unethical.
India has also earned the reputation of being a nation of shoplifters. In the 12 months to June 2011, consumers and store employees, shoplifted goods worth a staggering Rs 34.7 bn. This is according the Global Retail Theft Barometer conducted by Checkpoint Systems. India has earned the distinction of being a nation with highest retail 'shrinkage' in the world for the fifth consecutive year! There is a huge lack of awareness amongst corporates to adopt anti-fraud measures and stem corruption.
Starting off with a clean slate may have not been possible. However, there is still some hope left. There are certain individuals having enough clout who are really trying to make a difference. Industry stalwarts including Deepak Parekh (HDFC), Keshub Mahindra (Mahindra Group), Azim Premji (Wipro) etc together drafted an open letter to the government on the menace of corruption. While the Lokpal Bill is the first step, a greater effort needs to be made to entirely weed out corruption from the country. We believe that it is time both the government and companies realize that corruption is no longer going to take them too far. Else thanks to India's ranking on the corruption index, investors will be wary of buying into the country's long term story.