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Is corruption waning from Emerging Markets?
Thu, 29 Oct Pre-Open

Measures taken to stem corruption are more widespread in Emerging Markets (EM) than ever. The governments across Asia to Latin America are making efforts to bring down corruption. They want to make politics and business more transparent.

Recently, Petrobas, state run oil company in Brazil faced a bribery scandal controversy. However, immediate action was taken against some of the politicians who were involved in the bribery with some of the senior politicians and top executives facing jail term.

Reportedly, attempts to eliminate bribery and corrupt practices have led to volatility in the equity markets of emerging economies. The volatility is triggered as jailed politicians or executives results in short term political turmoil and policy paralysis. However its effects are short-term in nature. Over the long term, such anti-corruption campaigns translates into better corporate governance, financial disclosures for investors, independent judiciaries and a free and vibrant local media.

Back home, the Modi government's promise to bring back black money within 100 days of assuming office doesn't seem to have brought any fruitful results so far. However the government has initiated steps to bring down the black money.

The new law against black money imposes a penalty of 120% on undisclosed foreign income or assets. Further, repeat offenders can face as much as 10 years in prison and a fine up to Rs 10 m. The government has also made efforts to gain information of overseas bank accounts. This will make it harder to stash the funds abroad. India, so far has brought just a little over Rs 25 bn of black money. Reportedly, the black money brought back, amounts to Rs 20 for every Indian, far short from the Rs 2 m per person that the government had promised while campaigning last year.

In one of our recent article we had explained the impact of the black money on India's Gross Domestic Product. Therefore rigorous steps will have to be taken by the government to bring back the unaccounted money.

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