Digging out corruption in India

Most of India's 1.2 billion people are being held to ransom by systemic corruption at all levels of government.

Ratan Tata, the almost reclusive chairman of the US$70.8 billion (Dh260.03bn) Tata Group, seldom courts controversy.

But last week, Mr Tata raised many eyebrows when he revealed why his company, which has dabbled in diverse businesses including steel and cheap cars, could not realise its aim of starting a private airline in India.

His plans, he alleged, were thwarted by a government minister who demanded 150 million rupees (Dh12.1m) in exchange for the official clearance.

"I happened to be on a flight once. A fellow industrialist sitting next to me said 'you know, I don't understand. You are very stupid. You know that the minister wants 150m rupees. Why don't you just pay? You want the airline'," Mr Tata said at a seminar.

"I said you will never understand this. I just want to go to bed at night knowing that I haven't got the airline by paying for it."

Mr Tata's comments immediately raised a storm with the finger of suspicion pointing to a former aviation minister who fervently denied the allegation and threatened to commit suicide if Mr Tata did not name the minister.

Under pressure, Mr Tata partially withdrew his statement, claiming it was not a minister who demanded the bribe but he did not deny someone in the ministerial hierarchy did.

Since taking over as chairman of Tata Group in 1991, Mr Tata is believed to have tried to enter India's aviation business three times in collaboration with Singapore Airlines.

But the plan gathered dust for years, perplexing analysts who remained bullish about the family-run conglomerate, long regarded as an aviation pioneer after it founded Air India in the 1930s, which was later nationalised.

Mr Tata's alleged encounter with government corruption in India is hardly an aberration. In this nation of 1.2 billion people, corruption is endemic and widely regarded as damaging the economy and hampering the pace of development.

India ranks 84 out of 180 countries in terms of corruption, according to the latest Transparency International Report. An estimate by the late CK Prahalad, a management expert from the Ross School of Business at the University of Michigan, put the cost of corruption to the Indian economy at up to 2.5 trillion rupees a year.

Global Financial Integrity, a think tank in Washington, estimates almost $462bn in ill-gotten gains have been transferred overseas between 1948 and 2008, away from the prying eyes of tax authorities.

But the figure does not account for the entire cost of corruption in India as some of it is kept onshore.

In recent weeks, India has been rocked by a series of corruption scandals, exposing suspected government malfeasance and abuse of power that may have resulted in losses worth billions of rupees.

This month, the government accepted the resignation of Suresh Kalmadi, the head of the Commonwealth Games organising committee, from a parliamentary post over allegations of misappropriation of funds in one of the Games events held last month.

Ashok Chavan resigned this month from the post of chief minister in the western state of Maharashtra over an alleged role in allotting apartments in a Mumbai tower that were intended for war veterans and widows.

And in another case, Andimuthu Raja, the telecommunications minister, resigned last weekend amid allegations of impropriety in handling the allocation of second-generation mobile telephone spectrum in a 2008 auction.

All three officials deny any wrongdoing.

A 76-page report presented to the Indian parliament last Tuesday by the comptroller and auditor general said the auction process violated "every canon of financial propriety, rules and procedures", causing the government to lose $38.9bn in potential revenue.

Last week, in a rare rebuke of the prime minister Manmohan Singh, India's supreme court demanded an explanation for his failure to investigate the telecoms scam.

But analysts say growing corruption makes it more challenging to bolster the country's flagging infrastructure and threatens to derail India's brisk economic expansion.

More than the big-ticket scandals, corruption has become a part of everyday life in India. It is not uncommon to hear stories of public money meant to build a road or a healthcare centre being pilfered by bureaucrats responsible for projects.

This year, the government raised its social spending to $47bn, widening its fiscal deficit to a 16-year high. The landmark rural employment scheme, which promises every rural family 100 days of employment, costs 1 per cent of GDP. And the food security bill, which promises to put food on every dinner table, costs the exchequer another $2bn.

These schemes are crucial, analysts say, to fight hunger and malnutrition that affects 800 million Indians who live on less than $2 a day.

In last year's Global Hunger Index, India ranked 65, well below countries such as North Korea and Zimbabwe in a ranking of 84 countries.

But these schemes are prone to corruption. Nearly two decades ago, Rajiv Gandhi, a former prime minister, said only 15 per cent of government spending on the poor actually reached them. The rest was siphoned off by officials.

That figure has grown phenomenally in recent years. According to a 2008 Transparency International report, Indian households that fall below the poverty line spent more than $196m in bribes for access to basic public services such as education, water and health care.

Transparency International warns corruption is deepening poverty and harming development.

Recently, India's right to information act (RTI) has become a potent tool to check corruption in government circles. It grants ordinary citizens the right to scrutinise records, documents, e-mails, circulars and any other information held by public authority including central and state governments, local bodies and non-government organisations.

In a country where public information has always been heavily guarded, the RTI has been the most effective legislation since independence as it has introduced a rare measure of transparency and accountability.

"RTI is helping expose corruption more than ever before," says Shailesh Gandhi, the chief information commissioner of India who claims RTI applications are growing at a rate of between 20 and 30 per cent a year.

"But at the end of the day, information alone cannot stop corruption. A robust investigative and judicial system is needed to be in place to punish the guilty."