India: Corruption Reform Fails

December 30th, 2011
in econ_news

by Sanjeev Kulkarni

Econintersect: The fight against graft has received yet another serious setback in India. The Lokpal Bill [creating Ombudsman to root out Dharavicorruption] has been "put to sleep at midnight" as per the news report in The Times Of India. The country has been wracked by multi-billion dollar scams. Led by anti graft crusader thousands took to the streets last summer, forcing the Government to bow to demands to create a powerful ombudsman's post.  But the bill was controversial right from the time it was introduced in Lok Sabha.  Picture is a view in Dharavi - described further below.  Click on photo for larger image.

Follow up:

The bill which was passed in the lower house [Lok Sabha] had been sent to the upper house [ Rajya Sabha] for approval where it was met with stiff opposition. According to Reuters which quotes Arun Jaitley, BJP leader:

"The ruling Congress party depends on fickle allies and independents for its majority [ in Lok Sabha]. With a key ally objecting to certain sections of the bill and pressing for amendments, passing the bill appeared unlikely.

This was a choreographed act. The government didn't have the majority," said Arun Jaitley, the BJP leader, after the upper house session was adjourned. "It is both a political and moral defeat for the government.  It should resign."

This is the ninth attempt to create an ant-graft bill.  The eighth attempt by parliament to pass the bill had failed earlier.

The anti-graft 74 year old crusader Anna Hazare has opposed the current Congress version of the bill.  He ended his current fast on mounting concerns of his ill health.

The corruption is wreaking havoc on investors confidence both domestic and foreign in the country.  According to a news report in The Times of India:

Ajay Piramal who is sitting on $3.8 billion mountain of cash. Yet the billionaire Indian tycoon, working in one of the world's fastest growing economies, is struggling to figure out what to do with the money. The problem isn't opportunity, he says. It's India.

His dilemma is a worrying sign for India. With the country mired in corruption, bureaucratic red tape and unclear and changing government policies, many of the men who made their billions here are saying maybe it's time to quit India. It's got to be easier to do business elsewhere."

A recent investing article by Martin Hutchinson, Global Investing Strategist of Money Morning, echoes similar sentiments:

"India has a government that can't stop spending, inflation over 10% and huge corruption. Furthermore, its stock market is still pretty inflated. I wouldn't put much money there until the government changes. Contrary to what you read in the media, almost all the real liberalization progress came under the Vajpayee government of 1998-2004, which the Indian electorate then ungratefully threw out. I'd want an Indian government without the corrupt socialist Congress Party before I'd invest; only then could I be sure that Indian gains would not be poured down a rat hole."

Meanwhile Bharat the other India of down trodden miraculously survives and contribute to the economy. As reported in New York times, Asia's most notorious slum Dharavi of Mumbai featured in Oscar winning movie Slumdog Millionaire is a microcosm of "Misery, Work, Politics and Hope"

"It is a visual eyesore, a symbol of raw inequality that epitomizes the failure of policy makers to accommodate the millions of rural migrants searching for opportunity in Indian cities."

The slum is epitome of misery.

The streets smell of sewage and sweets. There are not enough toilets. There is not enough water.....Hygiene is terrible. Diarrhea and malaria are common. Tuberculosis floats in the air, spread by coughing or spitting. Dharavi, like the epic slums of Karachi, Pakistan, or Rio de Janeiro, is often categorized as a problem still unsolved, an emblem of inequity pressing against Mumbai, India’s richest and most glamorous city. A walk through Dharavi is a journey through a dank maze of ever-narrowing passages until the shanties press together so tightly that daylight barely reaches the footpaths below, as if the slum were a great urban rain forest, covered by a canopy of smoke and sheet metal.....


"Dharavi is one of the world’s most infamous slums, a cliché of Indian misery. It is also a churning hive of workshops with an annual economic output estimated to be $600 million to more than $1 billion.

“This is a parallel economy,” said Mr. Mobin, whose family is involved in several businesses in Dharavi. “In most developed countries, there is only one economy. But in India, there are two.”

"Its “formal” economy consists of businesses that pay taxes, adhere to labor regulations and burnish the country’s global image. India’s “informal” economy is everything else: the hundreds of millions of shopkeepers, farmers, construction workers, taxi drivers, street vendors, rag pickers, tailors, repairmen, middlemen, black marketeers and more."

Picture below is an "industrial" "street" in Dhavari.


Dharavi essentially is the microcosm of problems that plague India; the wide chasm between the 'glamorous' India of BRIC and its poor counterpart Bharat.

Note: Here is the score card as perceived by this author a member of the civil society :

Indian political, business leadership and civil society: -10
Bharat: +10

Lokpal Bill put to sleep at midnight: The Times Of India
Rajya Sabha fails to vote on Lokpal bill: Reuters
Lokpal bill: Eight attempts, no results: The Times Of India
Ailing Anna Hazare cuts short hunger strike: Reuters
Ajay Piramal has got tons of cash but nowhere to invest: The Times Of India
Forget the BRICs: Invest in These Five Emerging Markets: Econintersect
In One Slum, Misery, Work, Politics and Hope: The New York Times

About the Author


Sanjeev Kulkarni is an entrepreneur based in Pune, India. He worked for large organizations in board level position before venturing on his own. He is currently involved as an investor in health care software company and as an investor, mentor in an automation company. Very widely traveled, he has experience of working in different geographical areas with people of varying nationalities. He did his BS from Indian Institute of Technology, Delhi.


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1 comment

  1. sunil chandra (Member) Email says :

    While I largely agree with Sanjeev's canvas, I do object to his selective choice of politician's comments, in this case those of Mr Arun Jaitely, the Leader of Opposition.

    Everybody knew that the ruling party did not enjoy a majority in the Rajya Sabha. That, rightly, did not stop the Government from hoping that the opposition parties would support the passage of the Anti-Corruption Bill. This was not an unreasonable expectation considering the overall background and the parliamentary processes that the Bill had passed through already.

    Once it became clear that Mr Jaitley's party and other opposition paties would actively oppose the legislation, the Government really had no choice but to withdraw and redraw its strategy.

    Mr Jaitly stood exposed as an individual and as an irresponsible leader and so Mr Kulkarni's giving credence to his little speech has disappointed me.



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