Retail graft has gone wholesale


India has been shining for quite some time now. Or so those running the country would have us believe. For most ordinary Indians, however, pockets of darkness still exist in the way government and bureaucracy function. This would also include MNCs. While on the one hand, they're changing India's economic profile, on the other, they are also grappling with deep-rooted barriers like corruption. But as they get economically and politically powerful, will these international firms help ease corruption?

Not so soon, say Wharton management professor Jitendra Singh and Ravi Ramamurti, professor, International Business and founder, Center for Emerging Markets, Northeastern University, Boston. Both have been studying the emergence of MNCs in emerging economies such as India. In June, they organised a conference on this topic in Boston, in which participants from institutions such as MIT and Harvard presented their views. The papers will be published in 2008.

Ramamurti, who has been studying the international competitiveness of firms in emerging markets for over 20 years, says India is ahead of most developing countries in transparency. "But (India) has a long way to go before our institutions are truly professional and independent, or the average public official's salary is high enough to make corruption unappealing," he told STOI via email. "Keeping in mind that most corrupt officials earn many times their salary through corruption, it will take a huge pay increase (or moral awakening) to wean them off corruption."

But rising incomes by themselves won't end corruption. A high-income country like Italy has a worse ranking on Transparency International's 'corruption perception index' than an equally rich Sweden. And compared to many developing countries, India has many plus points, including a well-organised civil society and an independent media and legal system.

Now we have a significantly open economy too, which has contributed to a shift in the way corruption is practised and perceived in India. "While a sea change has occurred since 1991, some of the distorted cultural norms that took hold during the earlier period are being repaired by the forces of competition. The process will be long and slow. It will not change overnight," Singh was quoted on [email protected], the school's online business journal.

And so while companies such as Infosys, Tatas or Wipro have tried to resist the temptation of using corruption as one more means of gaining competitive advantage, others have used it and continue to do so as a key means of getting that crucial edge. Even foreign companies vary in the rigidity of their stance against corruption, some of them often using third parties to handle the unsavoury aspects of doing business in India.

In some ways, says Ramamurti, with economic growth, we have shifted from 'retail corruption', where petty officials took small bribes from average citizens, to 'wholesale corruption', where bureaucrats and politicians extract fewer but bigger bribes from companies. "Average consumer has benefited whenever real competition has been ushered in — for example, in air travel, wireless telephony or gas connections," he says. "In these cases, corruption has waned or disappeared, and the consumer is king." But where monopolies still exist or competition is imperfect, as in infrastructure, public services, or regulated businesses, there is still plenty of room for corruption.

Quite clearly, there's still a long road ahead.

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