India Battles for Transparency – Part I

NEW DELHI: In comparisons between China and India of the sort that have become commonplace in recent years, India is often given the edge on account of its political system. India has a deep-rooted democracy, the argument goes, while China is a brittle autocracy whose government functions without transparency or accountability. Indeed, the idea of India as Asia’s democratic alternative to China was underscored during US President Barack Obama’s November visit to India, where he declared that “in Asia and around the world, India is not simply emerging; India has emerged.”

A cursory look at Indian newspapers over the past six weeks, though, portrays a country submerged in corruption. Exhibit A: the so-called 2G telecom scam, the allocation of licenses for a pittance, an alleged $40 billion fraud that taints powerful politicians, leading industrialists and some of the best known names in Indian journalism. And though the Indian economy continues to grow at an impressive 9 percent per year, the depth of the rot suggested by the scandal raises questions about the sustainability of the Indian model of development. That sometimes corner-cutting corporations benefited the most from the corruption that accompanied India’s opening casts a shadow over the economic-reform process.

Despite loosening government control over the economy, enough remains for politicians to milk. The country’s businesses – hardly Boy Scouts themselves – remain beholden to an anarchic and greedy political class whose appetites have multiplied manifold since the advent of economic reforms nearly two decades ago. That the taint comes from the telecom industry, a poster child of Indian reform thanks to a massive user base of 600 million, built up over the past decade, could hurt public appetite for further reforms. And unless the country moves decisively to stem the rot, large businesses – both foreign and domestic – may think twice about future investments. The ultimate loser would be the people of India.

The 2G scandal, involving the government’s 2008 allocation of valuable telecom spectrum to favored firms at throwaway prices, already brought this year’s winter session of parliament to a halt over unsuccessful opposition demands for a wide-ranging inquiry. The man at the center of the storm, former telecom minister A. Raja, was forced to resign pending an investigation. Raja claims innocence. Meanwhile, the publication by two news magazines last month of a series of secretly taped phone conversations between Niira Radia, a high-powered lobbyist for two of India’s richest men – Mukesh Ambani of Reliance Industries and Ratan Tata of the Tata Group – and influential journalists, politicians and industrialists has India agog.

The recordings, part of an income-tax investigation of Radia, reveal a country run by clubby elites whose allegiance to one another is apparently greater than to the general public they’re supposed to serve. In the aftermath of national elections last year, Radia worked the phones in an attempt to ensure that the telecom portfolio – dubbed an ATM ministry in India’s political parlance for its lucrativeness – remained with Raja, already under a cloud of suspicion for corruption.

Well-known journalists apparently offered to act as intermediaries with the ruling Congress Party, agreeing to pass on messages from Radia to senior party figures and reporting back to her on conversations. In an unrelated matter, influential editors alluded to a capacity to fix a court judgment on a multibillion dollar gas-pricing dispute between Mukesh Ambani and his estranged younger brother Anil, or blithely discussed story placement and media strategy with Radia. An opposition member of parliament is heard allegedly plotting to change the order of speakers in a parliamentary budget discussion to benefit a potential tax break for Mukesh Ambani. The 142-year-old Tata Group, long known for a squeaky clean reputation, is under a cloud for using Radia to lobby on behalf of a minister now largely viewed as a byword for corruption.

Though most speakers on the tapes are not accused of illegal activity – and virtually all claim that the conversations have been misinterpreted by the public and the press – taken collectively the tapes nonetheless create an overwhelming impression that the exercise of power in India is compromised by a culture of rampant cronyism.

So far, middle-class ire – expressed on Twitter, Facebook and a plethora of blogs – focuses on the state of Indian journalism. Over the years, educated Indians have grown cynical about politics and politicians. Individuals regarded as personally honest – such as Prime Minister Manmohan Singh and senior opposition BJP leader L. K. Advani – are the exception rather than the norm. More worrying, from a longer-term perspective, is the idea that the tapes reveal undue corporate influence in the affairs of India. For the first time since the advent of economic reforms a large section of educated Indians blames business rather than government for creating a national problem.

That India’s institutions have failed to rein in corruption is undeniable. Transparency International ranks India 87 out of 178 countries surveyed for perceptions of public corruption, behind the likes of Malawi and Morocco. China is number 78. But though individual business houses are often guilty of gaming the system, the genesis of the problem in India is cultural and political. At best, 300 million Indians can be called middle class by even the most generous estimate. Most of the rest are too poor and ill-educated to make corruption an electoral issue. Caste, creed and the price of onions are more likely to influence their vote than looting in distant Delhi.

Moreover, India’s splintered polity is littered with caste-based or regional parties with little conception of the national interest. Raja belongs to one such party, the DMK, an important Congress ally from the southern state of Tamil Nadu whose campaign blandishments for prospective voters sometimes include cash-stuffed envelopes and cable TV connections. For its part, the middle class tends to personalize corruption rather than focus on the system.  In prosperous democracies, leaders are deemed upright as much for presiding over a clean government as for personal honesty. By contrast, until now Prime Minister Singh has remained beyond reproach despite the misdeeds of his cabinet colleagues.

But this doesn't mean India can't begin to curb corruption. The uproar over the Radia tapes shows that society’s capacity for outrage remains intact. Every walk of life has its share of the scrupulously upright. And unlike many developing countries, India has stood up and sustained credible institutions such as the Election Commission, the Supreme Court, and the Securities and Exchange Board of India.

If India wants to be taken seriously as a world power, it must establish similar institutions to fight corruption. A good place to start would be an independent anti-corruption commission backed with investigative powers, prosecutorial heft and fast-track courts. Unlike in China, where the threat of harsh punishment can deter blatant corruption, India has nurtured an anything-goes environment where the powerful rarely face trial or conviction. Only when Indian businessmen aren’t held hostage by an erratic and all-powerful political class – when public servants begin to pay for breaking the law – will the country’s future prosperity be assured.