Opinion

Corruption scares away foreign investors

Nilanjan Banik | Updated on March 12, 2018

We need a more pro-active judiciary.

To stem corruption, there is need for political and judicial reform.



India still ranks high in terms of corruption. Transparency International publishes a report in which it ranks countries on the basis of corruption.

Last year, ‘corruption perception index’ ranked India ranked 94 out of 176 countries. India earned a very low score of 36 on a scale from 0 (most corrupt) to 100 (least corrupt) with the cause of corruption principally attributed to the amount of bribe being paid to government officials.

Although there is no specific macro-level study quantifying the impact of corruption on a country’s growth rate, there is a strong correlation between rich countries and the lower level of corruption.

Countries such as Denmark, Finland, Sweden and Singapore, are some of the richest economies in the world and with minimal levels of corruption.

At another extreme, we find economically poor countries such as Somalia, Afghanistan and Myanmar, with very high levels of corruption. Countries like Italy, Greece and Ireland, which are mired in financial crisis, have fallen rapidly in terms of their ranking on the corruption index.

Judicial reform

Since the corruption index is based on perception, countries with higher corruption are also less attractive for foreign firms. Richer countries are the more trusted ones in terms of foreign direct investment (FDI) inflow. Scams and corruption in India have not only brought down our GDP growth, but have also resulted in lower FDI inflow. For 2008, India’s gross FDI inflow was $48 billion; it was down to $27 billion for 2013.

To stem corruption, there is need for both political and judicial reform. Investors will not be willing to invest if there is delay in settlement of disputes.

Recent data on disposal of court cases are not available. But in 2008, more than 50,000 cases in the Supreme Court; more than four million in the high courts, and over 27.5 million cases in subordinate courts were awaiting disposal.

Considering the total number of outstanding cases, every judge in the country will have an average load of about 2,147 cases. India has 14,576 judges as against the sanctioned strength of 17,641, including 630 high court Judges. This works out to a ratio of 10.5 judges per million population. This ratio is going to become more adverse with more and more people becoming literate.

For example, in a relatively more literate State, Kerala, there is an addition of 28 new cases per 1000 population per annum, as against three new cases per 1,000 population per annum in Bihar. Between 2005 and 2008, around 12 per cent (6,900 out of 57,000 cases) of the appeals were accepted for hearing in the Supreme Court.

For the US, this figure is around 1 per cent. It is easy to go in appeal from a lower court to a higher court, say, Supreme Court. This adds to the backlog. To improve the investment climate, judicial reforms are needed.

Institutional FACTORS

Now, to corruption, the political environment and the judiciary. The recent verdict by the Supreme Court banning a politician in jail or police custody to fight elections is a welcome move. Judgments on political issues should be delivered in a few years. Political funding is opaque and non-transparent. It is mobilised by looting the exchequer, extorting money from the public or by selling patronage.

Another alternative is creation of some institution that will shoulder part of the courts’ burden. The National Human Rights Commission and the Child Rights Commission have been set up because the judiciary failed to check the rise in atrocities. Similarly, institutions such as Election Commission, Telecom Regulatory Authority of India, Central Electricity Regulatory Commission, and the Securities and Exchange Board of India have set examples of good governance. Finally, the Public Procurement Bill 2012 is also expected to reduce number of scams arising from government procurement such as in the Common Wealth Games.

(The author is with Glocal University.)

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Published on September 18, 2013
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