India’s costly culture of corruption

New Delhi

The perfect metaphor for the new India can be found on the new highway connecting this stately capital and Gurgaon, a Tysons Corner-like edge city of gleaming office buildings, shopping malls and high-rise condominiums in various states of construction that is already home to 3 million aspiring young professionals.

Steven Pearlstein is a Pulitzer Prize-winning business and economics columnist at The Washington Post.

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The high-speed roadway, part of India’s infrastructure boom, boasts four lanes in each direction. Most of the time, however, there are five lanes of traffic — testimony not only to how fast the Indian economy is growing but also to the Indian penchant for crossing lines and ignoring rules that get in the way of their ambitions.

Traffic lawlessness is a small problem for India. The much bigger one — the one everyone is talking about these days — is corruption.

The telecom minister is in jail, awaiting trial on charges that he sold wireless spectrum to many of the country’s biggest business groups for billions of dollars less than it was worth. His top aide recently hanged himself, and once-celebrated billionaire oligarchs are now being hauled before investigators.

Several-billion dollars have turned up in the foreign bank account of a politically connected businessman, said to be just a fraction of all the political “black money” that is laundered through tax havens such as Mauritius before returning to India disguised as foreign direct investment.

The government’s nominee to head an ethics watchdog commission was so ethically challenged that the Supreme Court had to step in to block his nomination, even as a former chief justice is now the subject of criminal investigation.

And if all that weren’t bad enough, one of the icons of the Indian diaspora, Raj Gupta — former managing director of McKinsey & Co., director of Goldman Sachs and Procter & Gamble, founder and chairman of the Indian Institute of Business — has been caught on tape providing inside information to hedge fund manager Raj Rajaratnam.

“The sheer size and audacity of this corruption has shocked the nation,” said G.V.L. Narsimha Rao, a political pollster.

Well, maybe not shocked, exactly.

After all, this is a country where people of a certain age still remember when you had to bribe somebody to get a train ticket, a phone line or government approval for a new piece of business equipment. The “License Raj,” and the petty bribery that it gave rise to, were said to have ended in 1991 with the market liberalization and deregulation pushed through by then-Finance Minister Manmohan Singh.

Twenty years later, Singh is prime minister, but it is still not uncommon to hear of people greasing palms to get a college scholarship, tax refund or mortgage from a state-owned bank. By various estimates, 15 to 50 percent of government subsidies for the poor are siphoned off because of fraud. Among the upper middle class, it is common to have two phone lines at home, in case one of the lines is cut by workers in the state phone monopoly looking to extract a bribe for reconnecting it.

Vinod Mehta, editor of Outlook, the Time magazine of India, explains that a web of restrictive laws governing the use and transfer of land make anything real estate-related a target-rich environment for bribery, and accounts for most of the corruption. Real estate developers report that the under-the-table costs of expediting the dozens of approvals can run into seven figures for major projects.