India corruption scandals stall government as lawmakers spar over inquiries

A series of India corruption scandals is likely to add to India's reputation as one of the riskiest countries in Asia for investors.

India’s Parliament was frozen for a 20th successive day Thursday, after opposition parties continued their noisy calls for a cross-party inquiry into a telecoms scandal that has rocked the Congress Party-led government.

In the past few days, the government has managed to pass a couple of minor, uncontroversial bills. But more significant business has been delayed, while shouting has stalled all serious political debate.

The government had planned to push key reform bills in this session of Parliament that would ease land acquisition for industry and help maintain rapid growth in Asia's third-largest economy. Parliament was also waiting to discuss India’s increasingly violent Maoist insurgency and consider laws governing prisons and schools.

“Nothing could be more unfortunate for a democracy than its Parliament not functioning for over a fortnight,” said an editorial in the Daily Pioneer newspaper.

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But with the current session ending on Dec. 13, it seems unlikely that any of the important bills, many of which are controversial, will be passed.

Massive telecoms scandal

India’s biggest ever political scandal came to a head Nov. 14 when Andimuthu Raja was sacked from his post as telecoms minister after he was accused of presiding over the rigged sale of second generation (2G) mobile telephone licenses and bandwidth in 2008.

This is estimated to have cost the country as much as $40 billion – a sum around the size of India’s defense budget, or, by the reckonings of some nongovernmental organizations, enough to feed the poorest 10 percent of Indians for an entire year.

Also in the past month, federal investigators have arrested leading business executives in a housing-loan probe and organizers of the graft-tainted Commonwealth Games for stealing from public funds.

Meanwhile, a series of leaked telephone conversations between a corporate publicist Nita Radia and some of India’s biggest power brokers has gripped India, offering as it does a window into a world of widespread and corrosive corruption involving big business, government, and the media.

Government seeks to take action

The government has sought to take action over the scandals.

On Wednesday, officers from the Central Bureau of Investigation, which is probing the affair, searched for clues at the government-owned bungalow of Mr. Raja in New Delhi. The government’s critics argue this is too little, too late, more than a year after the 2G scam came under investigation.

The telecoms ministry has also threatened to withdraw the 2G licenses from many of the companies that bought them back in 2008 – a move that has been criticized by business analysts, who say it sends a poor signal to potential foreign investors.

“The whole thing is unsettling – people have to know what they are getting into,” says Kunal Bajaj, a telecoms analyst based in Delhi.

Bad news for investors

The affair will only reinforce what was already widely known about doing business in India. According to the Political & Economic Risk Consultancy, based in Hong Kong, India is the riskiest country in Asia for investors thanks to pervasive corruption and bureaucratic inefficiency. What's more, India ranked 84th out of 180 countries in Transparency International's Corruption Perceptions Index.

In a bid to make the government introduce structural changes that would more effectively curb corruption, a group of India's most prominent and popular civil society leaders have joined to push for new anticorruption legislation.

The India Against Corruption movement argues that the two main bodies – the Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI) – responsible for dealing with graft cases are "ineffective".

"No vigilance or anticorruption body in our country is independent and final. Either an agency is recommendatory or it is vulnerable to political influences or both," the new group wrote in a letter to Prime Minister Manmohan Singh. “This has led to a situation where the high and mighty never get punished for corruption."