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India | Modi’s Operandi: is India tackling corruption?

India | Modi’s Operandi: is India tackling corruption?

Two years in, the Modi administration has enacted several measures aimed at addressing this issue. However, it remains to be seen whether the Modi administration and Bharatiya Janata party more generally can fully deliver on its electoral promises in a country as large and complex as India.

Narendra Modi led his Bharatiya Janata Party (BJP) party to power in 2014 declaring ‘na khaunga, na khane dunga’ (‘I will not be corrupt, and I will not allow others to be corrupt’), a thinly veiled reference to the corruption scandals widely perceived to have brought down the previous government led by the Indian National Congress.

Modi’s ambitious agenda for India encompasses physical infrastructure development aimed at boosting business by connecting India’s agricultural, industrial and economic centres, coupled with improvements in education, public health and housing. Meeting these goals requires considerable foreign investment and the mere fact of Modi’s election appears to have heartened foreign investors: in 2015, India overtook China to become the world’s largest recipient of foreign direct investment (FDI).

The Modi government remains keenly aware, however, that endemic corruption across all sectors of the Indian economy leaves potential investors wary, and could ultimately prove a stumbling block to Modi’s ambitious reforms - which political analysts agree he hopes to have two full parliamentary terms of five years each to implement.

Unsurprisingly then, Modi’s government has moved fast to put in place two anti-corruption laws aimed at stamping out corruption in the public sector. But while the laws represent India’s most robust anti-corruption measures to date, they have been met with a hailstorm of criticism from anti-corruption NGOs and quarters of the Indian media, which claim that the bills have been watered down and will have little practical effect: recent newspaper headlines have openly asked if the BJP is even interested in putting effective anti-corruption measures in place.

So, do these bills have more bark than bite, and are they likely to have any impact on the corruption environment in India?

Who guards the guards?

Two key pieces of legislation have been working their way through parliament in the two years since Modi took power. Although both were proposed by the previous Congress-led administration, it is the BJP which has breathed life into these new and proposed laws, and given them the potential to address corruption in India in a meaningful way.

The first law addresses ‘lack of oversight’ - a key reason why serious corruption has previously gone unpunished in India. Although India currently has a number of anti-corruption bodies, these are often perceived as acting under the influence of the government of the day. The result has been both that politicians and businessmen close to the government have often escaped investigation. The new bill, the Lokpal and Lokayuktas Act (‘LLA’) will create a Lokpal and Lokayuktas (federal and state-level ombudsman) which are specifically designed to investigate corrupt politicians. Crucially, the BJP has taken concrete action to ensure the ombudsman are free from political influence: in July 2016, the government pushed through amendments to the bill which allow a representative of the largest opposition party to sit on the committee to select the Lokpal. The process of selecting a Lokpal is now underway and when it is complete India will, in theory at least, have its first truly independent anti-corruption watchdog - an unprecedented achievement for the incumbent government.

Despite this, the government has been criticised for some aspects of the legislation, namely for watering-down the Act’s originally far-reaching powers. The original Act required public servants, along with their dependents, to submit a declaration of assets and liabilities to the state, in order to help law enforcement agencies to detect suspected corruption. But family members of politicians complained that requiring them to declare assets would expose them to kidnap and other threats: the BJP conceded and in the July 2016 amendments they indefinitely suspended the deadline for all public servants to declare their assets. Although this concession removes what could have been an important tool in addressing corruption connected to family members, it does not detract from the BJP’s overarching achievement of creating a neutral body to investigate officials who had previously been allowed to act with impunity.

On other points, the government has insisted on standing strong. It courted criticism from NGOs that complained that provisions of the Act that will place any non-government organisation that receives more than Rs 10 million ($150,000) in government funds under the remit of the Lokpal. This will mean that its staff are classified as government officials and are subject to the same disclosure requirements as politicians. This provision of the Act remains in place (although is temporarily suspended to allow for new debate in parliament), and ensures that public resources cannot be abused by any party.

Removing temptation

The LLA is just one cog in the wheel of the BJP’s anti-corruption drive, and the government is acutely aware of the need to stop bribes being offered in the first place. India has long ignored the role of bribe-givers in encouraging officials to abandon their public duty. The government has chosen to tackle this by pushing forward another proposed law - the Prevention of Corruption Act (Amendment) Bill of 2013 - which will, for the first time, penalise private sector organisations which pay bribes. The effect of this law is to make companies and their directors liable for bribes paid either by their employees, or by third parties acting on behalf of the company, and is in this sense similar to the UK Bribery Act.

While the press has complained that the two years the BJP has taken to pass the bill are an indication that the government has tried to stymy the legislation, the opposite appears to be true: the bill that has emerged removes many vagaries in the original legislation, now requiring corruption trials to take place within a two year period (anti-corruption trials up until this point have taken an eye-watering eight years, on average, to conclude) and dramatically increases the minimum custodial sentence for those involved in bribery from 6 months to 3 years. These bold moves, and the fact that the BJP has been willing to push for these against powerful vested interests, shows that the government has made concrete efforts to address its country’s corruption problem.

A promising future

There is still a long way to go to stamp out corruption in India, but recent efforts by the government to legislate against it are encouraging. Moves to bring the country into line with international anti-corruption standards shows that the political elite is starting to take India’s corruption problem seriously. While the effect of the laws is yet to be seen, the teeth the government has given them are promising and put concrete action behind the pledge with which Modi came to office.

Image: Obama and PM Narendra Modi of India Visit MLK Memorial Alex Wong/DPA/PA Images

Published: 27th September 2016
Categories: Company News