Data cafe: The graft hurdle

By: | Published: May 12, 2016 6:11 AM

The World Bank Enterprise Surveys, that find 1 in 3 businesses worldwide constrained by corruption, show how graft is proving to be a serious hurdle for business in India

The World Bank Enterprise Surveys, that find 1 in 3 businesses worldwide constrained by corruption, show how graft is proving to be a serious hurdle for business in India. Out of the 9,281 firms surveyed between June 2013 and December 2014, most (19%) listed corruption as the top challenge they face in the business environment in India. While the next big obstacle was access to power (listed by 15.3% as the top challenge), India’s high-corporate tax regime was a close third (13%). Informal sector practices (12.1%) and access to finance (11.7%) round off the worst-five afflictions of the business environment in India.

Curiously, India still does marginally better than its South Asian counterparts on graft. Bribery incidence, or the percentage of firms experiencing at least one bribe request, in India was 22.7%, compared with 24.8% for all of South Asia. In terms of bribery depth, or percentage of public transactions where a gift or informal payment was requested, Indian respondents said that nearly a fifth (19.6%) of all such transactions had needed greasing. In both respects, India fared worse than the rest of the world (17.6% bribery incidence, and bribery depth, are much lower 13.7%). For Indian firms, even getting utility services involves significant expectations of having to pay bribes—the Survey finds that over half of Indian firms were expected to “give gifts” to get an electrical connection (51.5%) or a water connection (52.5%). Here, India performs worse than not just South Asia (37.3% and 36.7%, respectively) but the rest of the world (16.5% and 16.1%) as well. Setting up a business, too, remains a difficult proposition in India compared to the rest of the world as nearly 26% of Indian firms are expected to grease the authorities’ palms for obtaining an operating licence (compared to 14.8% of firms across the globe) while two-fifths are expected to give bribes to get an import licence (world average, 14.4%). Further, two-fifths of Indian firms are expected to illegally incentivise the issue of construction permits (versus 23% of firms worldwide). With India ranked 130th in the 2016 ‘ease of doing business’ rankings, the government has its task cut out. It has to begin with fostering a freer market.

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