In our study “India business climate indexThe topic “was discussed by many entrepreneurs”Corruption” cited as one of the biggest obstacles to growth. We would therefore like to take a closer look at this explosive topic here. In contrast to the subjective feeling of our respondents, we encounter the phenomenon relatively rarely even in India Corruption “in the classic sense”.
We investigate to what extent the German middle class in India is actually “slowed down” by corruption and what really lies behind the specter of “corruption”. And most importantly – how to deal with it.
The objective figures say: Corruption is flourishing in India!
In the current corruption ranking (Corruption Perception Index According to the NGO Transparency International), India ranks 79th out of 176 countries. This puts India in pretty bad company and on par with Serbia, Brazil, Turkey and China. So, objectively speaking, one cannot say that everything is fine in India when it comes to corruption.
The evil of “petty corruption” is primarily a problem for the poor
In fact, in India you can always observe with your own eyes the “daily petty corruption” or become its “victim” or perpetrator. For example, a traffic police officer randomly stops you on the street, criticizes you for something trivial, and only lets you go when you hold a 100 rupee note under his nose. Very few people feel like it, to get involved in discussions now and therefore buy valuable life time with a manageable amount of money.
More or less secretly, most Indians who can afford it use the power of money to buy one or two advantages “last minute”. For example, when it comes to this, to get a ticket for the fully booked train to Mumbai. In India, this kind of “petty corruption” is seen as a necessary tool that everyone uses or complains about, depending on which side they are on.
Such cases of corruption now only marginally affect foreign entrepreneurs. Maybe he even takes advantage of the opportunities that this widespread bad habit opens up to him every now and then. This also shows what is wrong with Indian society - in many important and urgent situations in life, it is difficult to make progress on the “normal” path. Basically, this omnipresent misconduct should rather be described as abuse of office, arbitrariness and petty crime and it always harms the poorest people who are not “involved” and cannot buy any advantages in the struggle for life.
Potential for corruption in administration
However, there are areas where real corruption can exist as a real danger for entrepreneurs: in public administration and especially in approval processes.
Actually, no one in India can deny you your rights, since India is officially a constitutional state. However, the granting of the same can be delayed as much as possible…. Because time is money - and so sinister elements in the Indian bureaucracy use the many opportunities for delay and also deliberately provide false information, in order to earn “acceleration money”, the so-called “speed money”. In plain English: a bribe to get what you are legally entitled to anyway.
And so in the past, middle-level civil servants in the relevant offices were able to achieve considerable prosperity. But these golden times are now slowly coming to an end. Prime Minister Modi seems to really mean it when he talks about it, to eradicate corruption in the country. And even if this is just political lip service, the digitalization of all administrative processes is helping to ensure that the opportunities for corruption in office are dwindling every day.
A bizarre but true story on the side: After Narendra Modi took office, quite a few observers complained that no more permits were issued in public administration and that all projects were “on hold”. The reason: Because no one dared to do it anymore, No more decisions were made to take the usual bribe.
The media and civil rights activists are actively fighting corruption
In principle, however, foreign companies and their representatives in India are significantly less affected by bribe demands than purely Indian companies. Because Indian officials cannot assess foreign companies and their managers, they are cautious. The risk that the process will run uncontrolled is too great for many officials.
If you are nevertheless confronted with corruption, ignore any hints and concentrate solely on ensuring that you fully comply with all requirements. Unless you violate objective criteria, you will get everything in India - it may just take a little longer.
Faith is the other way around, Using the power of money to “cheat” yourself beyond a rule or requirement is quite risky. If you are not really in the right and have once paid a bribe to an official, you will have to pay him for the rest of your life. And it will become more and more expensive over time, otherwise your failure will be exposed. In India, there are also “subscription bribe payments” – without the option to cancel!
Therefore, always plan enough time for your administrative procedures, approvals and administrative processes and always meet all requirements 100 percent.
Corruption vs. Nepotism
When you talk about corruption in India, it's basically often nepotism or nepotism meant. This refers to excessive obtaining of benefits by or for family members, family members, relatives or even friends.
From our point of view, this almost epidemic nepotism is India's biggest problem because it can be observed at all levels. Nepotism makes competition, fairness, quality awareness, objectivity and sustainable business impossible. Instead, public and private funds and resources seep away in non-transparent networks.
Corruption vs. Kick-Backs
The so-called “kick-backs” or hidden commission payments are also often described as corruption. But from our point of view they are a phenomenon in themselves.
Kick-backs are ubiquitous for personal financial gain
In India it is typical for so-called “advisors” to try – even without being asked, to arrange transactions or influence decisions in favor of a particular provider or supplier. If this succeeds, you can make a personal profit through the “kick-back”. However, such “advisors” ultimately distort competition in the market.
Conversely, if someone asks you for fees or commissions in order to influence a potential customer's purchasing decision in your favor, it clearly shows that you are talking to the wrong person. Because at the same hierarchical level, corruption in the sense of bribes is not an issue at all in India. Your own pride is too great for that and the potential loss of face is too risky. Only identify and negotiate directly with the decision-maker!
Of course, such bad habits can also affect your Indian company. It is not uncommon for your own employees - especially in purchasing - to collect commissions from your suppliers. You can only respond to such misconduct by immediate dismissal. The application of the four-eyes principle and rigorous and regular Audits There are necessary preventive measures in your own Indian company for clean and transparent business.
Conclusion on the topic of corruption in India
In our opinion, the term “corruption” is too broad and too unspecific to speak about it in general terms or to assess the phenomenon.
In any case, if one understands the above-mentioned pointers, corruption in India is an easily preventable evil. With some knowledge about nepotism and the misunderstood entrepreneurial spirit of some market participants, you can achieve your goal in India without using dark money to help.
If you have any more questions or need advice in a current case, simply contact us.
