Corruption in India- does it affect growth?

Arvind Subramaniam poses the question in today's BS. His answer is equivocal, as is to be expected (of any economist, on the subject of corruption). Contrary to what the popular press would have us believe, the evidence from economic analysis does not suggest that corruption- or bad governance- necessarily derails growth. It's not just India's example that is telling; there is China's and, before that, of numerous other countries, such as Indonesia.

Subramaniam argues that India has managed to sustain growth by intense use of skilled labour, while not making the most of unskilled labour. Since skilled labour is drying up fast, he says, land will become an important factor. Since corruption will push up land costs, it will impact adversely on growth.

I am not so sure. Land is already mired in corruption and its costs have already shot up in many parts without affecting growth. I suspect that the contention that the 'governance deficit' will undermine growth is fated to go the same way as the contention about the 'infrastructure deficit', especially the shortage of power in the nineties. Remember the figures put out as required for investment in infrastructure? Investment, especially FDI, did not come anywhere near the projection but that did not prevent the Indian economy from taking off in the last decade.

Indian business found ways around the infrastructure shortage. They will do the same with shortage of labour or land. The Economist, in another article, talks about the 'Hindu rate of self-deprecation'. It suggests that grumbling about approvals required or corruption has not stopped India from growing so far. I would venture to suggest it won't do so in the future either.