Thursday, March 27, 2014

Estimating the size of corruption in India

Everybody knows corruption is rife in India. Just how bad is the problem? The Economist attempts to quantify corruption in India using three methods:

The first is to tally the money made from scams, based on estimates from officials and investigators. (Our calculation uses realised profits, or the present value of anticipated profits. We use the low end of some official estimates.) The second approach, which is applied more widely in our new index of cronyism (see article), measures the relative performance of billionaires in industries, such as mining and property, that are prone to rent-seeking relative to those in other lines of business (see chart 1). A final method tracks the relative performance of an index of politically linked listed firms constructed by Saurabh Mukherjea of Ambit Capital, a broker (see chart 2). An average of the approaches suggests the gains from rent-seeking over the past decade peaked at about $80 billion. That is equivalent to 7% of the stockmarket’s value today. It is worth noting, though, that the share of GDP for the rent-seeking billionaires and the premium on politically connected firms are no longer what they were in the boom years.

Assuming bribes paid were 5-15% of money made by businessmen, the Economist estimates that total bribes paid would amount to $4-$12bn.  Presumably, this is over a decade. Translating into rupees, this amounts to Rs2400-7200 crore every year.

1 comment:

Anonymous said...

Corruption: Is it so bad? Particularly, the money paid remains in circulation in the country and does not out?

Corruption is loss of money or unequal distribution of money or both? I think it is latter.

7200 cr per year - Yes, it is huge, but no so huge these days when the numbers around are in Lac crore...

More than estimation, there is need for solution. Even after verbose on the subject, I, as citizen, am still waiting for one person to be sentenced (not trial) to jail for 'x' number of years, together with replenishing the loss he/she caused to exchequer. That is still not happened and not sure when will see the light at end of tunnel (assuming & hoping there is an end)...

Btw...what is happening to Lokpal? President signed it...what is execution news and plan?

By the way, is Corporate Governnance (Clause 49 and others) somewhere accountable for this figure of Rs 7200 cr per year..meaning, a strong Clause 49 could have preclude 7200, which it failed and hence ought to be held accountable...