OF

(SHOULD WE REALIZE THE IMPACT OF BRIBERY ON INDIAN

ECONOMY)

SUBMITTED BY:- GUIDED BY:

MOHAMMAD ABBAS Mr.. Vishwas
chakranarayn
Regd. No- 10906034

SUBMITTED TO
Department of management Lovely Professional University
Phagwara

ACKNOWLEDGEMENT

I take this opportunity to present my vote of thanks to all

those guidepost who really acted as lightening pillars to
enlighten our way throughout this project that has led to
successful and satisfactory completion of this study.
We are really grateful to our COD Mr.Devdhar shetty for
providing us with an opportunity to undertake this project in
this university and providing us with all the facilities. We are
highly thankful to Mr.vishwas chakranarayan for his active
support, valuable time and advice, whole-hearted guidance,
sincere cooperation and pains-taking involvement during
the study and in completing the assignment of preparing
the said project within the time stipulated.
Lastly, We are thankful to all those, particularly the various
friends , who have been instrumental in creating proper,
healthy and conductive environment and including new and
fresh innovative ideas for us during the project, their help, it
would have been extremely difficult for us to prepare the
project in a time bound framework.
 Name – MOHAMMAD
ABBAS
Regd.No 10906034
Roll no. RS1904A24

Introduction
Corruption and bribery are complex transactions that involve
both someone who offers a benefit, often a bribe, and
someone who accepts, as well as a variety of specialists or
intermediaries to facilitate the transaction. By perpetuating
the ‘abuse of entrusted power for private gain’ – Transparency
International’s (TI) definition of corruption – both the bribe
payer and bribe taker cause damage in a number of ways.
Ultimately, their corrupt dealings create extreme inequity –
both in markets and in societies.

Much blame has been apportioned over the years to the bribe
takers – those who pocket the wealth and take advantage of
the influence and authority that corruption affords them. And,
indeed, bribe takers must be exposed, prosecuted and
appropriately punished. The systems that breed this behaviour
require holistic reform, so that bribes are not demanded in the
first place.

TI believes it is also critical to shine a spotlight on the bribe

payers – whose supply of bribes, irregular payments and other
forms of influence-buying fuel the machinery of corruption. It
has been part of TI’s mission for the past 15 years to curb the
so-called supply side of corruption, both domestically and
across borders.

This report presents highlights of a brand new survey

commissioned by TI, the 2008 Bribe Payers Survey.1 It looks in
detail at the sources of corruption in the international
marketplace, both in terms of where the bribes are paid and
by which businesses. Above all, the Bribe Payers Survey
illustrates how the supply of corruption is viewed by a global
selection of senior business executives, who understand the
markets and market pressures in their own countries, some of
which drive corruption. Based on the results of the 2008 Bribe
Payers Survey, TI has produced an index and two sectoral
rankings:

The 2008 Bribe Payers Index (BPI): a ranking of 22 of the

world’s most economically influential countries according to
the likelihood of their firms to bribe abroad.
Two new rankings of industrial sectors: one that ranks sectors
according to the likelihood of firms in that sector to bribe
public officials; and another that ranks sectors according to
the degree to which their firms use contributions to politicians
and political parties to achieve undue influence on
government policies, laws or regulations – a phenomenon
often referred to as state capture.
The findings of the 2008 BPI and the sectoral rankings show
that many of the world’s most influential economies, and
some key industrial sectors, continue to be viewed as greatly
compromised by international corruption. As such, TI calls on
governments and the private sector to renew their efforts to
curb the supply side of corruption. It is only with concerted
and continued effort that we can stop the abuse of power for
private gain and mitigate the devastating impact it has on
lives and livelihoods the world over.
1. Survey Methodology in Brief
The 2008 Bribe Payers Survey consists of 2,742 interviews
with senior business executives in 26 countries and territories
completed between 5 August and 29 October 2008. The
survey was carried out on behalf of TI by Gallup International,
which was responsible for the overall implementation of the
survey and the data quality control process. Gallup
International relied on a network of partner institutions to
carry out the survey locally.

The countries surveyed were selected on the basis of their

Foreign Direct Investment (FDI) inflows and imports, and
importance in regional trade. Total inflows of FDI and imports
of goods from these 26 countries amounted to 54 percent of
world flows in 2006. In each country there were a minimum of
100 senior business executives interviewed and samples in
each country were designed taking into consideration the
following variables: the size of firms, sector and location.
Additionally, due to the nature of the phenomenon under
analysis, the survey oversampled large and foreign-owned
firms.

To assess the international supply side of bribery reflected in

the 2008 Bribe Payers Index (BPI), senior business executives
were asked about the likelihood of foreign firms from countries
they have business dealings with to engage in bribery when
doing business in the respondents’ country. In short, senior
business executives provided their informed perceptions of
the sources of foreign bribery, and these views formed the
basis of the 2008 BPI.

The 2008 BPI ranks 22 countries. The countries chosen are

some of the world’s largest and most influential economies,
with combined global exports of goods and services and
outflows of FDI that represented 75 percent of the world total
in 2006. Australia, Brazil, India and South Africa were also
included for their role as major regional trading powers. The
2008 BPI is calculated based on two questions from the Bribe
Payers Survey. Senior business executives were first asked
which of the 22 countries to be ranked they have commercial
relationships with. For those countries that they selected, they
were then asked to assess the frequency with which
companies from these countries engage in bribery when
operating in their own (the respondents’) countries. To
construct the Index, the 5-point response scale used in the
survey was reversed, converted into a 10-point scale system
and then a simple average was calculated for each country.
Assessments of a respondent’s own country (12 countries in
total) were not included. The countries are then ranked based
on the mean scores obtained for each country.

Table 1 (page 5) shows the 2008 BPI results along with

additional statistical information that indicate the level of
agreement among respondents about each country’s
performance, and the precision of the results.9 Scores range
from 0 to 10, indicating the likelihood of firms headquartered
in these countries to bribe when operating abroad: the higher
the score for a country, the lower the likelihood of companies
from this country to engage in bribery when doing business
abroad. According to the senior business executives
interviewed around the world, companies from Belgium and
Canada were least likely to engage in bribery when operating
abroad. These two countries are followed closely by the
Netherlands and Switzerland. At the other end of the
spectrum, respondents ranked companies from Russia as
those most likely to engage in bribery when doing business
abroad. No country receives a 9 or 10 in the 2008 BPI. This
means that all of the world’s most influential economies were
viewed, to some degree, as exporting corruption.

Types of Bribery
The 2008 Bribe Payers Survey allows us to evaluate the
informed views of foreign bribery by companies from the 22
countries even further, by exploring the frequency of different
types of foreign bribery.

The three types of bribery assessed included:

bribery of high-ranking politicians or political parties

bribery of low-level public officials to ’speed things up’
the use of personal or familiar relationships to win public
contracts.
To evaluate these types of bribery, senior business executives
were asked how often companies headquartered in each of
the countries they knew about engaged in each form of
bribery. Figure 1 (page 8) depicts the results (see the full set
of results in Table A1 in Appendix three).

Overall, the results from this analysis agree with findings from
the 2008 BPI. Companies from China, India, Mexico and Russia
were reported by respondents to engage most often in the
three practices. Similarly, the top 2008 BPI performers are
seen to engage in them less frequently.

According to business executives with extensive knowledge of

business practices in countries at the bottom of the index,
companies headquartered there exhibit different bribery
patterns when operating abroad. For example:

About half of the respondents reported that companies from

Russia often bribe high-level politicians and political parties
and engage in bribery of low-level public officials, while
somewhat fewer considered it common practice for Russian
companies to use personal and familiar relationships to win
public contracts.
Companies from Mexico were reported by 38 percent of
respondents to be likely to use personal and familiar
relationships to win public contracts, but only by 32 percent to
bribe high-level politicians, political parties or low-level public
officials.
30 percent of respondents indicated that companies from
India are likely to bribe low-level public officials to speed
things up, which was a higher result than the other two types
of foreign bribery assessed.
Even top 2008 BPI performers were reported to be weaker in
some areas than others:

16 percent of respondents considered Belgian companies to

‘often’ or ‘almost always’ use familiar or personal relationships
to win public contracts.
Ten percent reported that use of familiar or personal
relationships is often engaged in by Canadian companies
when operating abroad.
Seven percent of respondents reported that companies
headquartered in the Netherlands often engage in bribery to
low-level public officials to ’speed things up’ when operating
abroad.
When asked about the behaviour of Swiss companies, five
percent of respondents reported that Swiss companies often
engage in bribery to high-ranking politicians or to political
parties or used personal and familiar relationships to obtain
public contracts.
Bribery in Sectors

To provide a fuller picture of how corruption affects the private

sector, TI has used data from the 2008 Bribe Payers Survey to
create two new rankings of industry sectors. The first ranks
sectors according to the degree to which firms in each sector
are likely to bribe public officials. The second ranks sectors
according to the degree to which firms in each sector use
contributions to politicians and political parties to achieve
undue influence on government policies, laws or regulations, a
phenomenon often referred to as ‘state capture’. These
rankings, unlike the BPI, do not focus specifically on foreign
bribery, but assess views of overall sector-specific corruption.

To tackle the supply-side of corruption, it is crucial to

understand the vulnerabilities of different sectors to
corruption risks. The sectoral indices show two of the
significant ways that industries are seen to engage in corrupt
practices. The first – the bribery of public officials – is a
primary form of corrupt
transaction. In this case, certain sectors, namely public works
contracts/construction, real estate and property development,
oil and gas, and heavy manufacturing and mining, are
believed to bribe officials in their business dealings more than
others. The cleanest sectors, in terms of bribery of public
officials, were identified as information technology, fisheries,
and banking
and finance.

For the second sectoral ranking, TI sought to evaluate how

certain sectors might exert undue influence on the policy
process using financial or other means at their disposal. This
practice is commonly referred to as state capture, a term
coined by the World Bank and European Bank for
Reconstruction and Development in their 2000 report on the
Business Environment and Enterprise Performance Survey
(BEEPS). In the report, state capture is defined as ‘the efforts
of firms to shape and influence the underlying rules of the
game (i.e. legislation, laws, rules and decrees) through private
payments to public officials’. 14 These payments may be legal
or illegal, but they create a distortion of both the legal
framework and policy process, with a negative impact on the
broader economy and society.

The practice of state capture is of particular concern because

it extends beyond efforts to secure a particular deal or
business opportunity. State capture implies that the very
framework governing a sector, or even the economy, is guided
by a particular interest, rather than by the public interest. This
practice obscures policy decisions and undermines public
accountability.

In the 2008 Bribe Payers Survey, senior business executives

indicated that public works contracts/construction, oil and gas,
mining, and real estate and property development were the
sectors most likely to engage in practices of state capture.
Banking and finance was seen to perform considerably worse
in terms of state capture than in public sector bribery,
meaning it exerts considerable influence on the rules of the
game. At the other end of the spectrum, agriculture, fisheries
and light manufacturing are believed to be the sectors least
likely to engage in state capture.

A total of 19 sectors have been evaluated in the 2008 Bribe

Payers Survey.15 For the rankings of both public sector
bribery and state capture, respondents were asked their views
on up to five sectors in which they had business relationships.
As with the 2008 BPI, these sectoral rankings therefore draw
on informed perceptions of senior business executives, each
of whom evaluated an average of three sectors.
DELHI — India’s economy is booming, but a big part of doing
business here involves schemes, bribes, payolas, quid pro
quos, etc.

So while India's entrepreneurs are buzzing with brio and great

ideas, they're often thwarted by bureaucratic hassles.

The country ranks 85th on Transparency International’s

“Corruption Perceptions” index, which measures the “abuse of
public office for private gain.” (For what it’s worth, Denmark,
New Zealand and Sweden are the top three. Iraq and
Myanmar take up the bottom of the list with Somalia last at
180. The U.S. is 18th. China is 72nd.)

A recent study on entrepreneurship conducted by National

Knowledge Commission here in India was based on interviews
with 155 entrepreneurs from across the country. About 60
percent said they faced corruption at some time during the
course of conducting (or setting up) a business.

A World Bank report called "Doing Business in South Asia

2007" said it takes 35 to 52 days to start a business in India.
The costs (fees, obtaining registration documents, etc.) are
high and the process involves a byzantine 13 procedures.

With all this mind, I've culled together a little list based on the
premise that getting things done in certain parts of the
subcontinent is about who you know, what you say and how
much you can pay. The following phrases — euphemistic gems
all — were collected from various business owners I’ve spoken
with over the years. They signal that a situation is ripe for a
bribe, and if you want to get that license or those papers or
that project greenlighted, the best thing to do might be to
reach for your wallet:
"You haven't added any wheels to file. How's the file going to
move if it doesn't have any wheels?"

"You haven't made any arrangements for the tea and water."

"You haven't paid the facilitation charge."

"How about something for the kids?"

"How about the UTT allowance?" (UTT=under the table)

In many parts of India, there exists a de-facto system for
resolving traffic tickets (among other things), with which I am
sure many of you are familiar. Typically, when a person is
pulled over for some traffic violation, they have the option of
paying roughly half the official ticket amount as a bribe
directly to the policeman instead of receiving the official
challan (fine). Having directly witnessed this system in action
countless times, I often find myself wondering whether this is
actually such a bad thing.

There are three major reasons why bribery is considered a bad

thing in situations like this. First, the government loses a
source of legitimate revenue. Instead of going into
government coffers, the fine money is going into the pocket of
the policeman. Second, by taking bribes the police undermine
their legitimacy as those who uphold the law. Widespread
knowledge of police corruption is not conducive to
maintenance of law and order. Third, the option of bribery
reduces the incentive for people not to break laws in the first
place (assuming that the bribe is less than the expected
punishment conditional on being caught).

In the Indian context, however, not all of these concerns are

necessarily applicable. The first issue of depriving the
government of revenue is not particularly notable when one
considers that corruption is endemic to almost every
administrative branch of the Indian government, and it is
therefore difficult to determine whether the money is better
off in the policeman’s pocket. If it were a safe assumption that
the government would use the fines collected for some
socially useful purpose, it would be easier to condemn such
instances of bribery. Unfortunately, it is rare that one can
accurately make such an assumption in the Indian context.

The issue of police undermining their own legitimacy also

seems to be a much more muted concern India, primarily
because the police themselves do not enjoy a great deal of
social legitimacy to begin with. Bribery is to a large degree
institutionalized and often considered simply a cost of doing
business with the police. The vast majority of the police force
in India is also severely underpaid – taking bribes like this
allows them to supplement their meager income. As long as
the police are severely underpaid and have the bargaining
power to take bribes, one can only expect that most will.
Assuming that the police will seek to supplement their
earnings with bribes, we can only hope that they engage in
types of bribery that have a relatively low social cost. The
social cost of accepting bribes instead of traffic tickets seems
relatively low compared with say, demanding bribes to file
police reports or to have criminal cases dropped.

Bribery as practiced in this context also maintains some

incentive to follow traffic laws. Since the police will generally
only pull over someone who has actually broken a law, the
bribe replaces the fine as a financial incentive to follow the
rules. Since the bribe will always be smaller than the fine
itself, its possible that the incentive is watered down a bit, but
the fact that bribes are only taken from those who have
broken the rules in the first place maintains some degree of
incentive to follow the law. This is in sharp contrast to hafta
bribes (weekly payments collected from local businesses)
which are more indiscriminate in nature.

We have been reporting from time to time on this blog about

how corruption is widespread (as if I had to tell you that :) in
India and who are the people who take maximum bribes.

However, I was not able to actually provide any numbers on

the extent of corruption in India. Finally after some research,
we have some numbers for you that can quantitatively
measure the extent of corruption.

India Corruption & Bribery Report

--------------------------------------------------------------------------------

What is the amount of bribes requested by people in

India?

The above numbers clearly suggest that Bribery in India is at a

grass root level with close 86% demands were done for $5000
or less (2,50,000 rupees or less, out which more than half
were for $26 (Rs. 1300) or less.

Because, corruption takes place at such a grass root level, it is

extremely difficult to contain it.

Having said that, 14 people out of 100 taking bribes are for
amount more than $5000 (Rs. 2,50,000). Actually, if you look
at the top officials are even more corrupt. I will tell you why I
say that –

The number of big bosses is merely 1%-2% of all officials, yet

according to the report 14% of bribes are of huge amounts,
showing that big bosses are involved even more compared to
low level officials who are taking bribes.

On a sidenote, China’s number is much higher with 24% of

reported demands were for amounts between $5,001 and
$50,000, 6% of reported demands were for amounts between
$50,001 and $500,000, and 6% were
for amounts greater than $500,000. interesting…

--------------------------------------------------------------------------------

What is the nature of Bribe Demands in India?

No guesses here – if you want to get your work done, bribe

em’ ! thats what is quite clear and in line with the notion we
have.

More than half of all the bribes were paid to get the work in
time !

77% of all reported bribe demands in India are related to the

avoidance of
harm, including securing the timely delivery of a service –
which is actually a right of a person (such as clearing customs
or having a telephone line installed) and receiving payment for
services already rendered

Only 12% of the bribe demands were for gaining a personal or

business advantage (including exercising influence with or
over another government official, receiving inappropriate
favorable treatment or winning new business).

One thing for sure, we are now used to this corrupt system
and take it in our stride as part & parcel. We do not want to go
extra lengths and take the easy way out. But this easy way
out is actually the roots of corruption in India.

--------------------------------------------------------------------------------

Who demand bribe in India?

No guesses here !

Whooping 91% of reported bribe demands originate from

government officials in India.

The greatest sources of bribe demands, were from national

level Government officials (33%), the police (30%),
state/provincial officials and employees (16%), and city
officials (10%) respectively .

Do you know which of the two Indian ministries ask for bribe
more than other? – They are Customs office (13%) and
Taxation and Water (9%).

China fares slightly well when it comes to Government officials

taking bribe (85%) – Another major difference is that India
Police (30%) are far more corrupt than their Chinese
counterparts (only 11%).

--------------------------------------------------------------------------------

What is the frequency of Bribe Demands in India?

Nearly 90% indicated being solicited for a bribe between two
and 20 times.

Overall 60% people reported bribe demands of 5 times or

lower from the same individual. However, 9% asked for bribes
more than 100 times.

Compared to China, it differs significantly with 73% people

indicating that they had received multiple bribe requests.
Almost 20% of those individuals reported receiving more than
100 bribe demands in China.

--------------------------------------------------------------------------------

In what form was the bribe requested?

Do you want any tips on how to give bribes? here is what our
corrupt officials prefer..

If in doubt, give cash, as 92% of all bribes are preferred to be

“cash or cash equivalent,” The next best thing is a “gift,” (5%)
including requests for company products, jewelry and similar
items. Less common still, at approx. 1% each, were requests
for hospitality or entertainment items; travel for other than
business purposes; and other assistance, such as
help with a visa, medical care, or scholarships.

Surprisingly, there were no reports in India of demands for

“additional business” or “sexual favors.” In China, those
demands accounted for a combined total of 7% of reported
bribe solicitations.

--------------------------------------------------------------------------------

So, there you have it – How, what, who and why of Indian
Corruption.

[These numbers were gathered from BRIBEline, a project

managed by TRACE International Inc., an anonymous online
reporting tool that collects data about bribe solicitations made
by official, quasi-official and private sector individuals and
entities in India ]

Author: Arun Prabhudesai

Arun Prabhudesai is founder / chief editor at trak.in. He
jumped the Entrepreneurship bandwagon in early 2008 after a
long 13 year stint in I.T Industry. You can follow him on twitter
@trakin or get in touch with him at 91.9822575676.

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