SCAM IN INDIA & WALL STREET VIEW

The power of compounding seems to be working overtime when one counts the addition of zeroes to the size of scams hitting India. Over the past 4 years, the numbers have been mind boggling! Corruption has been a menace that has hit the Indian economy harder than any natural disaster. Unfortunately, the roots of the same have been so widespread over the decades that tackling it has been a tall order.

An interesting article in the Wall Street journal had put into perspective how the government could have utilized the funds from the 2G spectrum had no scandal taken place. Food for every destitute Indian for the next decade. Funding of the flagship employment program for India's marginalized for the next five years. Primary schooling for every Indian girl for the next three years. The reduction in every Indian's tax rate by 15% for the next year, or the reduction of India's outstanding debt by 10%. Thus the absence of the scams over the past 2 decades could have meant a huge boost to the Indian economy. But the chronology of scams shows that policy inaction has left the culprits more confident over the years. In fact, in the biggest scam in Indian history that was uncovered in 2010, members of the government itself were found responsible.

Chronology of scams in India	Size* (Rs m)
Bofors scam, 1989	400
Harshad M scam, 1992	6,000
Telgi scam, 1995	20,000
Hawala scandal, 1997	1,000
Ketan P scam, 2001	50,000
Satyam scam, 2008	90,000
CWG scam, 2010	80,000
2G spectrum scam, 2010	1,760,000
Overall corruption	15,550,000
Money laundering	18,860,000

Data source: Wikipedia, Equitymaster
*Estimated numbers

The synonymy of corruption with India has indeed left a bad taste in moth of global investors. Indian stocks witnessed a huge downgrade in valuations when the CWG and 2G scam were uncovered. Since then, investors have dumped every stock that has been even remotely in the news for being associated with a scam. But the problem does not end there. There's another scam that dwarfs absolutely everything that has occurred so far. And this scam answers to the name of money laundering. As per the results of a study on corruption, published by Rediff, the size of money laundered by Indians stands at staggering Rs 18.8 trillion. The same is apparently 1.2 times the overall size of corruption menace in the country. We believe that it is time both the government and companies realize that being corrupt is no longer going to take them too far.

source:equitymaster