Just how corrupt is India?

Transparency International has not one regular corruption index, but three. There is a Corruption Perception Index, a Global Corruption Barometer and a Bribe Payer's Index. What has just been published and reported in the media is the 2005 version of the CPI.

As TI makes clear, this is perception about corruption, as opposed to actual instances of corruption, captured in the GCB. Moreover, unlike the GCB, the CPI is not a public opinion survey. Responses are restricted to business people and country analysts. It is constructed such that scores range between 0 (highly corrupt) and 10 (highly clean). India obtains a score of 2.9, compared to 2.8 in 2004.

Incredible! Corruption in India is down

This gives India a mid-point rank of 88 among 159 countries; other countries bracketed with India are Armenia, Benin, Bosnia and Herzegovina, Gabon, Iran, Mali, Moldova, and Tanzania. Media reports have focused on the rank improvement from 90th in 2004 to 88th in 2005.

This must be seen in the context of only 146 countries being ranked in 2004. The other point to note is that TI has a threshold score of 3, and countries with scores lower than 3 (this includes India) are regarded as possessing serious corruption problems. About half the countries ranked have such problems.

Corruption has many angles. There is the big-ticket corruption associated with government procurement, including defence and elections. There is the smaller or petty variety of corruption associated with procedures and discretion at the petty functionary level.

The CPI's primary focus is the latter, particularly in the interface between enterprises and the government, with the interface between citizens and the government figuring more in the GCB. The positive correlation between corruption and economic development is obvious, although there may be debate about which is cause and which is effect.

In an earlier study on South Asia, TI estimated that if corruption levels in South Asia were to decline to the levels prevalent in the Nordic countries, the increment to GDP growth could be 1.5 percentage points. This may or may not be true, since many instances of corruption are transfer payments in national income accounting.

However, the fact that corruption imposes transaction costs and hurts the poor more, is obvious. A UN Convention against Corruption has been ratified and will enter into force in December 2005. This focuses more on cross-border issues.

Domestically, TI advocates public access to information about budgets, revenue and expenditure, increased resources for anti-corruption efforts, ratification of anti-corruption conventions, and civil society vigilance. These are desirable objectives, but implementation is fraught with problems.

Indeed, the UPA government's attempt to increase public expenditure, despite corruption and leakage, is defended by references to Right to Information Acts, decentralisation, and panchayat, as well as NGO involvement. True, there are some instances of success, including through e-governance.

But there is no obvious way to replicate and clone these throughout the country. And despite the UPA's talk of improved governance, little has materialised in terms of implementation.

The silver lining is the advent of information technology, which makes transparency, data analysis, and even plain access to documents and numbers much easier. In addition, IT has facilitated media attempts to capture corruption on film. The Indian score may well move to 3.0 in 2006.