How does corruption impact on foreign companies doing business in India?
Corruption is a difficult topic in any country – no less India. We surveyed foreign companies across the globe and how does corruption impact on foreign companies doing business in India was one of the key concern areas. Many people will be very uncomfortable to talk about the issue at all, and many will officially say that things are much much better. Many will informally tell you that it is still a problem.
Transparency International still ranked India as 79 of 176 countries surveyed. Its score marginally improved from 38 in 2015 to 40 in 2016, with most the country scoring 40 out of 100 (100 being completely transparent). A very strong indicator that this is changing was the Indian public response to demonetisation back in November 2016. Prime Miister Narendra Modi got a great deal of very positive feedback from a lot of people throughout most of the period where the largest currency notes were withdrawn without any notice and people were forced to either deposit stacks of large notes in the bank and make it visible (to tax authorities) or to loose the money altogether. There are many stories from this period – both funny and tragic – of the super-rich and the lower middle class dealing with this sudden block in the cash economy that has fuelled India for so long, but the most consistent story has been the positive appreciation of this attempt to formalise the informal economy. Over nine million new tax payers have now joined the formal economy thanks to this push and this will push up the tax revenue received by the government (from 16.7% of GDP currently). While there were many criticisms of the implementation by RBI, the overall opinion seems to have been positive – by both the public and the business community – and this suggests that there is opportunity for more efforts to curb corruption.
Saying all that, it is still true that every business and every individual can tell you examples both personal and professional of facing corruption and trying to challenge it – often without success. At the same time there are more and more examples of activities that used to be rife with corruption (filing your taxes or getting your identification) that now have been automated or better policed and no longer require citizens to pay bribes for every single service.
It will be very interesting to see where India ranks in the 2017 Transparency International Report.
One way to avoid corruption is to ensure all your paperwork is in place and you never require special help. M+V experts can help ensure your company is can help you ensure your India business 100% legally compliant and to help you get all your required legal registrations and reporting requirements in place.