India’s corruption conundrum

Last year was not a good one for scandals involving high-profiled Australian business leaders.

First there was Mark McInnes, who resigned in disgrace after admitted he had acted inappropriately towards a junior female staff member. Then former rich list member Ron Medich was arrested for his alleged role in the conspiracy to murder former business associated Michael McGurk.

These cases stood out because on the whole, our business leaders are a pretty well behaved bunch. There are relatively few instances of illegal behaviour and thankfully, allegations of corruption are equally rare.

Unfortunately, that is not the case in India, where overnight a billionaire property developer was taken into custody for his role in an alleged corruption scandal that is believed to have cost the Indian taxpayer a staggering $40 billion.

Shaid Balwa, managing director of Indian developer DB Realty, is the vice-chairman of telecommunications company Etisalat DB, formerly known as Swan Telecom.

Indian prosecutors have alleged that Swan was involved in a scandal in which they claim former Indian telecoms minister Andimuthu Raja favoured some companies when allocating 2G telecom licences back in 2008.

The Indian Government has estimated that by allegedly awarding the licences away on the cheap, the Government was denied $40 billion in revenue.

Raja, who was arrested last week along with three of his aides, has denied all wrongdoing, as has Balwa.

However, as the Financial Times pointed out overnight, the Indian stock market it down 14% since news of the scandal first broke in November. Foreign investors have withdrawn more than $1 billion in funds, apparently fearing a rise in corruption in the country.

The case will of course raise questions in the minds of entrepreneurs that do business in India, or are intending to.

Clearly the country remains one of the most attractive growth prospects in the world, but it’s equally clear that doing business in India requires lots of research, plenty of local knowledge and expert assistance.