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Corruption in India Stifles Economic Growth, Fosters Violence against Whistleblowers

September 13, 2010

By Karly Curcio

Karly Curcio is an economist at Global Financial Integrity.

Cumulative Illicit Financial Flows out of India from 2000-2008 Total Over US$125 Billion

Photo: Trey Ratcliff | CC BY-NC 3.0

India’s economic boom continues with an average growth rate of over eight percent between 2004 and 2009 by GFI calculations. As the money flows, however, the poor continue to stay poor. Corruption is rampant in India as it is in almost all developing countries. Both corrupt political and corporate officers manage to siphon off funds – intended to aid the people of India – off to political and private sector elite. Recent efforts in India to challenge this corrupt affront on humanity have been met with severe violence.

An article in the Washington Post reviewed recent violent crimes in India related to whistle blowing on corrupt acts and proposed legislation to protect individuals who divulge information about corrupt officials. According to the article, “eleven people have been killed or found dead in mysterious circumstances in India this year after exposing corruption in schools and public utilities, illegal mining and unauthorized water and electricity hookups, according to activist groups. Hundreds of others have been attacked, threatened or harassed for similar crusades.”

Much of the work at GFI studies illicit capital flight out of developing countries. GFI research from a report on India soon to be released shows that from 2000 to 2008 India had more than US$125 billion in cumulative illicit capital flight. Much of the funds flowing out are generated at home within India and then sent illegally abroad. So the growth of corruption and India’s underground economy contributes significantly to illicit financial flows from the country.

As India develops economically and builds better infrastructure, one would think that all Indian citizens would see an increased standard of living and that the income inequality levels would fall. However, the gini coefficient, which measures income inequality, has actually increased over the time period measured,  2000-2005, from 0.32 to 0.37 on a scale of 0 to 1, with 1 being the highest income inequality. We see in India – as in other currently developing countries – that as the economy grows, so do illicit flows. This positive correlation exhibits the increased incentives to conduct illicit flows, mostly because more money is flowing within the system to steal away and constant greed is tapping into that pool.

India Ranks 84 out of 180 countries in Transparency International’s 2009 Corruptions Perceptions Index ranking. As corruption continues to plague both the country and its ability to develop free and fair institutions to monitor and charge corrupt officials, the majority of India’s economic growth will never make it to the people of India who desperately need it the most.

Stopping, or at the least curbing, corruption is important, but there are many ways to work towards that effort. India’s legislative efforts to protect whistleblowers and those who work to fight corruption is a step in the right direction, however more must be done. Global efforts to make it harder to move illicit funds around the world would help. These efforts include increasing financial transparency, as well as stronger work by developed-country governments to crack down on their home banks accepting these laundered, illicit funds. The developed world’s continued passive acceptance of illegal money sets a poor precedence for reigning in such activities.  By implication, it says we will not do all that we can to help the poor people of every nation to break free of a toxic cycle of corruption that often leads to life-long poverty and sometimes—if you try to stand up against such corruption—death.

Editorial Note: Later this year, Global Financial Integrity will release a new report measuring illicit financial flows out of India from 1948 through 2008. Sign up here to receive notices when new GFI reports are released.

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Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

  • Abhinav Bhatnagar

    Looking forward to the release of this report.
    I wish this report gets translated into Indian languages and gets taken up by the Indian media.
    I also request you to involve more Indian education institutions in such studies.

    • http://www.myskow.org Rajeshwari

      I am appalled at the ongoing corruption in India even with its economic growth in the almost 10% per year range. People like Santosh Hegde of the Lokayukta in Karnataka are the last hope to address corrupt practices by politicians who pretent to be above the reach of law and order. God bless Santosh Hegde and God help the poor citizens of India!

  • http://www.taxworldweb.com E Kruger

    Could anyone imagine the total amount of Illicit Financial Flows from all BRIC countries?!

  • sreedharrao ravinutala

    Very small emloyees in government know to accumulate unimginable amount
    of money in india. It is very well possible this kind of money sent out of india.Generally small fish only get caught in corruption cases .Big fish will never be caught .As society people accept bribes as a way to get work done in government .

  • DR.SHUKLA

    IT IS GOOD OME AGENCY SUCCESS TO FIND OUT FACT, NOW PLEASE HELP S TO FIND OUT NAMES AND WHERE THE AMOUNT DPOSITED N WHICH ACCOUNT. AS PER ANY COUNTERY LAW THIS IS VERY BIG SCANDALE AND SWISS BANK WILL ALSO CONCIDER THIS FACTS ON THE BASIS THEY SHOULD DECLRE THE NAME OF ALL ACCOUNT IF IT IS TRANSPERANT IN THIS TYPE OF CASE AND COLLECTING FUND

  • DR.SHUKLA

    IT IS GOOD OME AGENCY SUCCESS TO FIND OUT FACT, NOW PLEASE HELP US TO FIND OUT NAMES AND WHERE THE AMOUNT DIPOSITED IN WHICH ACCOUNT. AS PER ANY COUNTERY LAW THIS IS VERY BIG SCANDALE AND SWISS BANK WILL ALSO CONCIDER THIS FACTS, ON THE BASIS THEY SHOULD DECLARE THE NAME OF ALL ACCOUNT IF SWISS BANK IT SELF IS TRANSPERANT IN THIS TYPE OF CASE AND COLLECTING FUND

  • http://gmail K.Singh

    Even though there is not much surprise over the news, it is worthwhile to know more
    andmore, now that the Indian/Swiss authorities are engaged in a dialogue on this
    subject. We must do everything to uncover such transfers which are not only illegal,
    but pin-point who the “real” enemies of the State are! It can be easily surpmised that
    there is a close nexus between the high-ups in government, political system, and the
    unscrupulous businessmen.
    Noise is always made about “evidence” as if there is not enought of it; yet no one — not
    to our knowledge — has done anything credible (no matter which party is ruling) to put
    a stop, and make urgent efforts to recover huge amounts, so the nation can move
    ahead, and poverty is reduced. Let a white paper on the subject appear within the
    country. It is pleasing to read blogs/comments of serious-minded.

  • http://gmail K.Singh

    Recent remarks of the Law Minister regarding comments of the Chief
    Vigilance Commissioner (retired) sounds like a joke, as he feigns that is not
    much corrupt element within the govermnent channels.
    A good law Minister will like to ‘listen’, read and unlearn more and more to reach
    at the bottom of the problems. Alas, they are part of the problem!

  • rajesh ruparel

    Recently my house got burglared in india, we caught the robber and handed over to police. they recovered everything. Then came the corruption.they retured only 75%. They said we did a big favour by recovering the goods about rs 300,000. ie us$ 7500.. So we take 25% and return the rest to you. Agree or u go to court and it will take 2 years and before u get your goods.And the goods may not be in original condition ie we replace the real gold jewellery with fake one. Finally they a signed affidait from us that they did a great job.We have no choice

    I find out this is common street knowledge in india. as to how corruption happens.I f you like info like this tell me where to post it. ON the street people know how it happens in every department of government. And how i faced corruption in every dept.
    And officially the goverment and it emploees will say there is little or no corruption

  • GR

    I wish, this report would be picked up by Indian Media and published widely increasing awareness among the society. The main problem is that the persons who participate in this crime, are the one’s who do the crime on the other hand either directly or indirectly. The media, who is supposed to bring this out is also under the control of this imbecile corrupted moles in govt. If the inequality proceeds in this scale, civil war would breakup resulting in a wider scale of devastation to life’s and the future of the nation.

  • GR

    I wish, this report would be picked up by Indian Media and published widely increasing awareness among the society. The main problem is that the persons who participate in this crime, are the one’s who are running the govt. and prevent this from happening. Its quite like fence grazing the garden scenario, rather than preventing from sheeps destorying.The media, who is supposed to bring this out is also under the control of this imbecile corrupted moles in govt. If the inequality proceeds in this scale, civil war would breakup resulting in a wider scale of devastation to life’s and the future of the nation. Thanks !

  • v.raj

    I would really like to know the basis on which such incredible figure of more than US$125 billion in cumulative illicit capital flight 2000 to 2008. It is all very well to give speculative figures like this but it is a different thing when one has to support it with hard data. Without supporting data, the credicility of the report is open to serious question.

  • http://www.financialtransparency.org/author/kcurcio/ Karly Curcio

    Thank you all for your comments and questions. Regarding the data and methodology for generating the illicit flow estimates, estimates of illicit financial flows from India in the forthcoming report by Dev Kar, Lead Economist at GFI and a former Senior Economist at the IMF, are based on well-established economic models which use official data reported by the Government of India to the IMF. The report will present the methodology and the underlying data used in an appendix. Upon publication, the report and all appendices will be freely accessible on GFI’s website. I also encourage anyone interested in receiving updates on all forthcoming GFI reports, including the India report, to sign up here: http://action.gfip.org/signup_page/updates

    Thanks again,
    Karly Curcio

  • C H Shaw

    It’s open secret in India how corrupt our PIGs ( Politicians of Indian Government) and bureaucrats are. We don’t need terrorists to distroy our nation. Our own PIGs n bureaucrats are doing this very honestly, 24×7. What will happen even if report is published ? Since last 64 years, any politician or bureaucrate or religious thug, is punished ? India is safe haven for thugs. Sincerity is sin n honesty is curse in this jungle of thugs.

  • Manoj

    “The Indian society and public life has been overrun by corruption for the simple reason that, irrespective of the party or parties in power, the Governments of the day have at best sought to play it down, offered it tacit support and at worst connived with the perpetrators”. Scams, frauds and other graft cases are detected with overwhelming rapidity and the latest ones surpass older ones in technique and figures involved. “Many people are dying of hunger. Who is responsible for such deaths? Hungry children in tribal India show how the nation is failing its poorest and furthering the Maoist rebellion. Is it any wonder our politicians see Naxalism as a military problem; that they talk of waging war in the poorest states of India against its poorest citizens; than acting against poverty? Keeping the poor always poor, so that they dream only for FOOD. “Corruption has become a low-risk and high-paying activity that makes no difference when the Government increases the allocation for poverty alleviation schemes running into thousands of crores of rupees, in which the money, instead of reaching the intended beneficiaries, is siphoned along the way? “Political support can be leveraged by not proceeding against corrupt politicians. Today we have come to accept it as legitimate mobilization of support in Parliament; a’dharma has become the dharma of coalition politics “. “The BJP/Left-sponsored cut motion was defeated by the Congress through the expedient means of cutting deals with three tainted leaders facing prosecution for amassing wealth beyond their known sources of income”. However, there are ministers who have been accused of earning thousands of crores through XYZ deals or agricultural imports. It is also true that the Indian political class has collectively shown a distinct lack of interest in pursuing the black money stashed away in Switzerland and Lichtenstein”. What’s worse is that the rot has spread everywhere: From the Income Tax Department, Customs, defense forces and IPS to health services and education. In the Rajya Sabha, Minister of State in charge of the Department of Personnel and Training Prithviraj Chavan said, “As on March 31, 2010, the number of IAS and IPS officers facing trial for criminal charges in CBI cases is 84 and 33 for the two respective categories”. ”Now, India is being robbed of its resources not by foreigners but by its own citizens”.

  • Manoj

    GOD, PLs. HAVE MERCY ON INDIA !!!!!

  • http://google.com Naveen B

    Subject: Corruption in Media (News paper) – Vizag.

    We want to bring it to public notice about the corruption in Media (News Papers). Some of the small news papers are encouraging bribe/corruption to benefit them self in various departments of government viz. DAVP, Railways, electricity board, vizag Steel etc.

    We have to take the responsibility to address the said corruptive business, take necessary steps to prevent this kind of scam and save government/public money, also save middle class, poor farmers from this corruptive business people.

    Complete Details on Fraud Business.

    Any News paper will earn money from government advertisements. The amount for government ads will be decided by the DAVP (Directorate of advertising & Visual publicity) basing on the circulation of the paper.

    Many news papers head quartered in Visakhapatnam shows 60,000+ news paper circulations in Vizag to DAVP, but they print only max 2000 news papers per day to circulate in various government offices to show that the advertisement is published and should give more advertisement to our publication.

    As the responsible government individuals are bribed with a share of 40 & 60 percent on every advertisement (40% as bribe and 60% to publication), there is no one to bother at all on the circulation and priority for giving advertisements to these fraud publication is more as everyone is getting benefitted.

    As these publications are established with necessary technical requirements in case of riding by DAVP vigilance, they print 60,000 papers and transport them to godown for that day or two.

    Now these publications slowly established their branches in Vijayawada, Srikakulam, Kakinada, Karimnagar, Warangal, Rajamundry and Tirupathi in order to increase their income thru this corruptive publication business. Paper will be printed in Vizag having future date (next day’s date) on the paper and sent to the mentioned branches to circulate in necessary government offices, so that no one can question why paper is late. But officially there will be an agreement with the local printer to handle vigilance rides and for documentation purpose to get registered with DAVP/PCI. After some years slowly the new branches will also become 60,000 circulation and then loot money in crores.

    As said above, though the respective department knows about this fraud business, the managing directors of these news papers maintain it by bribing concerns in DAVP & PCI. If any official refuses to take bribe and don’t favor them, then as shown in movies the managing director of publication will impact their personal lives. The same bribe policy (40-60 percent share) is successfully implemented in Railways, Vizag Steel, electricity board and various departments of government to get the advertisements.

    All the money earned thru this business is black money and this will be converted to white money by showing the fake income certificates from Farm lands. This is again by bribing respective MRO of the Mandal. Also several lakh rupees were given as gift money to managing directors and family by the person who is rice ration card holder (the servant of news paper managing director or relatives) So that the black money will be converted into white and no need to pay tax and show source of income to government.

    With this black money, they are buying weapons (rifles) and becoming as dons of Vizag, Black mailing poor people in real estate dealings.

    Apart from the above, these fraud news papers are getting benefits from government in various forms like free land for publication (by making poor house less- this is so pity on humanity), loans at very low interest rates as part of encouragement to small scale industries. Multi story buildings are constructed in the land given by government and created lodges, rented to other business (this is another way to convert the black money to regular).The loan amount with less interest rate taken from government., will be used in micro financing at very high interest rates and harassing middle class and poor people if they are unable to repay in different ways.

    Can’t government take action on this fraud business and save poor and middle class people???

    We hope the government authorities can easily prove that many of the news papers headquartered in Vizag doesn’t have the circulation of 60000+ papers per day and seize the news paper to save public property. Also recover the assets earned thru the fraud business.

    Guys add your comments as well and provide your support, to save our Nation.

    List of Such big fraud news papers In Vizag are:

    1. Vijayabhanu Daily – Most fraud and having assets worth of 70 Crore.

    2. Visakha Samacharam.

    3. Leader.

    List of news papers registered with DAVP in A.P. and see how many you know.

  • http://www.softmusk.co.in Asif Patel, Belgaum

    Enough of corruption and Politicians
    Corruption has grown rampant, these politicians are so busy in filling their pockets they don’t have a movement to stop and think that if they eat up our country like termites the day is not far where nothing will be left in the country. Corruption will one day reach its saturation point and just the thought of it scares me, There will no law and order left, whatever little trust or hope we have in politicians will be completely lost, as a byproduct of corruption Naxalites will pop up everywhere in the country and win the trust of citizens who would have lost hope in politicians and then imagine every day there will be blasts, shout outs and violence, Why are we heading towards this terrible future is this what we want to give out kids, why should we and our kids suffer because of these corrupt politicians and above it common man is made so helpless that he cannot get a single work done without paying corruption and then these smart politicians blame us saying we promote corruption, how shameless.

    Enough is enough time has come when we all stand together and start a movement against corruption, decades ago Mahatma Gandhi had started struggle to give us independent country and now after 63 years it is time we start a new struggle to give out kids corruption free country for their bright and peaceful future.

    Rather than keeping quiet and turning blind eye to what is going on around us, Do your bit by protesting against corruption in whatever form you can, tell your friends and family about politicians who are caught in corruption charges and persuade every one not to support them and express their rage against them in whatever form they can as I am doing my bit by writing this.

  • Anurag Shrivastava

    I feel media never shows the real truth.
    Media is not for the people in India. It’s for the rich people and politicians.

    I request all here to see the Nero’s Guest Documentary by P Sainath.
    It is a wonderful documentary about why the inequality ,especially on farmers commiting suicide in India.

  • ayan majumdar

    corporates, bureacrats and politicians from congress,dmk,ncp etc work as a triad to generate black money and then send them to tax haven countries. we indians are responsible as we vote those parties to power; without these parties into power ,corrupts cannot create/stash black money.

  • Siddhartha Bandyopadhyay

    Nearly all the communities in India (such as Bengali), are succumbed in ‘Culture of Poverty’(a theory introduced by an American anthropologist Oscar Lewis), irrespective of class or economic strata, lives in pavement or apartment. Nobody is at all ashamed of the deep-rooted corruption, decaying general quality of life, worst Politico-administrative system, weak mother language, continuous absorption of common space (mental as well as physical, both). We are becoming parents (mindlessly) only by blindfold self-procreation, simply depriving their (the children) fundamental rights of a decent, caring society, fearless & dignified living. Do not ever look for any other positive alternative behaviour (values) to perform human way of parenthood, i.e. deliberately co-parenting of those children those are born out of ignorance, real poverty. All of us are being driven only by the very animal instinct. If the Bengali people ever be able to bring that genuine freedom (from vicious cycle of ‘poverty’) in their own life/attitude, start/involve themselves in ‘Production of Space’(Henri Lefebvre), at least, initiate a movement, by heart, decent Politics will definitely come up.
    - Siddhartha Bandyopadhyay, 16/4, Girish Banerjee lane, Howrah-711101, India.

  • Siddhartha Bandyopadhyay

    Most of the communities in India (such as Bengali), are succumbed in ‘Culture of Poverty’(a theory introduced by an American anthropologist Oscar Lewis), irrespective of class or economic strata, lives in pavement or apartment. Nobody is at all ashamed of the deep-rooted corruption, decaying general quality of life, worst Politico-administrative system, weak mother language, continuous absorption of common space (mental as well as physical, both). We are becoming fathers & mothers only by self-procreation, mindlessly & blindfold. Simply depriving their(the children) fundamental rights of a decent, caring society, fearless & dignified living. Do not ever look for any other positive alternative behaviour (values) to perform human way of parenthood, i.e. deliberately co-parenting of those children those are born out of ignorance, real poverty. All of us are being driven only by the very animal instinct. If the Bengali people ever be able to bring that genuine freedom (from vicious cycle of ‘poverty’) in their own life/attitude, involve themselves in ‘Production of Space’(Henri Lefebvre), at least initiate a movement by heart, decent & dedicated Politics will definitely come up.
    - Siddhartha Bandyopadhyay, 16/4, Girish Banerjee Lane, Howrah-711101, India.

  • Somnath Mukhopadhyay

    Thanks to GFI, we are beginning to discuss this. The media in India is controlled by financial interests and it is only the free Internet that can open up this debate. The people with power in India are the most corrupt and, as Siddhartha says, the people without power are resigned to this. Singh bribes his way through Parliament. The ordinary person on the street says he has to do this for the greater good. Every politician acts like a mini-Gandhi in public and yet hordes away his ‘black money’ off-shore. Where do you start? You start by having a grassroots debate on this and the only available forum is the Internet. Do you think someone will now be able to bribe the GFI to stifle this debate?

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