Five years ago, the Indian people gave Narendra Modi the chance to realize his big promise: clean up the corruption in India. Today, Modi’s promise remains a promise. Corruption is still thriving in India, in all the usual places. That’s evidenced by a string of high profile scandals that shook his administration. Like a murky 7.8 billion euro weapons contract to purchase 36 Rafale fighter planes from France. And a $2 billion bank fraud uncovered last February at India’s state-owned Punjab National Bank.   Corruption in Modi’s India is also evidenced by a string of reports from Transparency International. Like the one published early this week, ranking India 78 in corruption out of 175 countries. While this is a slight improvement from last year’s ranking, the recent ranking is still worse than the 2015 ranking—see table 1. These findings must have surprised Indian observers. Prime Minister Modi and his Bharatiya Janata Party came to office with a promise to free India from the vice of corruption.

Table 1 Corruption Remains Strong Under Modi

CountryCorruption Rank 2010Corruption Rank 2015Corruption Rank 2016Corruption Rank 2017Corruption Rank 2018
India8776798178/175
Philippines13495/168101/168111/18099/175
Pakistan143/168117/168116/168117117/175

Source: Transparency International And they made good on this promise by launching unconventional measures like getting rid of “black money,” ie the 500 and 1000 rupee notes.   Apparently, Modi’s government has been fighting corruption in the wrong places, among the country’s poor. And it has left corruption thriving in the high places, among the country’s rich.

Indian Shares

Indian SharesKoyfin   Meanwhile, India has also been ranked among the “worst offenders” in terms of graft and press freedom in the Asia Pacific region.   “Philippines, India and the Maldives are among the worst regional offenders in this respect,” states the 2017 report. “These countries score high for corruption and have fewer press freedoms and higher numbers of journalist deaths. In the last six years, 15 journalists working on corruption stories in these countries were murdered, as reported by the  Committee to Protect Journalists (CPJ) .”   Persistent corruption is usually a big impediment to spreading the benefits of economic growth from a narrow elite to the masses. And that could explain a big decline in the percentage of Indians who rate their lives positively enough to score it as “thriving” since Modi’s party assumed office, as discussed in a previous piece here. India’s situation is neither new nor unique in the emerging market world. And it has been nicely rationalized by Daron Acemoglu and James A. Robinson in Why Nations Fail: The Origins Of Power, Prosperity And Poverty.  In most global emerging markets, the “state” – ie the political institutions that set up the rules of the economic game — represents a few economic elites rather than the masses, according to the authors of the book. That’s a breeding ground for the rise of crony capitalism and corruption. Populist governments of all kinds and sorts come to the office with the promise to change this situation. But all too often it is the existing situation they embrace once in office.   As has been the case in India.

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