Corruption in India: How should foreign investors deal with it?
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Any foreign company doing business in India will eventually have to deal with corruption. Prime Minister Modi has made many changes in recent years to improve the situation in the country, but India still ranks 93rd in Transparency International’s corruption index. As an international company, you want to stay as far away from paying bribes as possible, because this can have serious consequences not only in India, but also at home.
Clean business takes time
It is still not uncommon to be asked for ‘speed money’ in India, an amount paid under the table to get a permit approved faster, for example. Although in some cases it seems like there is no other solution than to pay, we strongly advise international companies against this. Firstly, it is of course prohibited and secondly, it is possible to do clean business in India.
For example, the German IT company Optanium went to India looking for an accounting firm that could set up their entity in India without paying bribes. The process of setting up ultimately took longer, thirteen months instead of six, but this allowed Optanium India to get off to a good start. An important tip is therefore to plan enough time to handle matters such as applying for permits or the release of your products by customs.
‘It’s easier for foreign companies to avoid corruption’
In an interview with Quartz, Ravi Venkatesan, former chairman of Microsoft India and author of the book ‘Conquering the Chaos: Win in India, Win Everywhere’, explains how companies should deal with corrupt situations. “It’s easier for a foreign company to avoid corruption. Local management can stand their ground and say that paying bribes is against their corporate policy. If a hard line is drawn, the bribers will simply walk away.”
In addition, Venkatesan believes that having a very strong administrative department is essential. “Staff your company with competent, long-term administrative staff who can hold their own discussions with government officials. Many companies underinvest in these functions because they don’t see them as the core of their business. Instead, they outsource these administrative tasks to local agents, who pay the ‘speed money’ and simply bury it in their other expenses.”
“Many companies in India underinvest in administrative staff. That makes them vulnerable to corruption.”
— Ravi Venkatesan
Always have your paperwork in order
Fortunately, there are more and more situations in India where corruption has been completely eradicated by automating or better controlling processes, such as filing your taxes or obtaining your identification. If you make sure that all your paperwork is in order and that you never need special help, you can easily avoid corruption.
