Will Corruption Derail India 2047?

China watchers have long scrutinized national anniversaries for pronouncements about major achievements or shifts in economic policies or goals. China’s emergence as a manufacturing and economic juggernaut has been made plain over years of anniversary milestones. Meanwhile, India watchers’ eyes are fixed on 2047, which will mark 100 years of independence and, if all goes according to plan, the fulfillment of Prime Minister Narendra Modi’s promise to transform India into a developed nation.

As reported by the New York Times, India is investing in port infrastructure in a bid to attract global manufacturing, but India will need more than just better port infrastructure to catch-up to China, which dominates lists of the world’s busiest ports by cargo tonnage. The World Bank estimates that 70% of the urban infrastructure needed in India by 2047 is yet to be built. In 2024, India’s finance minister allocated nearly $134 billion just for transport infrastructure. And therein lies a major conundrum for India – how to keep corruption at bay while spending billions to sustain development of much-needed highways, bridges, railways, multimodal logistics parks, and the cities of India’s future. Most indicators suggest it won’t be easy.

According to the Association of Certified Fraud Examiners, corruption is most prevalent in the construction sector, where, according to its 2024 study of Southern Asia, some 74% of identified occupational fraud schemes relied on corruption. A slew of deadly infrastructure incidents are evidence that billions of Rupees have been siphoned off through fraudulent practices, at least according to Indian politicians. In June 2024, monsoon rains caused the partial collapse of canopies at three airports, including India's largest, Indira Gandhi International Airport in New Delhi, where one person was killed and eight injured. Congress president Mallikarjun Kharge blamed the incident on “corruption and criminal negligence.” Not one to mince his words, Kharge accused Modi’s government of “taking the nation on a highway to hell,” after India’s Comptroller and Auditor General released a report on highway projects marred by compliance deficiencies, violations of bidding processes, and fund mismanagement. 

Cracks appearing just months after the opening of Mumbai’s sea bridge prompted the Maharashtra Congress to again blame corruption facilitated by Modi’s ruling coalition. At least 13 bridges have collapsed so far this year. In 2022, public anger swelled after a 100-year old suspension bridge in Gujarat state collapsed, leaving 135 dead. The Bharatiya Janata party reportedly had awarded a repair contract for the bridge to a local clock manufacturer with no experience working with bridges. Ten have been arrested in connection with the collapse.  

India also needs to improve its soft infrastructure. Investors still complain about bureaucratic red tape even though Modi has pushed through significant reforms in this area. Shipping agents and vessel crews face demands for low-level gratuities and other facilitation payments, many of which go unreported by employees who, despite, or because of, annual compliance training, fear that encumbering their managers with potential disclosure requirements at home will have negative repercussions for their own careers.  

Whether Indian shipping infrastructure will rival China's by 2047 remains to be seen, but the countries currently have at least one thing in common: critics who suggest anti-corruption enforcement has been politicized by the ruling party. Critics have accused Modi’s administration of weaponizing its law enforcement bodies to attack political opponents (cf. “Will Modi Scale Back Investigations Post-Election?,” by Maxwell Abbott, Nardello & Co. Insights, June 17, 2024). China watchers are calling Xi Jinping's anti-corruption drive a never-ending crackdown, which some say has helped Xi gain political advantage. With corruption as pervasive as ever, companies and investors should proceed cautiously, and pay heed to the new US Foreign Extortion Prevention Act that allows for the prosecution of corrupt foreign officials (cf. “A New Weapon for the US Department of Justice to Fight Foreign Corruption,” by Michael Ramos, Nardello & Co. Insights, August 21, 2024).