Measuring corruption

India remains a middling performer

The latest Corruption Perception Index (CPI), prepared by Transparency International, suggests that corruption in the public sector in India remained an issue in 2023, with India’s global ranking slipping to 93 out of 180 countries from 85 in 2022. The ranking represents relative standings; the country’s CPI score dropped to 39/100 from 40/100 (a higher score denoting a better record). The Transparency International commentary suggested that no significant conclusion could be drawn from this marginal change. The report identified the passage of the telecommunication law, which expands the state’s surveillance powers as a possible red signal. But a glimpse of India’s CPI score and ranking over a longer time period suggests that corruption is a genie that India is yet to defeat decisively.

Since 2012, India’s CPI score has been range-bound between the upper 30s and lower 40s. It registered its best performance in 2018 and 2019 at 41 in both years. This is, in fact, not a great deal different from China’s record, which has been similarly range-bound, with its latest score dropping to 42/100 from 45/100. In terms of ranking too, India mostly moved between the mid-70s and mid-80s, with the best performance in 2015 at 76, up from 85 the year before. To be sure, the veracity of these findings can be open to question since they are based on the subjective perceptions of businesspeople and experts. The CPI score, considered a more consequential metric than country rankings, draws on three data sources picked from 13 different corruption assessments collated by a variety of institutions including the World Bank and World Economic Forum. Perhaps the fact that India shares its rank with Kazakhstan and Lesotho needs to be treated with some caution. The CPI covers such metrics as bribery, officials using their public office for private gain, excessive red tape, the ability of the government to control corruption in the public sector, and so on. It specifically excludes, among other things, citizens’ direct experience of corruption, money laundering, tax fraud, illicit financial flows or informal economies and markets, since all of these are difficult to track. Since these are fairly common elements in most developing economies, including India, it is possible that the CPI captures a partial picture of corruption in these countries.

 India’s marginal elevation to the 40s in terms of CPI score since 2016 could be a reflection of key changes in public asset distribution policy from discretionary licensing, the source of the telecom and coal scandals that felled the United Progressive Alliance, to the auction format. The margin for public corruption may have narrowed also with the introduction of such institutional mechanisms as goods and services tax and insolvency law. But given the magnitude of government expenditure in the economy and the efforts to attract manufacturing investment through extensive production-linked incentive schemes, the real game changer would lie in reforming the judicial system. India has been a poor performer on this score. A quick and robust justice-delivery system by itself can become a big deterrent. In the World Justice Project Rule of Law index, one of the indices on which the CPI score is developed, India registers a score 0.49 (score range from 0 to 1, with 1 indicating the strongest adherence to the rule of law). This is roughly the same as Vietnam, India’s key competitor in China-plus-one investment.