Volume 3 Issue 1

VIEWPOINT

April-June, 2011

Towards a Corruption-free India1

N. R. Narayana Murthy
I had the privilege of watching Dr. Sarabhai from a
distance and listening to him when he was the Chairman
of the Indian Institute of Management - Ahmedabad, and
I was a rookie systems programmer at the computer
center there. He was a world-class scientist, a superb
leader, and a rare visionary. His contribution to Indian
Science through his founding of Physical Research
Laboratory is well-known. His founding of the Indian
Institute of Management was a watershed event in the
history of Indian management education. His most
important contribution is the use of space technology
to the economic well-being of the country through his
founding of the Indian Space Research Organization.

about how Bangalore will take away jobs from Buffalo.

I never thought India would be feared as a job snatcher
from the most powerful country in the world - the US!
His words are, in essence, an acceptance of India's
importance in international trade.
However, this is not the whole story. There is another
India that has not participated in this happy story of
India's phenomenal economic progress. Our Prime
Minister keeps exhorting us to make this impressive
economic progress an inclusive one. He is right because
India has the largest mass of poor in the world - over
350 million are earning less than Rs. 40 per day. We have
the largest mass of illiterates in the world - about 400
million. We have more than 250 million Indians not
having access to safe drinking water. We have more than
750 million Indians not having access to decent sanitation.
More than 50% of our rural primary schools do not have
a teacher for every class. The list goes on.

His belief in such economic upliftment was reflected

in his statement: "But we are convinced that if we are
to play a meaningful role nationally, and in the
community of nations, we must be second to none in
the application of advanced technologies to the real
problems of man and society." The best tribute we can
pay to such a patriot is by redeeming his dream of
making India a better place for all. Such a goal cannot
be achieved unless India's governance becomes largely
corruption-free. Therefore, I will speak on the importance
of fighting corruption.

Unless we create hope and confidence in the future for

every Indian, our progress will not be sustainable. This
is an onerous responsibility that rests on the shoulders
of every one of us, in general, and our youth, in particular.
This is where role models like Sarabhai can instill
courage, confidence, discipline, honesty, sacrifice and
hard work in every one of us to wipe the tears off the
eyes of every Indian child - from Nagaland to Rajasthan,
and from Kashmir to Kerala.

The India of today is very different from the India of

1971, the year in which Dr. Sarabhai died. We have come
a long way from being considered a poor, pitiable, and
weak country to an important global economic power.
Our GDP growth rate is the second highest in the world.
Our exports are flourishing. Our stock exchanges are
on fire. Foreign direct investment is galloping. Our
cricketers have become top performers. India has more
billionaires than Japan. Bollywood music and Indian
cuisine are known throughout the world. Our software
industry is the talk of the whole world. Our youngsters
have done so well that President Obama keeps talking

If we want to achieve inclusive growth, we have a long

journey ahead to continue this growth and make our
economic progress truly sustainable. Such a dream of
bringing inclusive economic growth mandates that we
make our economic progress all-pervasive and
sustainable over a long period of time to touch every
citizen.
Secondly, we must create
opportunities for our illiterates
large numbers. We have to
dependence on agriculture to

Vikram Sarabhai Memorial Lecture delivered at Ahmedabad Management Association on July, 2011.
Note : IMJ is thankful to the author for his consent to publish his speech.

IMJ

decent livelihood
and semi-literates in
move people from
manufacturing and
N. R. Narayana Murthy

Volume 3 Issue 1

April-June, 2011

Court on corruption", "8 of 16 former Chief Justices of

India corrupt: Former Law minister", "Free run for illegal
mining, fake permits, fraudulent exports" are some of
the clippings from recent newspapers.

services so that our agriculture can indeed provide

better per-capita income to our people and elevate their
lifestyles. This is possible only by enhancing contribution
of manufacturing, particularly low-tech manufacturing,
and low-tech services to our GDP. The number of people
below the poverty line is estimated to be about 350
million. Unless we make the lives of these 350 million
people and the other citizens of India better, we would
fail as a nation.

Washington-based Global Financial Integrity, a think

tank, recently released a report that India lost a staggering
US$ 462 billion in illicit financial flows abroad due to
tax evasion, crime, and corruption, post-independence.
However, the highly-respected Indian economic
journalist, Mr. Swaminathan Iyer, argues that most of
the black money is in India itself and not abroad.

How do we do it? First, we have to create at least 80

million such jobs in the next five years. Second, we have
to provide decent access to education, healthcare,
nutrition and shelter at affordable prices to every Indian.
Third, we have to make their already-not-so-pleasant
life better by ensuring that they are not harassed for
bribes to obtain simple services like ration cards, gas
cylinders, driving licenses and obtaining land records
from the public governance system.

A study of 160 small companies in Bangalore, Mumbai

and Ahmedabad has showed that 30% of these companies
paid bribes of at least Rs. 5,000 per month to a plethora
of government inspectors. A study by ASSOCHAM has
said that 40% of the price of electricity in India is due
to theft and corruption. A study by EXIM Bank has
showed that the so-called "transaction cost", a polite
term for bribes, raises the cost of exported goods by as
much as 25%.

To create 80 million jobs through low-tech manufacturing

and services, we have to improve our infrastructure by
building enough roads, ports, power plants and other
such infrastructure for industrial activity. Given that
this would require huge investments, we have to attract
large Indian and foreign investors who will use India
as a base for domestic and export-oriented
manufacturing. Such large scale domestic and foreign
investment will require three factors that create trust in
investors. They are: a quick response and investorfriendly bureaucracy; transparency of rules and
regulations; and a corruption-free decision-making
regime in the government. Here I will cover only the
issue of reducing corruption to accelerate our inclusive
economic growth.

Ramesh Ramanathan, Swati Ramanathan and

Raghunandan Thoniparambil of Janaagraha have done
extensive work on corruption and on how to reduce it.
In their paper titled, "Corruption overview and I Paid
A Bribe approach", they talk of two types of corruption
- Wholesale and Retail. Wholesale corruption refers to
big ticket items of corruption that emanate generally
from direct or indirect interaction between business
entities and governments. I have already given several
examples of Wholesale corruption. I will talk about
Retail corruption later. Let me continue with Wholesale
corruption.
Let me quote from an article on corruption in http://
www.india-post1947.com to give you a few more
examples of Wholesale corruption. A few snippets from
that article are: "Officials often steal state property. In
Bihar, more than 80% of the subsidized food aid to poor
is stolen. In cities and villages throughout India, Mafia
raj consisting of municipal and other government
officials, elected politicians, judicial officers, real estate
developers and law enforcement officials, acquire,
develop and sell land in illegal ways. Many state-funded
construction activities in India, such as road building,

Nowadays, it is impossible to open a newspaper in India

and not see umpteen references to corruption in the
country. "There is governance and ethical deficit, admits
Chidambaram", "2G spectrum scam: Former telecom
minister A Raja arrested", "Senior Maharashtra
government official burnt to death by oil mafia", "Indian
bureaucracy ranked worst in Asia: Survey", "One in
three Indians 'utterly corrupt': Former CVC", "In MP,
babus sleep on bed of cash", "Nothing moves in
government departments without money: Supreme
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N. R. Narayana Murthy

Volume 3 Issue 1

April-June, 2011

is that it is impossible to live in India unless you submit

to the regime of corruption. Of course, the rich, the
powerful and the elite do not agree with this since they
substitute nepotism for corruption, or pay bribes through
service agents.

are dominated by construction mafias which are

groupings of corrupt public works officials, materials
suppliers, politicians and construction contractors.
Shoddy construction and material substitution (e.g.
mixing sand in cement to reduce the quantity of cement
used in actual construction and submitting expenses for
full quota of cement) result in roads and highways being

Janaagraha has created a website called "I Paid A Bribe

(IPAB)" where citizens can input their experience with
corruption. They collect data in three buckets - I paid
a bribe; I did not pay a bribe; and I did not have to pay
a bribe. The purpose of this exercise is to help citizens
understand this hydra-headed monster called corruption
and help citizens and the governments to fight it. Their
data shows that of the 11,583 people from 409 towns and
cities that have posted their experiences, 10123 people
or 86.65% paid a total bribe of Rs. 39.13 Crores; 1165
people (9.96%) got the job done even after refusing to
pay any bribe; and 395 (3.39%) of the people were not
even asked to pay bribe!

dangerous, and sometimes simply washed away when

India's heavy monsoon season arrives". The 2G scam,
Commonwealth Games and Adarsh Society scam are
clear examples of Wholesale corruption.
While Wholesale corruption touches the lives of the rich
and affects corporations, Retail corruption affects the
daily lives of common people and it involves the overthe-counter transactions between citizens and
government officials. People tell me that even such
routine transactions as obtaining a gas cylinder, getting
a death certificate, being given a bedpan in a hospital

Robert Klitgaard explains the root cause of corruption

in a simple yet elegant formula, C=M+D-A. In simple
words, corruption equals monopoly plus discretion
minus accountability. Wherever these conditions are
present, be it in the public or private sector, corruption
tends to grow. It must be recognized that corruption is
all pervasive in India and covers public and private
governance systems. However, it is the public
governance system that requires our attention here since
the amounts spent in this system and its impact on the
society are huge and it affects the poor much more than
the private governance systems. The returns on reforming
the public governance systems are very high. Fortunately,
the private governance systems have market competition
as a deterrent force to keep errant industrialists under
check. In public governance systems which are
monopolistic, there is no such force.

to an immobile patient, getting a driving license,

registering ones land, and obtaining an approval for
ones house plan all require bribes to be paid.
My own experience in buying medical prescription in
India, including a recent purchase, is that unless I am
very careful about the shop, these drugs are often fake
and do not cure the ailment at all. In Government
hospitals, corruption is associated with non-availability
of medicines, getting admission, consultations with
doctors and availing diagnostic services. The annual
bribe paid by rickshaw pullers in Delhi to the police
is estimated by Ms. Madhu Kishwar to be Rs. 480 Crores!
A 2005 study done by Transparency International (TI)
in India found that more than 50% of the people had
firsthand experience of paying bribe or peddling
influence to get a job done in a public office. Transparency
International estimates that truckers pay annually $5
billion in bribes.

Why is combating corruption so important at this stage?

This is the first time in the history of India in the last
300 years that we have received some recognition from
the world. This is the first time in this period of 300 years
that Indians have moved confidently towards economic
progress and have created a hope that we may indeed
solve the problem of poverty in India. This is the first
time that foreigners have shown an interest in India as
an investment destination. Our software industry has

Garibi Hatao, the famous slogan introduced by Mrs.

Indira Gandhi, has just remained rhetoric even after
forty years. Dr. Manmohan Singh's dream of "Inclusive
Growth" has not gained momentum, thanks to our
corrupt citizens. This is the sorry state of affairs that we
have come to in the last sixty years after independence.
The opinion of most common people I have talked to
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N. R. Narayana Murthy

Volume 3 Issue 1

April-June, 2011

become a world-leader and is expected to grow to US$

300 billion in the next 10 years. That means most Fortune
2000 corporations will do business with Indian software
firms and visit India often.

Now, let me get to the issue of reducing both Wholesale

We have become a member of G-20. India has a decent

chance of joining the Security Council. Most thinkers
that I have spoken to in India and abroad feel that this
window of opportunity, if not used well, is unlikely to
come again in the near or medium future. If the world
forgets India now, it is unlikely that we will be back
on the front burner of people's mind for a long, long
time. To seize these wonderful opportunities that I
mentioned, India will have to be a nation that engenders
trust in the mind of leaders outside.

necessary for a sustained change in the mindset of people

corruption and Retail corruption. Before I go into any

specific methods to combat corruption at these two
levels, let me talk about an important primal condition
towards a better India. While institutions, systems and
rules, and strict implementation of these rules are very
important to create a decent and honest society, I am not
sure we can achieve any worthwhile progress in creating
a corruption-free society unless we have a critical mass
of leaders in every aspect of life - politics, bureaucracy,
business, academia, military and civil society - who
believe in honesty, decency, investor-friendliness,
civility, rule of law applicable to everybody irrespective
of power and pelf, putting the interest of the country

There is a large body of literature on the negative impact

of corruption on economic growth and investment in
a country. Corruption results in non-merited and wrong
choices, inefficiencies, delays and uncertainties.
Economists have established that corruption is likely to
reduce GDP growth rate by 0.5% to 1.5%. According to
these economists, corruption inflates expenditure and
reduces return on capital. Purchases of goods and
services will be based on who gives the highest kickback
rather than who provides the best value-for-money to
the public.

above their personal interest, and pride in the nation.

It is important that our leaders are not just honest but
are also courageous to take tough and quick actions
against errant people and publicize these actions. Once
we build a culture of meeting out quick and heavy
punishments far outweighing the gains these culprits
have made from corruption, I believe that we will see
a gradual snowballing of movement towards a
corruption-free India. I believe that compliance by
common citizens to rules and norms of a community
gains momentum and enthusiastic acceptance when

In such environments, the experts believe that large

programs will be designed to generate huge illegal
income to politicians and bureaucrats rather than to
improve the quality of life of people. In other words,
only countries with low corruption can enjoy efficient
returns on public investments and bring faster and more
efficient economic growth. This is particularly true for
countries that aim to bring inclusive growth that our
Prime Minister wants. Given that we need huge
investments to create such inclusive growth, we must
be seen as a highly desirable destination for investment,
trade, tourism and education. We must be seen as
trustworthy, honorable, investor-friendly and hospitable
people who will take quick and transparent decisions
in the interest of our nation. We must compete with the
best of governments in enhancing the confidence and
comfort of global business people in doing business
with us. These transformations require that we remove
corruption from public and private governance.
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leaders demonstrate their compliance with such rules,

regulations and values.
Looking at the state of the country today, this appears
to be a tall order but we have to remain optimistic. We
should not believe people who tell us that it is not
possible to pick a small number of honest politicians
and bureaucrats to run our country from among a billion
Indians.
The institution of Lokpal when fortified and populated
by honest and courageous people is a good instrument
for fighting Wholesale corruption. This is where all of
us must support the efforts of the government of India
and Shri Anna Hazare in arriving at a strong Lokpal Bill
which will indeed be able to build a culture of honesty
in public governance and in the interface between
business leaders and public officials.

N. R. Narayana Murthy

Volume 3 Issue 1

April-June, 2011

I will not go into the details of the various clauses of

Jan Lokpal such as whether the Prime Minister must
come under the purview of Lokpal, and whether CBI
and CVC must work within the ambit of Lokpal. These
issues are under discussions among experts and a suitable
solution will be found in time. It would have been nice
if an all-party committee and a few representatives from
the civil society had gone into all aspects of the Bill and
come to a quick and good conclusion. On the issue of
whether an "unelected group" of people can force the
government to do good things is to be judged in the
context that the "elected" have not passed the Lokpal
Bill for over 43 years! Therefore, it is time for the masses
to work with the government to do good things.

also notes that the thrust of political finance reform in

democracies worldwide have four main characteristics:
limits on expenditure including sub-limits on particular
expenditures; limits on contributions from individuals
and organizations; public funding, full or partial, of
elections and/or parties; and reporting and disclosure
of election, party and candidate finances in a suitable
form as an administrative pre-requisite for
implementation of any or all of the above.
In my opinion, public funding of elections, as has been
done in many developed nations of Europe, is an
extremely important step. Audited accounts of political
parties must be available for public disclosure within
90 days of the closure of the financial year. Any adverse
comments by auditors must result in office bearers being
banned from holding any public office for ever.

Lokpal Bill alone will not be sufficient to reduce

corruption. We have to improve merit, transparency
and accountability in financial matters, public
procurements, public-good auctions, and in appointing
key officials. We have to simplify our laws, particularly
our direct and indirect tax laws, to improve compliance.
Decentralization of power, involvement of the civil
society in reviewing complaints about and the progress
of a government function, and transparency and
accountability of politicians and officers in dealing with
the civil society are extremely important to reduce
corruption.

The punishment for the wholesale bribe taker in India

is very light today. We must introduce a rule that recovers
at least 2 times the bribe amount plus interest on the
bribe amount from the bribe taker, his family and his
assigns.The guilty person must be sent to imprison at
least for 15 years. We must strengthen our courts to
speed up the process of judging the corruption cases
and punishing the guilty. We must strengthen institutions
and governance processes to improve judicial
independence and impartiality, judicial integrity,
judicial accountability and judicial transparency.

It is not just sufficient to pass laws but the central and

state governments must be enthused to use these laws
to reduce corruption. For example, India passed the
Benami Transactions Prohibition Act in 1988 but no
government in India has used this act to seize Benami
property. It is very important that we start to use this
act at least after 23 years! This will serve as a disincentive
to corrupt people.

Management is about progress while administration is

about status. Therefore, we have to orient the mindset
of bureaucracy towards management from the current
administrative mindset. We can do this by linking the
increases in salaries and bonuses for senior bureaucrats,
ministers and legislators to a few important macro
parameters like: GDP growth, improvement in human
development index, reduction of number of people
below poverty line, net exports, job creation, and
improvement in global rankings like those by the
Transparency International. The lower level bureaucracy
can be incentivized by bonuses linked to clear, objective,
measurable progress parameters of their own
departments with focus on speed of response,
transparency, honesty and accountability.

Our economic policies should not encourage corruption.

A classical example is the adulteration of diesel with
petrol, thanks to differential pricing. This is where direct
subsidy to the poor using their unique ID of the UIDAI
is a good idea.
We have to devise a finance system for election that
addresses three objectives: corruption scandals, rising
campaign costs, and equal opportunity for political
participation, as pointed out by Mr. E. Sridharan. He
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There have been several suggestions to reduce Retail

corruption. In my opinion, use of e-governance systems

N. R. Narayana Murthy

Volume 3 Issue 1

April-June, 2011

to separate the point of delivery of services from the

I suggest that every office that offers public governance

point of decision-making is a good tool to reduce

services is encouraged to install the Token system and

corruption. If the governments can outsource the point

a workflow system which details the processes and steps

of delivery to at least a couple of competing private

involved and the official involved in each of the steps

sector companies, and monitor their performance before

of the service delivered by the concerned office to citizens.

renewing the contract, it may help reduce corruption.

This system must be made completely transparent to the

public so that the public knows how long an application

Janaagraha has proposed a Token system to reduce

for a service is waiting at a given step with a given

deliberate delays in responding to the requests of citizens

officer.

for services. This is a good suggestion and will perhaps

work in most cases. However, there are cases when

In each town or village, there should be a civil society

bureaucrats raise unnecessary and meaningless queries

committee formed by the government to review the

if the parties do not agree to pay bribe. In such cases,

status of the applications for services once a month. This

your token position is lost. Let me give an example. In

committee can question the official involved in delayed

1984 when we imported a computer at Bangalore, the

cases and expedite the process. In addition, it is best that

customs officer rejected our concessional duty certificate

the delivery points of service requests be separated from

issued by a Joint Secretary of the Department of

the decision-making points and given over to at least

Electronics without any rhyme or reason other than that

two competing private sector providers.

we were unwilling to bribe him. We offered to pay for

In the end, it is all about the value system of people in

his telephone call to the Joint Secretary in Delhi and even

a society that determines how proper and correct they

for the travel of his assistant to Delhi to verify the

are in their actions whether they join public or private

certificate. In fact, the Joint Secretary called the Bangalore

service. It is also about the pride of our country. This

officer, verified the authenticity of the certificate,and

is where "walk the talk" by our leaders becomes

refaxed the certificate. All went in vain. It took us 10

extremely important. Studies by experts have shown

years to get back the unjustly-levied customs duty!

that societies which have embraced meritocracy and

Dr. Kaushik Basu, a well-known Economist from Cornell

performance orientation are better able to handle

University and the current Chief Economic Advisor to

problems of corruption. In such societies the aspiration

the Government of India, has proposed a law to make

of public servants is to get ahead in their career by hard

bribe giving, at least certain classes of low-amount,

work, performance and honesty. My hope is that every

harassment bribe giving, legal. He believes that, today,

Indian will work hard, smart and honest to make this

post the bribing act, both the bribe giver and the bribe

country a corruption-free country.

taker are guilty and, therefore, have incentive to keep

Two major curses against this country are our apathy

it secret.

and our singular hatred of speed. We are probably the

On the other hand, if bribe giving and not taking is made

slowest country in the world in actionizing our intent.

legal, then the bribe giver can co-operate with the

What takes a month in most other countries takes years

authorities post the act to expose the bribe taker. This

in our country. It is extremely important that all of us

is akin to the bribe giver turning an approver under the

- the government, opposition parties, bureaucracy,

current system and escaping punishment. This sounds

corporate leaders, academia, media and the civil society

an interesting idea and should be tried. The only possible

- come together and take quick action to remove

issue with this idea is that the rest of the community of

corruption from this country. I am positive that it will

bribe takers may shun the bribe giver, and future

happen.

transactions of the bribe giver with this community of

officials may get affected.
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N. R. Narayana Murthy

Volume 3 Issue 1

April-June, 2011

He has been awarded the Padma Vibhushan by the

Government of India, the Legion d'honneur by the
Government of France, and the CBE by the British
government.

N. R. Narayana Murthy is the Founder of Infosys Limited,

a global software consulting company headquartered in
Bangalore, India. He founded Infosys in 1981, served
as the CEO during 1981-2002, and as the Chairman and
Chief Mentor during 1981-2011. Under his leadership,
Infosys was listed on NASDAQ in 1999. He is currently
the Chairman Emeritus of Infosys.

He is the first Indian winner of Ernst and Young's World

Entrepreneur of the year award and the Max Schmidheiny
Liberty prize, and has appeared in the rankings of
businessmen and innovators published by India Today,
Business Standard, Forbes, BusinessWeek, Time, CNN,
Fortune and Financial Times. He is a Fellow of the
Indian National Academy of Engineering and a foreign
member of the US National Academy of Engineering.
He has about 25 honorary doctorates from universities
in India and abroad.

Mr. Murthy articulated, designed and implemented the

Global Delivery Model which has become the foundation
for the huge success in IT services outsourcing from India.
He has led key corporate governance initiatives in India.
He is an IT advisor to several Asian countries. He serves
on the boards of many companies as well as business
schools. The Economist ranked Narayana Murthy among
the ten most-admired global business leaders in 2005.
He topped the Economic Times list of India's most
powerful CEO's for three consecutive years: 2004 to 2006.

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N. R. Narayana Murthy