Scams to negatively hit FDI inflow in India: Survey

A report titled 'Bribery and corruption: Ground reality in India' released by the industry body FICCI and Ernest & Young (EY), a multinational professional services firm, has found that corruption - real or perceived, is having a detrimental impact on the country's economy.

Around 83% of the respondents in the survey, carried out to formulate this report, felt that the recent spate of scams will negatively impact FDI inflows into the country. According to 73% of the respondents from PE firms, a company operating in a sector that is perceived as highly corrupt, may lose ground when it comes to a fair valuation of its business, as it bargains hard and factors in the cost of corruption in the sector during a transaction.

77% of the respondents think that it is the responsibility of the Managing Directors to handle the bribery and corruption-related issues in the organizations. Some of the specific findings of the survey reveal that the sectors most vulnerable to corruption include the government and public sector, infrastructure and real estate, metals and mining, aerospace and defense, and power and utilities sectors.

A large number of respondents appeared to be aware of unethical business conduct, including irregular accounting to hide bribery and corruption, gifts being given to agents and third parties being used to pay bribes. More than half of the respondents felt that it is the lack of will to obtain licenses and approvals the "right way," which leads to bribery and corruption. Complicated taxes and licensing system also fuel corruption.

FICCI's president Naina Lal Kidwai said that corruption invariably increases transaction costs and uncertainty in an economy while lowering efficiency by forcing entrepreneurs to divert their scarce time and money to bribery rather than production.

Arpinder Singh, Partner & India Leader - Fraud Investigation & Dispute Services, E&Y says, "Through this report, we set out to ask corporate India their perception about corruption and its impact on country's future and the results made for an uncomfortable reading. On one hand, it is forcing investors to rethink their India entry strategy, and; on another it is distorting free market and creating unfair competition."

Source: http://www.merinews.com/article/scams-to-negatively-hit-fdi-inflow-in-india-survey/15888292.shtml

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