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Scandals hit India's reputation
November 26, 2010, Friday
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INDIA'S reputation as a place to do business took another hit after the scandal-tainted government charged top public sector bankers with accepting bribes worth hundreds of millions of dollars.
The scandal is one of the biggest to taint India, potentially harming the image of Asia's third-largest economy as a destination for foreign investors, especially as it comes a few days after Prime Minister Manmohan Singh has had to defend his government in another graft scandal involving telecoms licences sold at rock-bottom prices.
The Central Bureau of Investigation on Wednesday arrested five officials from state-run listed lending companies, including the chief executive of LIC Housing Finance , accused of taking bribes to facilitate large corporate loans.
Three senior executives from a listed private firm were also arrested on charges of handing out the bribes.
Indian Finance Minister Pranab Mukherjee said in a statement yesterday he had asked all banks, financial institutions and insurance firms to look into their exposures to firms named by federal investigators in the case.
"The message is not good, both for the market also for the economy," said D.H. Pai Panandiker, head of private think tank RPG Foundation in Delhi.
"All these things create a very bad image about the country and it's kind of loss of faith in the system," he said.
The scandals are unlikely to deter investors from India, one of the four key BRIC emerging markets in the world and a hot investment destination, analysts say.
"Anyone who has been an investor in India has to be familiar with issues like these," Vikas Pershad, CEO of Veda Investments in Chicago. "So, if someone is pulling out of India based on the recent events, he or she is really mistaken. The long-term growth story is intact."
Investors are keen to tap into a country with a young and fast-urbanizing population of 1.2 billion. Economic growth is forecast at 8.5 percent in 2010-11, and then between 9 and 10 percent every year after that, levels rivalled only by China.
India was ranked 87th in Transparency International's 2010 ranking of nations based on the perceived level of corruption. India lies behind China, which is in 78th place.
Shares in firms affected fell sharply since the scandal broke, underperforming the Mumbai stock index.
"The gratifications are huge, more than thousands of crores (hundreds of millions of dollars)," CBI Joint Director P. Kandaswamy said on Wednesday.
The arrests are the culmination of a year-long investigation in five cities in India, the CBI said.
The scandal is one of the biggest to taint India, potentially harming the image of Asia's third-largest economy as a destination for foreign investors, especially as it comes a few days after Prime Minister Manmohan Singh has had to defend his government in another graft scandal involving telecoms licences sold at rock-bottom prices.
The Central Bureau of Investigation on Wednesday arrested five officials from state-run listed lending companies, including the chief executive of LIC Housing Finance , accused of taking bribes to facilitate large corporate loans.
Three senior executives from a listed private firm were also arrested on charges of handing out the bribes.
Indian Finance Minister Pranab Mukherjee said in a statement yesterday he had asked all banks, financial institutions and insurance firms to look into their exposures to firms named by federal investigators in the case.
"The message is not good, both for the market also for the economy," said D.H. Pai Panandiker, head of private think tank RPG Foundation in Delhi.
"All these things create a very bad image about the country and it's kind of loss of faith in the system," he said.
The scandals are unlikely to deter investors from India, one of the four key BRIC emerging markets in the world and a hot investment destination, analysts say.
"Anyone who has been an investor in India has to be familiar with issues like these," Vikas Pershad, CEO of Veda Investments in Chicago. "So, if someone is pulling out of India based on the recent events, he or she is really mistaken. The long-term growth story is intact."
Investors are keen to tap into a country with a young and fast-urbanizing population of 1.2 billion. Economic growth is forecast at 8.5 percent in 2010-11, and then between 9 and 10 percent every year after that, levels rivalled only by China.
India was ranked 87th in Transparency International's 2010 ranking of nations based on the perceived level of corruption. India lies behind China, which is in 78th place.
Shares in firms affected fell sharply since the scandal broke, underperforming the Mumbai stock index.
"The gratifications are huge, more than thousands of crores (hundreds of millions of dollars)," CBI Joint Director P. Kandaswamy said on Wednesday.
The arrests are the culmination of a year-long investigation in five cities in India, the CBI said.
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