Corruption making life miserable for SMEs: survey

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SME Times News Bureau | 25 Jan, 2011
A recent survey on whether rampant corruption in the government circles has dented the country's global image has brought to light several startling facts, said a press release.

The survey conducted amongst small and medium enterprises (SMEs) by tradeindia.com, India's largest B2B portal, has revealed that almost all SMEs have been victims to corrupt babus at least once.

According to the release, 89 percent of the respondents agreed that the various scams that came to light recently have dented India's global image to a large extent, almost all respondents were of the opinion that all guilty should be put on a fast track trial and that a system should be brought in place to bring in more transparency in various government approvals pertaining to the day to day operations of SMEs.

In the light of the limited information on the scale of the problem of corruption, the survey was to assess the experience of bribery and corruption issues afflicting India's SME sector and thereby to improve our understanding of the issue.

It may be mentioned here that the Adarsh housing scandal in Mumbai, the corruption involving the preparations for the Commonwealth Games in New Delhi in 2010, and the 2G Scam have grabbed the eyeballs of all Indians. The magnitude of India's corruption story is mind-boggling and the Comptroller and Auditor General (CAG) has recently reported that the Indian exchequer has lost anywhere between USD 22 billion and USD 45 billion due to a single scam alone - the 2G Scam.

What many SMEs see as a way to get things done, every year, crores of rupees are paid in bribes with devastating consequences. SMEs across the country are increasingly concerned about the problem of bribery and corruption in various government circles.

"Corruption in the country is at its rampant best and perhaps not a single section of the industry has been spared from it. Bribery, the most common form of corruption that most SMEs face every single day is more difficult to monitor and control," a respondent noted.

More than 90 percent SMEs who participated in the survey believed that the government must take a more holistic approach towards fighting corruption. Respondents opined that efforts to improve law enforcement need to be complemented by initiatives in other policy areas. Initiatives to improve integrity in public procurement systems and to develop similar initiatives in related areas should be encouraged.

With the cost of corruption to the country well exceeding Rs. 250,000 crores, the survey found that SMEs feared that if these brazen acts of corruption continue, India's corruption could be a trillion dollar industry very soon. SMEs reveal that the main source of corruption was the misuse of state power. The state has misused power in various ways with favoured voting groups, and favouring business lobbies for campaign contributions, ignoring the sentiments of SMEs who are left to fight their own battles.

Corruption in India cannot be addressed without addressing the overall social environment and attitudes held in the society. Attitudinal change is an essential ingredient in achieving sustained reduction in corrupt practices relating governance. What India needs today is a leadership which can motivate and enrich government officials with an impaired sense of public service and responsibility, SMEs noted.

Respondents feel that corruption has imposed additional burden on SMEs in an arbitrary and capricious manner, and they also bear an indirect burden when dishonest government officials ask for bribes. Unable to get things moving without bribing, the input costs of SMEs are increasing rendering their products uncompetitive in global markets.

Upcoming entrepreneurs who responded to the survey suggested that a single window clearance for projects can do away with the interference of many bodies and thus the scope for harassment. Citing personal incidents of corruption, they (entrepreneurs) said that many a time they are dissuaded from going ahead with their plans due to the red tape, inspector raj, and officials asking for hefty bribes.

When asked whom SMEs would be most likely to turn to for advice when faced with a bribery and corruption issue, almost half of respondents believed that they would turn to their lawyer and 19 percent to their accountant. Almost a fifth of respondents either would not turn to anyone for advice, or were not aware as to whom they (SMEs) would turn to for advice. Interestingly enough, almost two-thirds of the SMEs who responded to the survey believed that there is not enough guidance to help them identify or deal with bribery and corruption.

Majority of respondents considered that bribery and corruption is an issue that SMEs may have to live with, and given the fact that they were unaware of availability of suitable guidance, bribery and corruption will always remain a cause for concern.

SMEs may feel powerless in the face of demands for bribes and are often unaware that bribery can be resisted or how to go about it in a situation where the propagation of their business lies on the hands of corrupt officials, the survey added.