10 months after cash ban, India graft still endemic

Bloomberg

Nearly 10 months after India’s unprecedented ban on high value notes that was designed to tackle entrenched corruption, bribery continues to oil the wheels of business in Asia’s third-largest economy, according to a US risk management firm that advises foreign investors.
Gifting of land, houses, luxury watches and sponsoring expensive travel abroad are now the preferred bribes as tax authorities clamp down on high value cash transactions. And for India’s vast shadow economy, estimated by McKinsey & Co. at a fourth of the $2 trillion economy, the cash ban has hardly made a dent.
“Transparency, post demonetisation, has marginally improved but I am not sure it has made a dent on corruption,” Tarun Bhatia, managing director at the Indian arm of Kroll Inc., said. “Of course, there is use of more plastic money than before but I don’t think it is a case where black money is no longer there. It has handicapped but not fumigated the parallel economy.”
Jagdish Thakkar, a spokesman in the Prime Minister’s office, didn’t return calls seeking comment.
While the use of credit and debit cards and digital transactions has risen from pre-note ban days, Indians mostly prefer cash for their daily transactions after limits for daily withdrawals were restored back to normal earlier this year. Besides, many Indians, especially in the vast hinterlands, lack a bank account or have limited access to technology or the Internet, making digital payments inconvenient.
For four decades, New York-headquartered Kroll has helped clients make risk management decisions about people, assets, operations and security. Their recent global survey showed companies worldwide are increasingly grappling with corruption and bribery challenges.