India Country Profile

Regional Differences in Corruption and the Regulatory Environment

India exhibits great regional variations in the level and impact of corruption. India is a union of 28 states (plus 6 union territories and the capital, New Delhi). Each of the local governments holds wide legislative powers, including areas such as public procurement (see the Corruption Levels and Public Anti-Corruption Initiatives for more information) and anti-corruption bureaus. According to Transparency International India's study of petty corruption within 11 public services throughout India in 2005, corruption affects different sectors in different states. Some illustrative findings of the study are the following:

• Kerala and Himachal Pradesh: Most public services in these states are ranked among the least corrupt in India.
• Gujarat: The judiciary, the police and land administration are ranked as the most corrupt services in the state.
• Maharashtra: Municipal services are ranked among the top five corrupt public services in India.
• Punjab: The police, the judiciary and municipal services are ranked as the most corrupt services in the state.
• Orissa: The judiciary ranks among the top four corrupt services in India.
• Haryana: The police, the judiciary and municipal services are ranked as the most corrupt services in the state
• Assam: The police are ranked as the most corrupt service in India.
• Karnataka: The tax service, judiciary and the municipal services are ranked among the most corrupt services in India.
• Jammu and Kashmir: Most public services are ranked among the most corrupt in India.
• Bihar: All public services are ranked among the most corrupt in India.

Overall, the study ranks Kerala, Himachal Pradesh, Gujarat, Andhra Pradesh and Maharashtra as the five least corrupt states, whereas the most corrupt states are Bihar, Jammu and Kashmir, Madhya Pradesh, Karnataka and Rajasthan. It is important to note that the study ranks the states on petty corruption using information from a household survey rather than from a business survey, which would indicate how companies are affected by corruption in different states. Transparency International India & CMS 2007 indicate that households below the poverty line are disproportionately affected by corruption both in urban and rural areas.

Similarly, companies will find great sub-national variations in the regulatory environment. India has a decentralised federal system of government, where state governments hold broad regulatory powers. This means that important regulatory issues such as land-use and environmental regulations may vary from one state to another. A study by the World Bank & IFC, Doing Business in India 2009, includes a comparative study of the business environment in 17 major Indian cities. Some of the findings of the study are presented below:

• Starting a company takes longest in Kochi (41 days) and in Bengaluru (40 days), whereas the same procedure in Noida is considerably less time-consuming (30 days). However, it is also pointed out that starting a company in Patna is less costly than in Bengaluru (38.6% of income per capita, versus 64.7%).
• Hyderabad requires the lowest number of days to fulfil all regulatory requirements to build a warehouse (80 days) compared to Kolkata (258 days), which performs worst in this category among the cities studied. The cost of obtaining licences for building a warehouse is lowest in Patna (277% of income per capita) and highest in Kolkata (1,999% of income per capita).
• Registering property is faster in Gurgaon and Koch (26 and 27 days respectively) than in Kolkata (107 days) and Bhubaneshwar (126 days). However, the cost of property registration is lowest in Ranchi (5.4% of property value) and highest in Noida (25.4% of property value).
• Trading across borders in India is characterised by a cumbersome bureaucracy, but again, regional differences are substantial. Importing and exporting operations run most smoothly from Bhubabeshwar's port (16 days to import, 17 days to export) closely followed by Chennai (19 days to import, 18 days to export). Import-export operations take longest time in Mumbai (41 days to import, 25 days to export).
• Commercial disputes before courts in India are among the most lengthy in South Asia. Again, Indian cities perform differently in the area of contract enforcement, with the shortest durations found in Guwahati (600 days) and Kochi (705 days) and the longest in Ahmedabad (1,295 days) and in Mumbai (1,420 days).

More than 50% of responding companies in the World Bank & IFC Investment Climate Assessment 2004 state that corruption and excessive regulation are major obstacles for doing business in India. In the states of Gujarat and Karnataka, this figure is 62% and 64% respectively. However, the same study shows that these two states are among the six Indian states identified by companies as having the most favourable investment climates in India: Maharashtra, Delhi, Gujarat, Andhra Pradesh, Karnataka, Punjab, Tamil Nadu and Haryana. These sates attract almost all foreign direct investment in the country, underscoring the fact that issues other than corruption also affect the investment climate, such as uneven development and regulation as well as poor infrastructure.

Responses to corruption vary from one local government to the other as well. The states of Bihar and Orissa, for example, have passed legislation that enables the state governments to confiscate the property of civil servants with disproportionate assets even before the courts have ruled on the case.