India Business Corruption Survey 2024: While bribery by businesses reduced in the last 12 months, 66% of them still paid it on one or more occasions

December 9, 2024, New Delhi: India has emerged as one of the most attractive destinations not only for investments but also for doing business. In 2023-24, India received $70.95 billion in foreign direct investment (FDI). Efforts of the central and state governments to improve ease of doing business showed results with India rising to 79th positions from 142nd (2014) to 63rd (2019) in 'World Bank's Ease of Doing Business Ranking 2020'. Yet doing business in India remains challenging despite central and state governments claiming to have removed many hurdles that are stumbling blocks to investment and doing business.

Urging participants from the industry and state governments to be open to new ideas of working, Union Commerce and Industry Minister Piyush Goyal on November 28 launched the CII Ease of Doing Business (EoDB) and Regulatory Affairs portal for getting insights into India’s business environment and to track suggestions for improvement. The portal attempts to provide status and updates on key initiatives on Ease of Doing Business by both the government and CII (Confederation of Indian Industry).

Goyal reiterated that the Government's National Single Window System (NSWS) guide for investors to identify and to apply for approvals as per their business requirements needs inputs from the industry. Unless the industry is engaging with the National Single Window System, getting licenses through it, and providing inputs to the Centre on it and industrial land bank to make it better, the initiative will not succeed, he added.

Reports from ground and in media suggests that bribery paid by businesses to get the work done is just one form of corruption in India that operates rampantly across the country. It is, however, difficult to place an exact number on the magnitude of business corruption. Levels of bribery and irregular payments are often exchanged by businesses right from registration of the business to timely enforcement of contracts, to even qualifying as a supplier, securing quotations and orders, collecting payments, and complying to the labour laws, etc. This magnitude of bribery is higher where there is an attempt to secure government business or payments.

Various administrations across the country, including union ministries, state governments and union territories claim to have reduced more than 39,000 compliances to foster ease of doing business as of January 17, 2023, according to the Economic Survey 2022-23. Has it indeed made a difference is the big question though.

Prime Minister Narendra Modi has often claimed the approach of trust and technology has strengthened efficient governance and ease of doing business. He has stressed that outdated rules have been replaced with business-friendly rules in keeping with the present-day needs. The replacement of a manual, human dependent process with a systems driven process is where success has been seen in reducing bribery. Classic examples include faceless tax assessments, introduction of security cameras on roads for challans or online requests for Aadhar and PAN card with the card delivered at the business or entrepreneur’s address. However, there are other scenarios where despite introduction of technology and systems, a particular step requires manual human intervention and as a result opens the door for corruption and bribes.

Though India passed the Prevention of Corruption Act (Amendment) 2018, which criminalizes both accepting bribes and giving bribes, corruption is till rampant when it comes to doing business largely because it benefits both the official accepting bribes and the business giving bribes. One example is the bribery case involving a high-rank government official of the Central Drugs Standard Control Organization (CDSCO), India's drug regulatory body, in 2022. After a probe, the CBI arrested 5 people including the Joint Drug Controller of CDSCO and consultants for permitting waiver of phase III clinical trials to a private drug company in exchange for bribes.

Discussions amongst business owners, corporate employees, startup and MSME entrepreneurs on LocalCircles indicated that it is still very difficult to start and operate a brick-and-mortar business in India without paying bribes. If the business is a technology driven startup, the vulnerabilities are reduced but even such businesses are susceptible to corruption related to taxation and labour.

The “India Business Corruption Survey 2024” was conducted to gather the pulse of businesses in India on corruption. More than 18,000 responses were received from over 9,000 unique businesses located in 159 districts of India. 42% of the respondents were from metro or tier 1 districts, 33% from tier 2 districts and 25% were from tier 3, 4 and rural districts. It asked five key questions to ascertain the level of bribery in the last 12 months along with common modes of transaction, and reasons behind paying a bribe, agencies to which they paid a bribe and the total number of bribery transactions. The survey also strived to ascertain whether the number of bribes and bribery transactions had reduced in the last 12 months.

66% businesses surveyed paid a bribe in the last 12 months

As many businesses would vouch anonymously, bribes remain a way of life when wanting to get government departments to speed up the permit or compliance process, even getting duplicate copy of the authority license or anything to do with property matters. To the survey query on “How many times did you have to pay a bribe (directly or indirectly) in the last 12 months?” 41% of businesses out of 2,339 respondents said they paid a bribe “several times”, while 24% paid “once or twice”. There were only 16% of businesses that claimed that they “always managed to get work done without paying a bribe”, and 19% said they “did not have a need” to do so. On an aggregate basis, 66% of businesses surveyed paid a bribe in the last 12 months.

Of businesses surveyed that paid bribes in the last 12 months, 83% paid it in cash and 17% paid it in kind (gifts or favours)

From gifts to cash to favours, bribes are paid in many modes. The survey asked respondents, “For the bribes you paid for your business in the last 12 months, what was the most common mode of transaction?” This survey question received 2,127 responses. Cash remained the most common way of paying bribes, with 53% respondents claiming to have done so while 17 % paid it “in kind (gifts or favours)” while 30% “paid indirectly through an agent”. In essence, of businesses that paid bribes in the last 12 months, 83% paid it in cash and 17% paid it in kind (gifts or favours). It must be noted here that many businesses, especially large corporates, startup unicorns or multinationals do not want to engage in corruption directly and hence they tend to hire middlemen, facilitators or agents who are tasked to also handle activities like bribery.

Of businesses that paid bribes in the last 12 months, 54% were forced to do so, while 46% paid it for timely processing

Bribery paid by businesses continues to take place despite computerisation in several places, and behind closed doors away from CCTVs. The survey next asked, “When did you pay a bribe for your business in the last 12 months, what was the reasoning behind it?” This question in the survey received 2,183 responses with 54% of respondents stating, “It was the only way to get work done” and 46% said “It would have taken a long time or significant effort without bribe”. In essence, of businesses that paid bribes in the last 12 months, 54% were forced to do so, while 46% paid it for timely processing. This kind of bribery amounts to extortion where permits, supplier qualification, files, orders, payments are routinely held up when dealing with Government agencies.

Number of bribery transactions and aggregate value of bribes paid by businesses surveyed reduced in the last 12 months

Many departments are going through digitization or introduction of systems to remove the manual or human interfaces, and this is having a positive impact on number of bribery transactions and the aggregate value of bribes paid by businesses. To understand this better, the survey next asked businesses, “How did the total amount of bribe and number of bribery transactions needed for your business change this year in comparison to last year?” This question received 2,204 responses with 19% stating “similar number of transactions and the similar aggregate value of bribe paid”; 26% indicated “fewer number of transactions and lower aggregate value of bribe paid”; 6% indicated “similar number of transactions, lower aggregate value of bribe”; 15% said “fewer number of transactions, similar aggregate value of bribe paid”; 4% said “fewer number of transactions, higher aggregate value of bribe paid”. However, 30% said “did not need to pay a bribe this year”. To sum up, the survey data shows that the number of bribery transactions and aggregate value of bribes paid by businesses both reduced in the last 12 months.

Businesses admitted to paying a bribe in the last 12 months to different types of entities for qualifying as a supplier, secure quotations & orders and collect payments

Government offices across states continue to be the breeding ground for bribes paid by businesses despite some measures implemented to reduce corruption. It must also be noted that public sector enterprises and even some private sector enterprises also have officials engaging in bribery when someone is doing business with them. The next question in the survey asked respondents where had they paid a bribe in the last 12 months for qualifying as a supplier, securing quotations & orders and collecting payments. This question in the survey received 2,209 responses. 72% of respondents claimed to have paid it to “government officials”, 51% paid it to “Public Sector Undertaking (PSU) officials”, and 28% to “private company officials”. To sum up, many businesses surveyed admitted to paying a bribe in the last 12 months to different types of entities for qualifying as a supplier, secure quotations & orders and collect payments. This indicates that bribery is rampant in India when someone is trying to do business with an entity. It must also be noted that such bribery is rarely reported in complaints as it suits the interest of both the bribe taker and the bribe giver. Though initiatives like the Government eProcurement marketplace are good steps to reduce corruption, there are still openings to engage in corruption for supplier qualification, bid manipulation, completion certificate and payments.

75% of the bribes were paid to officials of departments such as Legal, Metrology, Food, Drug, Health, etc.

Businesses from across the country have regularly reported instances of corruption in almost all Government departments on the LocalCircles in the last 3 years. This became evident in the open feedback exercise the platform conducted to understand names of departments where businesses have had to pay up regularly. Based on what was reported, the next question in the survey specifically asked businesses to identify the various departments where they paid a bribe in the last 12 months. This question received 9,027 responses with 75% of the respondents stating that “bribes were paid to officials of departments such as Legal, Metrology, Food, Drug, Health, etc.”; 69% said they were also paid “Labor/PF Department officials”, 68% claimed to have paid bribes to “Property and Land Registration or Transfer officials”; 62% paid to “GST officials”; 59% indicated “Pollution Department officials”; 57% to “Municipal Corporation officials”; 47% to “Income tax officials”; 45% of respondents indicated “Fire department officials”; 42% indicated “Transport department officials”, 41% of respondents indicated “Power Department officials”, and 38% indicated “Excise officials”. To sum up, most businesses who are paying bribes are paying to multiple departments like food, drug, health and legal metrology departments, labour/PF , property and land registration. Many also reported paying bribes to GST officials, pollution department, municipal corporation and power department.

In summary, the number of times businesses pay a bribe at many levels can be discouraging as corruption directly or indirectly hurts the country’s economy. The survey reveals that nearly 7 out of 10 Indian businesses paid bribes in the last 12 months mostly to the government officials to get permits or compliance done or for timely processing of contracts, with transactions exchanged mostly in cash and some in kind. Of businesses that were either forced or willingly paid bribes in the last 12 months, the survey reveals that 83% paid it in cash and 17% paid it in kind (gifts or favours). The reasons for businesses paying bribes varied according to the nature of trade like for qualifying as a supplier, securing quotations & orders and collecting payments. The survey reveals that the number of bribery transactions and aggregate value of bribes paid by businesses have reduced in the last 12 months. However, of businesses that paid bribes in the last 12 months, 54% were forced to do so, which amounts to extortion, while 46% paid it for timely processing. It appears corruption is a lingering malaise that pervades most government departments with 75% of those surveyed indicating that the bribes were paid to local officials of departments such as Legal, Metrology, Food, Drug, Health, etc. The survey also reveals that despite the Prevention of Corruption (Amendment) Act 2018, which criminalizes both bribe taking and bribe giving, bribing still is rampant.

Going forward, the key to reduce day to day business corruption in India and make doing business easier in the country is full digitisation of all processes pertaining to businesses at the state and local levels with full removal human interfaces. Because at the state and local levels the usage of technology for end-to-end processing is still minimal, that is why so many business owners are reporting corruption by legal metrology, food, drug, health, labour and municipal officials. If this is to be fixed, Central Government will have to make standards for how systems should work and mandate them and link them with funding provided for various programs to states and local departments/bodies. Till that is done, a significant reduction in day-to-day business corruption is impossible to achieve.

Survey Demographics and Methodology

Over 18,000 responses were received from over 9,000 unique businesses located in 159 districts of India. 42% of the respondents were from metro or tier 1 districts, 33% from tier 2 districts and 25% were from tier 3, 4 and rural districts. This survey was conducted using the proprietary LocalCircles stratified sampling methodology. With a minimum target of 25% participation from three location groups (Tier 1, Tier 2 and Tier, 3-5 & rural districts) on each poll, all polls were run. After the minimum participation criteria were met, all polls were run till they achieved a steady state. Post achievement of steady state, the LocalCircles system using the bootstrapping technique drew additional samples to test for the margin of error. All polls were found to have a margin of error under 3% and a confidence level of over 97%.