Several years ago, I traveled to India as an official for the State Department. The United States government has stringent rules about gifts. The only item I was ever able to accept was a pink plastic alarm clock that wakes one to the loud wail of the Islamic call to prayer. Knowing this, foreign governments generally understand that no shady dealings with American officials are possible.
The midlevel official I met in India’s Ministry of Science and Technology had different ideas. I briefly visited his dilapidated office to discuss Indian-American cooperation on scientific research. After a few minutes, his face lit up.
“The ministry has a large budget to host a conference for U.S. and Indian entrepreneurs working in the sciences,” he said. “You know lots of entrepreneurs, so why don’t you organize the conference for us? I will pay you to do it, and you can give me 10 percent of the fee back.”
I stared at him for a moment. He clearly felt not the slightest embarrassment at proposing a kickback likely larger than his annual salary. I mumbled something about not being the right person for this, and got out of his office as fast as I could. I chose not to report him because I couldn’t be 100 percent sure I hadn’t misunderstood, but the encounter stayed with me.
Corruption is hardly unique to India, and the country has somewhat improved its transparency rankings in recent years, but graft still acts like an enormous tax on the economy. In one scandal, telecommunications licenses were sold at below-market rates to preferred bidders, costing the government up to $39 billion — roughly the size of India’s defense budget at the time. The country’s system of selling coal licenses has been similarly opaque and wasteful, costing the government an estimated $33 billion.
Tackling graft is the linchpin to fixing income inequality, environmental problems and creaking education and pension systems, and to appeasing growing public anger. For corruption erodes trust in government, as India’s Congress Party discovered when it was turned out of office in 2014, in large part because many ministers were seen as inept and corrupt. Unlike in China, where the government has waged a top-down battle to root out dishonesty in the Communist Party, in India anti-corruption efforts have been fueled by citizens’ protests and a vibrant, free news media.
Beginning in 2011, the activist Anna Hazare, who describes himself as a disciple of Gandhi and has the same friendly, spectacled look, engaged in fasts and protests for more than two years, prompting hundreds of thousands of Indians to take to the streets. He wants the government to establish a national ombudsman’s office to investigate and prosecute corruption. So far, he has not succeeded at the national level, although a new anti-corruption party inspired by Mr. Hazare won recent local elections in Delhi.
Prime Minister Narendra Modi’s government has taken steps in the right direction by holding transparent auctions for public contracts, putting many government services online, and quietly making it harder for tycoons to get special favors. The most effective solution to date has come from outside the government, led by the Internet entrepreneur, Infosys founder and self-made billionaire Nandan M. Nilekani.
Mr. Nilekani is no neo-Gandhian folk hero. Tall and impeccably dressed, with a graying Rhett Butler mustache, he is a regular at the annual World Economic Forum in Davos, Switzerland.
About six years ago, with government support, Mr. Nilekani’s engineers created a biometric ID program named Aadhaar. Aadhaar takes fingerprints and iris scans to generate a national identity number for every Indian. More than one billion Indians have signed up. Those with numbers can now use a simple smartphone app to collect government pensions or scholarships, or receive banking services — all bribe-free.
One of those it helped is Ram, a farmer in central India (it’s common for rural Indians to go by only one name). He works for the National Rural Employment Guarantee Scheme, which guarantees the poor a minimum of 100 days a year of paid work building roads or upgrading irrigation systems. To get his meager wages of 800 rupees (about $12) a week, Mr. Ram had to take a day off work, ride the roof of a creaking bus to a nearby town and line up in the dusty heat for three hours to see a local bureaucrat who would likely deduct a fee from Mr. Ram’s wages. The whole rigmarole reduced his actual pay by about a third.
An Indian government study found that, on average, people like Mr. Ram receive only 61 percent of the wages they are owed by the government. The rest just disappears. Many government officials are barely paid a living wage, so this is also how they make ends meet.
Mr. Ram is proud of his Aadhaar ID card. To get his wages, he now simply stops at his corner grocery store. The owner scans Mr. Ram’s fingerprints on a phone app and then pays him, keeping only a legal 10 rupee (16 cent) commission.
Those who have previously benefited from India’s opaque systems are naturally opposed to Aadhaar. Some politicians argued that the Aadhaar system was a waste of money or infringed on privacy. Mr. Modi recently threw his support behind it, which silenced some of the critics.
A recent World Bank report said that digital ID transfers are already saving the Indian government $1 billion a year on just one fuel subsidy program. This success offers hope, but the rear-guard battle demonstrates what a herculean task broader reform will be.
The Aadhaar program and Mr. Modi’s emphasis on more open government contracting are an excellent start, but other possible fixes include setting up an independent commission to try the worst offenders — along the lines of what Mr. Hazare is proposing. India requires public officials to disclose their assets, but this is not always enforced. Pay increases for state officials would also be a useful carrot to encourage compliance. Above all, a comprehensive ethics and education campaign in schools and the news media would shift cultural norms away from seeing graft as an inevitable part of life.
India has begun many of these steps, in a limited way. It will prosper if the government redoubles its efforts.
Anja Manuel, a founder of the strategic consulting firm RiceHadleyGates, is the author of This Brave New World: India, China, and the United States.