Recently, an article “Corrupt babus make life miserable for SMEs” has rocked all over the globe. The article is a short study on corruption in government circles which is affecting SMEs business in various countries.
India’s largest B2B portal tradeindia.com has conducted a survey amongst SMEs on the subject to find out whether rampant corruption in government circles has affected various SME businesses in other countries. Some startling facts that came to light reveal that almost all SMEs have been victims to corrupt babus at least once. While 89 percent of the respondents agreed that the various scams that came into lime 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.
Since we have 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 of the Commonwealth Games in New Delhi in 2010, and the 2G Scam have grabbed the eyeballs of all the 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 $22 billion and $45 billion due to a single scam alone – the 2G Scam.
More than 90 percent SMEs who participated in the survey believe that the government must take a more holistic approach towards fighting corruption. Respondents opine that efforts to improve law enforcement needs to be complemented with 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 exceeding Rs. 250,000crores, 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 favored voting groups, and favoring business lobbies for campaign contributions, ignoring the sentiments of SMEs who are left to fight their own battles.
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) should 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.
India, today needs a leadership which can motivate and enrich government officials with an impaired sense of public service and responsibility, SMEs noted. Every year, crores of rupees are paid in bribes with devastating consequences as a way to get things done . SMEs across the country are increasingly concerned about the problem of bribery and corruption in various governments.
Bribery is one of the most worrisome issue for small and medium enterprises (SMEs), who feel powerless in the face of demands for bribes. They (SMEs) feel that bribery to get things done is a part of their business practice. Since SMEs lack the financial and human resources to counter bribery, they have today, become easy targets for corrupt demands and extortion. Moreover, bribery in the circles of SMEs happens in small amounts and usually goes unnoticed.
We are all aware that with limited business opportunities, tough competition and having to work under financial constraints, SMEs feel that paying a small sum to get their work done is okay if it means getting the job done. With no active ant-corruption agency or laws, SMEs are unaware as to whom to approach if they face such a situation where they are asked for bribes. Today in India, corruption has imposed additional burden on SMEs who have to bear an indirect burden when dishonest government officials ask for bribes. Corruption impacts adversely on the pricing strategy of SMEs because the payment of bribes to get odd jobs done increases the cost of doing business and consequently reduces the competitiveness of the product in the global markets.