Bribery In India: A Good Thing?

MELISSA BLOCK, host:

In many countries, starting a business requires more than a good idea. You also need an unmarked envelope full of cash - a bribe. You want that business license without the hassles? No problem.

NPR's David Kestenbaum from our Planet Money team recently visited India and he brought back the story of a young businessman and his envelope of cash.

DAVID KESTENBAUM: Gagan Singh was not actually all that excited about starting a business in the first place. He was 22 years old, wanted to be an artist, but his family said, Gagan, artist? That is not a good career choice. You should be a very successful businessman. So Gagan took some business classes, but they didn't prepare him for what was to come.

Mr. GAGAN SINGH: What happens on the street has no link with the studies. You can just burn all the books.

(Soundbite of laughter)

KESTENBAUM: Gagan started up a tiny business delivering telephone and Internet service. He hired four people. They needed to string up some wires and get licenses from the government but getting those things done without hassles required a bribe.

Mr. SINGH: The very first time, I still remember the guy was named Josan(ph). And I walked into his office, he very cool, ultra cool about it. He calls for tea. I'm sitting, he's just chatting, how am I, how is everything? And I'm, like, you bastard, I know what you want.

KESTENBAUM: So, Gagan chitchats, then takes out a folder with 10,000 rupees tucked inside, about $200, passes it to the government official who slips it into his briefcase.

Mr. SINGH: And he's, like, yeah, okay, where do I need to sign and, please, have your tea. Please have some cookies.

KESTENBAUM: That was not the end, though, Gagan says he had to bribe people almost every step of the way.

Mr. SINGH: I think about 10 to 15 people.

KESTENBAUM: You had to pay 10 to 15 people?

Mr. SINGH: Yes. Every person, starting from the line man to the junior engineer to the senior engineer, to their bosses.

KESTENBAUM: How did it feel doing that?

Mr. SINGH: It was really clashing with my principles of life. Thought I'd move away. Then my parents were like, every system in India works on this note. You cannot run away.

KESTENBAUM: This, frankly, was the story I was expecting to hear about how bribes made it more expensive to start a business, meaning bribes were probably slowing down the economy. Fewer companies means fewer jobs, fewer people climbing out of poverty. But then Gagan said something surprising.

Mr. SINGH: Now if I have to pay a bribe I would without any hesitation pay it.

KESTENBAUM: You would pay it?

Mr. SINGH: Yeah, now I'm in a different mood. Now I will pay bribes as much as possible and I would even enjoy the process of paying bribes.

KESTENBAUM: Why?

Mr. SINGH: Because something internally has happened.

KESTENBAUM: What about your principles?

Mr. SINGH: My principles have changed.

KESTENBAUM: What are your principles now?

Mr. SINGH: My principles are just get your things done. Everything is fair in love, war and business.

(Soundbite of laughter)

KESTENBAUM: So, bribes, good, bad, necessary? Here's Rema Hanna. She's an economist at Harvard who studied bribery in India.

Professor REMA HANNA (Economist, Harvard University): There is actually a large debate among economists about whether or not bribes are actually bad or good for economic growth.

KESTENBAUM: Really?

Prof. HANNA: Yeah. It's still a huge debate.

KESTENBAUM: It all depends, she says, on whether the rule you're getting around with the bribe is a good rule or a bad rule. Every country has some paperwork. According to one study in the U.S., it takes six days to start a business, India, 30 days, Surinam, 694 days.

Prof. HANNA: You can imagine a case that if you're able to pay a bribe and cut a lot of the red tape, get around a lot of the bad laws, it might actually make things in the economy move a lot smoother and you might actually see more growth because of it.

KESTENBAUM: I talked to a lot of people in India about bribery: business owners, taxi drivers, ordinary folks. Many had a story about how they had to pay someone off to get something done. And most people told me they thought it was a hassle, they thought it was unfair and they wished it would just go away. Bribery sometimes goes away as countries develop, but India's still in transition.

It's famous for paperwork, tangled bureaucracy and the courts are slow. So, often it just makes economic sense to shrug and pay the money. Because when you bribe someone, they can become like your own personal Ganesh, the god who is the remover of obstacles.

Gagan recently had to bribe a building manager who was threatening to cut some of Gagan's cables. And now the manager is no longer the cutter of cables, he is the protector of cables.

Mr. SINGH: He's, like, I'll make sure that nobody cuts them. So it's like he starts working for you. What more do you want? It's, like, your business grows, and he says, I'll get customers for you.

KESTENBAUM: Gagan now has about 15 employees. And he's doing well enough that he can spend most of his time making art. When I met him, he was in a gallery happily sketching.

David Kestenbaum, NPR News.

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