Loss of credibility[edit]
A study on Bribery and Corruption in India conducted in 2013[78] by one of the largest global professional services firmsErnst & Young (EY), a majority of the survey respondents from PE firms said that a company operating in a sector which is perceived as highly corrupt, may lose ground when it comes to fair valuation of its business, as investors bargain hard and factor in the cost of corruption at the time of transaction.
According to a report by KPMG, "high-level corruption and scams are now threatening to derail the country's it is credibility and [its] economic boom".[79]
Economic loss[edit]
Corruption may lead to further bureaucratic delay and inefficiency as corrupted bureaucrats may introduce red tape in order to extort more bribes.[80] Such inadequacies in institutional efficiency could affect growth indirectly by lowering the privatemarginal product of capital and investment rate.[81] Levine and Renelt showed that investment rate is a robust determinant of economic growth.[82] According to the neoclassical growth model, institutional variables contribute to determining steady-state per capita income levels and speed of convergence to its steady state, hence affecting its growth rate.[83]
Bureaucratic inefficiency also affects growth directly, such as through misallocation of investments in the economy.[84]Additionally, corruption results in lower economic growth for a given level of income.[81]
Lower corruption, higher growth rates[edit]
If corruption levels in India were reduced to levels in developed economies such as Singapore or the United Kingdom, India's GDP growth rate could increase at a higher rate annually. C. K. Prahalad estimates the lost opportunity caused by corruption, in terms of investment, growth and jobs for India is over US$50 billion a year.[1]
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