Ashoka Mody


Scams have become a pervasive aspect of business in India, leading to significant economic and societal repercussions.

The Harshad Mehta scam served as a stark warning against the perils of unregulated capitalism, but its message was overshadowed by the narrative of economic liberalisation.

Post-liberalisation, India witnessed large-scale pilfering from state-owned banks, further eroding public trust in financial institutions.

Cheered on by the state, it has infused an alarming disregard for ethical conduct and public accountability.

Starting in early 1989, the Indian stock market index, the Sensex, began scaling new heights. The spectacular rise through April 1992 was a puzzle: politics was in chaos, the economy was troubled, and yet the Sensex kept climbing, in a near-vertical ascent towards the end.

That episode, known since as the “Harshad Mehta scam”, is largely forgotten, and certainly dismissed for contemporary relevance because it was the creature of a unique moment. However, scams have recurred all too frequently and today are often a way of doing business. The costs to India’s economy and society have been large.

Most damagingly, scams have centred around malpractices in corporate governance: owners and promoters of companies have defrauded investors to enrich themselves. The Indian state, although armed with administrative and regulatory tools, has failed in its duty to safeguard the sanctity of the law. That state failure has caused an erosion of trust, the fundamental glue of social and market transactions. As Judge Arthur Engoron explained recently in State of New York vs Donald Trump, the legal system must maintain the “integrity of the marketplace” so as to ensure that transactions are “honest” and adhere to “the standards of fairness”. Integrity, honesty, and fairness may seem alien, even quaint, in a materialistic society. But as another US judge argued in a related matter, “the state has its own interest” in these moral values. Markets, the judges were saying, fail to achieve their economic and social purpose when the state does not rein in greed. As the great free-marketeer Adam Smith emphasised more than two centuries ago, markets fail where “avarice” vanquishes the moral virtues of prudence and fairness.

Indian observers have dismissed scams as entertaining exceptions orchestrated by socially deviant individuals operating at the edges of normalcy. With time though, the edgy behaviour of some has created an authorising environment for many. The deviant has become normal. Today, scamming is commonplace. Scams are even celebrated for the hyper-individuality they showcase. Lawless financial capitalism—cheered on by the state—has infused broader disregard for moral norms and public accountability. As Professor Partha Dasgupta explains, when everyone expects others will cheat, everyone cheats to stay ahead of other cheaters.

Harshad Mehta’s long shadow

The Harshad Mehta scam remains relevant because it warned of the dangers of unregulated capitalism. That warning got buried in the narrative of bountiful economic liberalisation. The lesson: beware extravagant narratives.

The stock market began its inexplicable rise in March 1990 even as India hurtled towards international bankruptcy. The 36-year-old Mehta’s mystique grew, especially when he moved from a modest home in Vikhroli to a seafront property in Worli. Allegedly valued at Rs.10 crore at the time, the new property had a nine-hole putting green, a Japanese garden, and parking for Mehta’s many luxury cars. In May 1990, the IMF wrote approvingly of India’s “booming stock market” for moderating the risks of plummeting foreign exchange reserves. In August 1990, Citibank India analysts hailed India’s economic prospects. Their reason for optimism: “India’s capital markets have come of age.” They self-consciously referred to rumours that financial institutions such as Citibank India were funding the market’s bizarre rise. The analysts rejected such insinuations, saying they found “no evidence” for it.

The narrative of success got a boost in June-July 1991 when a new government led by Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh dismantled import and industrial controls. This was a pivotal moment. Absent the needed human capital, gender equality, and functioning cities, the intended (and hoped for) boost to manufacturing never materialised. Instead, lawless financial capitalism took root.

Financial regulators were clueless about the reasons for and Harshad Mehta’s role in the market’s rise. The Bombay Stock Exchange (BSE) investigated Mehta’s operations. The Income Tax Department raided his home and office in early 1992. The taxmen were apparently looking for a link to a Dubai-based underworld don but came away empty-handed. S.A. Dave, chairman of the Unit Trust of India (a government-owned mutual fund), referred darkly to hot money inflows. And Reserve Bank Governor S. Venkitaramanan called a meeting of financial institutions.

By February 1992, the share price of Associated Cement Corporation (ACC) had risen to Rs.4,500, up from Rs.350 a year earlier; the broader market index, the Sensex, had risen to 2,300, up from 1,000 over the same period. Financial Times helpfully suggested that the Finance Minister’s reforms were causing the market’s rise. Then a madness set in: in just over two months through late April, the ACC share price more than doubled to Rs.11,500 and the Sensex almost doubled to 4,500.

Sure enough, it came crashing down. A year later, the Sensex had fallen to about 2,000. Indian capital markets had not magically transformed (as Citibank analysts had proposed); nor were markets foreseeing the benefits of reforms, as Financial Times claimed. The IMF’s wishful thinking notwithstanding, the market boom did not avert an old-fashioned IMF bailout.

Under the cover of extravagant narratives, Mehta used interest-free funds from state-owned banks to buy chosen stocks. Post-mortems by various watchdogs had the flavour of a judge’s decision to dismiss the charges against Jessica Lal’s murderers. As The Times of India then reported: “No one killed Jessica Lal.” In the Harshad Mehta scam, the management and executive board of State Bank of India faced no accountability even though that premier bank had, in effect, “lent” Mehta Rs.500 crore interest-free to play the market. Officials rallied behind the Reserve Bank, declaring it could not detect the scam because it lacked the digital capability to track Mehta’s transactions in real time. This was a cop-out. The Reserve Bank had over three years—and the obligation—to inspect banks for unusual activity. Charitably, it missed the fraud in plain sight, a feat that became a habit.

Mehta died an early death. The Income Tax Department still hounds his wife for taxes due. But he became a folk hero. This was the age of Gordon Gecko. Greed was good. The author Pankaj Mishra, writing his first book, a travelogue, had a travelling companion on a train journey, a Mr Goenka. “People consider Harshad Mehta corrupt,” Goenka said. “Why is he corrupt? Because he made a lot of money? I think he is a genius. I say even if he is corrupt, he is inspiring young people.” Mehta’s modus operandi became obsolete. His larger-than-life legacy lived on.

Ketan Parekh charts the way

Harshad Mehta inspired a notable young man: Ketan Parekh. Born in 1963, Parekh once worked for Mehta and came into his own as the new “big bull” around 1998. Less of a loudmouth than his former boss, Parekh rode the global boom in information technology stocks. Amid the new get-rich-quick narrative, he pushed up the stock prices of obscure information technology and communication companies. These companies had low “floating stocks”, meaning their promoters held much of the equity, leaving only a small portion of the stock ownership to trade. In those thinly traded markets, Parekh pushed prices up and thus seduced institutional investors into buying the stock believing it would keep appreciating. Even after the global boom ended in February 2000—at which time the Sensex briefly crossed a high of 6,000 in intra-day trading—Parekh successfully pushed up prices of his targeted stocks. His run ended only in early March 2001 when a so-called “bear cartel” crashed the prices of his stocks. Parekh blazed trails that others traverse to this day. He exposed embarrassing holes in India’s corporate governance: owners and promoters could defraud investors easily. In a memorable transaction early in his career, he coordinated with Gautam Adani’s officials to help run up the stock price of Adani’s flagship company. He revealed that technologically sophisticated regulatory safeguards were toothless without vigilant human regulators. Above all, he pioneered the use of Mauritius (and other tax havens) to launder ill-gotten wealth.

In perhaps the only documented case, the Securities and Exchange Board of India (SEBI) found evidence that, between October 1999 and March 2001, Gautam Adani’s officials participated in engineering surges in the stock price of Adani Exports, the precursor to Adani Enterprises. They did so with Parekh and other brokers. The associated parties engaged in so-called “circular trading”, which denotes synchronised buy and sell orders at successively higher prices. As the SEBI examiner not?ed, other than those circular trades, “there were hardly any genuine volumes in the scrip”. The synchronisation gave the appearance of large trading volumes and ensured that the traded prices were recorded as the new market prices. Even today, despite alleged safeguards in electronic trading, scammers manipulate stock prices through circular trading/synchronisation of orders.

To fund his market moves, Parekh used—Harshad Mehta style—weak links in the domestic banking system, in his case urban cooperative banks, especially the Madhavpura Mercantile Cooperative Bank. But Parekh would have been a forgotten scammer if he had not identified the Mauritius route to launder vast sums.

India’s Double Tax Avoidance Agreement (DTAA) with Mauritius came into force in 1983, but it generated little activity until about 1991, when India began liberalising, ostensibly to promote manufacturing but in fact triggering an explosion of financial activity. Since Mauritius did not tax companies residing in that country, the DTAA created an incentive for non-Mauritian companies, including Indian companies, to seek residency there.

Mauritius did not just offer a tax haven; its officials exercised little or no oversight on who was a legitimate Mauritian resident. Investors worldwide, therefore, used anonymous—so-called “shell”—companies in Mauritius to channel funds to India. Indian investors (and allegedly politicians) roundtripped their money through Mauritius, bringing it back home as “foreign” portfolio flows and direct investment from Mauritius.

Parekh’s genius was to combine the Mauritius route with the Indian government’s anxiety to attract foreign funds. Under one initiative, non-resident Indians could send money to India through entities known as “Overseas Corporate Bodies”. These entities were typically anonymous and the Reserve Bank later acknowledged that it kept no track of them after November 1999. Many Indian companies used “Overseas Corporate Bodies” as fronts in Mauritius and other tax havens. Under another government initiative, foreign institutional investors (vetted as legitimate by their own country authorities) could use anonymous sub-accounts to invest in India. As with the “Overseas Corporate Bodies”, the sub-accounts were convenient for “roundtripping” funds back into India.

It all came together in an elegant package. A Joint Parliamentary Committee (JPC) would later find that Parekh channelled funds through 14 “Overseas Corporate Bodies” and four sub-accounts of foreign institutional investors to manipulate the stock prices of targeted companies using his circular-trading method. Adani Exports figured prominently on the list of targeted companies identified by the JPC, as the SEBI report (noted above) would confirm.

In September 2003, SEBI banned Parekh from trading, but allegedly, he continued manipulating the market through proxy firms. In February 2018, a special court sentenced him to three years in prison for not paying a fine to SEBI.

Indian policymakers practically begged Parekh (or a kindred spirit) to commit fraud. Years before Parekh became the “big bull”, top policymakers were aware that the Mauritius route was being abused. Among notable vignettes in the damning JPC report, Finance Secretary Montek Singh Ahluwalia observed in an internal communication in November 1993 that investors were channelling money to India through Mauritius-based shell companies.

This led him to recommend: “We should try to abrogate the [double-tax avoidance] treaty.” He restated that position in December 1994. When the Revenue Secretary supported Ahluwalia’s view, Finance Minister Manmohan Singh called for “a dialogue in the matter”. His verdict: “We should not precipitate matters now.”

Indian regulatory bodies and courts also refused to take a stand. Asked to adjudicate on whether companies could legally reduce tax liabilities through the Mauritius Treaty, the Supreme Court ruled, with comic overtones, that the treaty helped the government attract foreign funds and technology; any adverse effects were compromises inherent in any treaty.

Finally, an initiative in 2012 to weed out fake claimants to tax benefits slowed down the portfolio flows from Mauritius. Other pressures, including the campaign by the Organization for Economic Cooperation and Development to rein in tax avoidance through tax havens and, more dramatically, the harsh light that the Panama Papers shone on tax havens in April 2016, forced an Indian response. In May 2016, an amendment to the India-Mauritius tax treaty gave Indian authorities the right to tax short-term capital gains at a 15 per cent rate. Portfolio flows from Mauritius fell.

But victory over fake investors remained elusive. Portfolio inflows increased from other tax havens, including from Singapore, with whom India amended its double-taxation treaty just as it did with Mauritius. The surge in portfolio flows came, however, from the US. US investors, in part, diversifying away from their domestic capital market, channelled a sizeable fraction of their flows through US-linked tax havens. The US, with its permissive laws of incorporation, then ranked third (ahead of the Cayman Islands and Singapore) on the Financial Secrecy Index, the ranking of how effectively tax havens hide the identities of investors. Today, the US, at the top of the Financial Secrecy Index, is India’s dominant source of portfolio flows. US investment banks maintain a huge network of subsidiaries in tax havens. In 2017, Goldman Sachs with 905 tax haven subsidiaries and Morgan Stanley with 619 were the top two US corporate users of tax havens; several other financial institutions shovelling money across borders were in the top 20 of that list. And, while Mauritius has fallen from the pinnacle as the source of portfolio flows, it ridiculously remains India’s top foreign direct investment source.

Post-liberalisation policymakers have been obsessed with attracting “foreign” funds. Long after Ketan Parekh faded, opportunities lived on for others to exploit. Recent accusations against Gautam Adani and his companies describe a modus operandi that mimics Parekh’s style almost to a caricature. In January 2023, Hindenburg Research, a US investment research firm and short-seller, accused members of the Adani conglomerate of using Mauritius and other offshore tax havens to manipulate the stock prices of their companies. Despite Adani Group’s quick and forceful denial, the Supreme Court asked SEBI to investigate the matter. As Indian regulatory agencies have done in the past, SEBI punted. In its preliminary report in May, SEBI said it had “drawn a blank”, “hit a wall”, and further investigation would be a “journey without an end”. SEBI claimed it was helpless because the “ultimate ownership” of the entities accused of manipulating the stocks was too “opaque”. In late August, the Organized Crime and Corruption Reporting Project (OCCRP) tried to clear up part of the opaqueness. It described instances of what it alleged were stock price manipulations by Adani associates between 2013 and 2018. The OCCRP also insinuated that SEBI—pressured by the Narendra Modi government—had ignored a letter which reported suspicious activity by Adani Group in its own stocks. Adani Group rubbished the new reporting and allegations.

Scammers rely on staying one step ahead of regulators. Little surprise then that scamming structures are becoming more opaque, which gives SEBI and other regulators reason to claim helplessness in prosecuting fraudsters.

The great Indian bank robbery

The long-standing scamming of state-owned banks has required little sophistication or artistry. This has been a simpler story of power and corruption. The use of state-owned banks as personal piggy banks began right after Prime Minister Indira Gandhi nationalised the major commercial banks in July 1969. Though she touted nationalisation as a Robin-Hood measure to take from the rich and give to the poor, her son Sanjay was among the first beneficiaries. He bullied officials at the Central Bank of India and Punjab National Bank to finance his car-manufacturing hubris, setting an enduring example for those with privileged access to the banks.

Large-scale theft from the coffers of state-owned banks was a post-liberalisation phenomenon. The well-known scammers—Vijay Mallya, Nirav Modi, and Mehul Choksi—remain out of the law’s reach, having escaped to destinations abroad. Indian authorities have claimed for years that they are trying to extradite the rogues.

In this gallery of rogues, the flamboyant Mallya stood out. He owned a yacht, a car-racing team, a football club, and a cricket team. His much-awaited Kingfisher calendars featured scantily clad women, and Lionel Richie performed at his 50th birthday bash. He was the “King of Good Times”, Mallya charmingly said.

Stealing from banks has become normalised. The rogues are no longer colourful personalities, but their numbers keep growing. In April 2015 or thereabouts, Raghuram Rajan, then Governor of the Reserve Bank, transmitted “a list of high-profile fraud cases to Prime Minister Modi’s Office for coordinated investigation”. In September 2018, a despairing Rajan wrote: “The system has been singularly ineffective in bringing even a single high-profile fraudster to book. As a result, fraud is not discouraged.”

The scam is now veiled by a process that hides the costs to the taxpayer from all but the episodic reporter who forces a governmental response through the Right to Information Act. The veiling mechanism is straightforward. When borrowers do not repay a bank for a few months, the bank is required to “write off” the loan. Prudential norms then require the bank to “provide” for the loss, an ac?tion that depletes its capital. In principle, the bank is required to actively seek “recovery” from errant borrowers whose loans they had written off. But the recovery process works poorly. The numbers add up: in the five years ending in 2022-23, banks wrote off Rs.10.57 lakh crore (around $129 billion) but recovered possibly a quarter of the write-offs. And so, the government periodically tops up the capital of the banks that incur losses. Stated simply, the taxpayer pays the unpaid loans.

State-owned banks are the acme of unaccountability. All talk about privatising them remains just that, talk: the largesse that these banks distribute to the privileged and powerful is a political asset no government is willing to forgo.

Another part of the banking system, non-banking financial companies (NBFCs), is even more of a Wild West than the state-owned banks. NBFCs do not, in principle, accept deposits from small customers and so are believed to require less regulatory oversight. That is an open invitation to fraudsters.

The fraud that led to the bankruptcy of Infrastructure Leasing and Financial Services (IL&FS) in August 2018 is the most famous—and consequential. Poorly conceived and badly executed government policy aggravated the regulatory chinks of an NBFC. IL&FS was established in 1987 to promote the then latest fad: public-private partnerships in infrastructure. Legally, it was a private enterprise, but it received almost all its equity (and later) debt funding from government-owned financial entities. Its largest shareholder (effectively a promoter that looked the other way) was the state-owned Life Insurance Corporation of India. IL&FS also received from the Indian government rarely granted sovereign guarantees of repayment of borrowing from international lenders such as the World Bank, the Asian Development Bank, and the German development bank KfW.

The scam flourished because the government never mastered the art of designing safeguards to protect the public interest in public-private contracts and because IL&FS’ hazy relationship with the government gave it an extra licence to operate without regulatory oversight. Gamesmanship in the bidding process for infrastructure projects led to frequent and capricious renegotiation of contracts, making it impossible to track their true economic value. The uncertainty in valuation allowed Ravi Parthasarathy—the pipe-smoking, fast-talking boss—and his immediate coterie to present an inflated view of IL&FS’ revenues and assets, as forensic audits revealed after the collapse. Under the fictional cover of flattering financial performance, Parthasarathy and the others engaged in dubious, roundtripping transactions and financial juggling between IL&FS’ multiple entities, enriching themselves and those they favoured. State-owned banks helped the financial shenanigans at IL&FS by providing it with a continuing flow of funds. Clueless credit-rating agencies rated IL&FS as AAA until a few weeks before it collapsed. When directors, shareholders, and whistle-blowers challenged him, Parthasarathy tried to ward them off with intimidation and litigation.

In principle, a paper-plan exists to salvage value from the IL&FS wreckage. But within the complex and opaque financial structure Parthasarathy had set up, claimants and counterclaimants to any residual value are stuck in India’s labyrinthine legal system and may remain there for decades. Predictably, the Reserve Bank learned no lessons. Although other NBFCs fell along with IL&FS, these so-called “shadow banks” still provide about one-fifth of credit extended by the Indian financial system under a deliberately lax regulatory regime.

Fintechs, a new narrative

Indian authorities and the country’s elite tout digital infrastructure as the springboard to leapfrog long-standing developmental handicaps into a brighter future. The narrative is that creative digital technologies will spur faster and more equitable growth through edtech, medical apps, and globally connected kirana stores. Fintechs, suppliers of financial services on the digital infrastructure, will be the keystone of the new growth model.

According to official accounts, India has over 3,000 fintechs. Even as fintechs have sprouted amid Panglossian expectations, stories of digital fraud have proliferated. Fake loan apps mushroomed after the first COVID-19 lockdown, offering funding to those who had suddenly lost their incomes. The loan apps demanded little documentation from borrowers but charged often stratospherically high interest rates. The most desperate borrowers, unable to repay their loans, were driven to suicide. In November 2021, the Reserve Bank declared 600 of the 1,100 apps illegal. But they were an “unstoppable disease”. Even as app stores removed them, clones reappeared. The scammers were always two steps ahead, easily dodging new restrictions.

COVID-19 has passed, but online extortions continue, perpetrated by Indian representatives of Chinese financial apps. They employ an exciting mix of shell companies, cryptocurrencies, and WhatsApp and Telegram group messaging. While the individual transactions are small, the total amount involved in a scam associated with a Chinese app can run to as high as Rs.100 crore.

The more serious problem though lies with fintechs that, in principle, operate legitimate businesses but have gravitated to fraudulent activities. The difficulty is that fintechs have an unclear economic purpose. They originated as payment service providers on the Unified Payments Interface, but they serve no other evident function that the traditional financial sector does not. What advantage, for example, do they have over banks in providing credit cards or lending services? What services can they efficiently deliver? Will they eventually displace traditional financial institutions to provide the full range of financial services? And, if digital technology does confer an advantage, why won’t conventional banks adopt those technologies themselves? With the heady COVID-19 days over, do fintechs have a future?

Among the celebrated fintechs, Paytm’s primary business was (and is) digital payments. But, in the manner of many Indian companies, it diversified early and wildly into insurance, gold sales, film and flight ticketing, and gaming. In November 2021, it made a dramatic public offering. Seeking a market valuation of $20 billion, its share price fell quickly from the opening offer of just over Rs.2,000 per share to Rs.1,500. While the price has recovered from the bottom of about Rs.800 a share, it is still trading below Rs.1,000. Like all start-ups, its path to profitability was unclear at the time of the IPO and remains cloudy today.

To boost profitability, Paytm has diversified into a dubious lending business. The interest ?rate for the loans it sells (on behalf of lenders it hosts on its platform) is set at a high of 22 per cent for nine months but can effectively range between 30 per cent and 55 per cent after deduction of processing fees. The promise to borrowers is virtually instant access to cash with little or no paperwork.

Fintech lending has morphed into a morally reprehensible and, ultimately bad, business. In the COVID-19 years, fintechs offered loans to desperate households at effective interest rates as high as 500 per cent. Some borrowers became addicted to such loans. They pay off old balances with new loans. Lenders employ brutal collection tactics, including blackmail. Touted as transformative technology, India’s digital infrastructure is also the site of extortionist moneylending. With the perception that “everyone is doing it”, the distinction between right and wrong has blurred.

The Reserve Bank declares itself opposed to “usurious” lending, which it claims it is monitoring. It also requires fintechs to tie up with banks or NBFCs (themselves dubious entities). The best the Reserve Bank has done thus far is impose a Rs.5.39 crore fine on Paytm for not complying with prudential norms, including know-your-customer guidelines and adequate risk-profiling of users.

The risks and messiness have spread. BharatPe, one of India’s largest fintechs, facilitates peer-to-peer lending at high rates and so attracts subprime borrowers, for which reason its default rates are high. Earlier this year, BharatPe faced a mini run when a former founder predicted a dire future for the company. The company had earlier dismissed that founder and his wife (who managed the company’s finances) for stealing company funds to live lavish lifestyles.

Another growing risk arises from regulatory arbitrage to overcome constraints on fintechs. The once highly regarded Bengaluru-based Slice has seen its business options narrow as the Reserve Bank demanded stronger ties between fintechs and banks. In response, the loss-making Slice has, with the Reserve Bank’s blessings, purchased an obscure loss-making bank in Guwahati. Merger of two loss-making financial institutions with completely different customer bases and operating cultures apparently helps foster financial stability.

Fintech executives at their recent annual conclave were decidedly gloomy. If their fears take hold, financial fraud will likely increase as promoters try to offset tumbling valuations.

Poor corporate governance plagues the entire digital start-up sector, most starkly exemplified by the resignation of the star edtech Byju’s auditor. Byju’s stands accused of inflating its revenues and delaying public disclosure of its financial statements. It is also embroiled in a fierce spat with international lenders who insist that Byju’s is in default to them because it has violated loan covenants. Several start-ups in edtech, in medical services (Phablecare and Pristyn Care), a car repairs platform, and even a so-called cloud kitchen, Bigspoon, have reported inflated values of sales and funds they have raised. According to an internal audit, the kirana stores’ platform Bikayi forged signatures of suppliers and store owners to bill them for services. Market manipulation through “paid tweets” to obtain recommendations from hired “influencers” is another ongoing scam.

Growing corporate malfeasance among overhyped digital start-ups is not a surprise. The current funding winter (following the rise in US interest rates) and the sharp slowdown in customer growth after the short-lived COVID-19-induced spurt have forced investors and promoters to face the reality of a tiny Indian market for digital services.

Fraud, a way of doing business

Commentators often laud the Indian business community for its tradition of entrepreneurship. Examples range from Cowasjee Davar’s establishment of a textile mill in 1854 to information technology start-ups in the 1980s and 1990s. But a phase change occurred in the 1990s. Successive governments ducked their responsibility to bolster the fundamental prerequisites of long-term growth—human development, gender equity, and functioning cities. Instead, they pushed for growth through the wonders of finance and technology. Gross inequalities, unsustainable growth spurts, and inept regulatory agencies fostered a permissive environment. Instead of pursuing responsible entrepreneurship, many businesses sought ways to get rich quickly. Corporate malfeasance became endemic. Companies violated rules of conduct in securities markets, manipulated their books, and stole from state-owned banks. They established shell companies, at home and in international tax havens, to hide identities and move money in mysterious ways. Business ethics suffered.

While scams are most intimately associated with finance—because that is where the money is—the culture of fraud has spread to many corners of the economy, including to the modern digital ecosystem. That, in turn, has bred, in Judge Engoran’s words, a disrespect for integrity, honesty, and fairness in the marketplace. Pharmaceutical companies, in connivance with their regulators, routinely produce substandard drugs, which sometimes kill. Pharma companies pollute the land and water with impunity. Ethical standards in the medical and legal professions have nosedived. Fake job agencies lure the desperate and unsuspecting into parting with their precious savings in hopes of a better life. And a mafia has infiltrated India’s once-storied call centres to prey on the elderly and trusting at home and abroad.

Reversing these pathologies is difficult because it is in no one’s interest to change the status quo. This is how a bad equilibrium works: a catch-22 situation from which there is no escape.

Ashoka Mody teaches at Princeton University. He is the author of India is Broken: A People Betrayed, Independence to Today (2023).
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