More than half of Indians confess to having had to pay bribes.

More than half of Indians confess to having had to pay bribes. Photo: Anupam Nath

While the China bears and bulls do daily battle and our markets wobble one way or the other on a percentage point of Chinese growth data, a genuine disaster continues to build to our north and remains largely ignored: India is rotten.

Not all of India, of course, and not rotten enough to make the 300 million or so souls of the Indian middle class economically irrelevant, but the corruption and ineptitude of the soon-to-be world's most populous country is so ingrained and of such a scale as to be one of the great crimes against humanity of this century.

With another 1.2 billion people now and 1.7 billion by 2050, something like a billion people will live stunted lives, denied the opportunity to realise a fraction of their potential, because their nation is so enmeshed in graft, rent-seeking and administrative despair.

According to research detailed in Britain's The Economist, global corruption watchdog Transparency International reports more than half of Indians (54 per cent) admit to paying a bribe last year, a higher proportion than in Nigeria (44 per cent) or Indonesia (36 per cent).

And the looming Indian elections seem to offer no hope of change. With a fractured democracy apparently incapable of making difficult but necessary decisions, the corruption class is as much a part of the governing as the governed.

As previously argued here, it matters on a selfish basis to Australia because India's failure to evolve limits our own opportunities, it has meant the end of the Goldilocks view of our resources-exporting future.

On a regional strategic basis, it matters because it's hard to imagine a nation of 1.7 billion remaining stable under such a broken system. But most of all, it matters to ordinary Indians, the "wasted workforce", as The Economist has described them.

Indeed, The Economist is one of the few major western publications to try to keep a regular tab what's happening in India, or what's not happening.

Last week it carried a fine investigation of India's corruption from an economist's point of view – it's damaging the economy.

And Indians know it, as the magazine reported:

In a recent poll 96 per cent of Indians said corruption was holding their country back, and 92 per cent thought it has got worse in the past five years.

The effects are economically debilitating, as The Economist reports:

Private firms have cut investments; a fall in investment from 17 per cent of GDP in 2007 to 11 per cent in 2011 is one reason why GDP growth has slumped to 5 per cent, the lowest level for a decade. And ineffective efforts to deal with corruption seem only to have made things worse. India's cranky legal system, its overlapping investigative agencies and its raucous media have meant that responses to the problem may have done as much to paralyse business in general as to punish wrongdoers. Few senior people go to jail; but officials fear being accused of malfeasance, so many think the safest course of action is to make no decisions at all.

The investigation is worth reading in full to understand the soul-destroying extent of Indian corruption and the toll it is taking on individuals and the nation.

The multi-billion dollar scandals are occasionally uncovered, but the petty graft is just as sapping:

India's entry into the global economy created unprecedented opportunities for dishonesty. Property became a multi-billion-dollar business governed by officials paid a pittance. The value of mining licences soared along with commodity prices. Privatisations and public-private partnerships became common, and prone to manipulation. At the same time the elite cadre of the civil service, the Indian Administrative Service (IAS), has decayed. A top officer puts the clean and motivated proportion of its 5,000 members at just 10 per cent — and adds that at the other end of the spectrum 15 per cent are "scum".

Inevitably, Australia will be a party to some of the Indian stench, in the same way that way we are a major receptacle of corrupt and stolen PNG money. (Whatever did happen to the Australians involved in helping to loot PNG public servants' superannuation? Nothing. Do our banks care where big deposits come from? Silly question.) And there is much more flowing out of India.

The Economist again:

In an office in Delhi an anti-corruption tsar is looking at a piece of paper. On it is the name of a fixer in Singapore who is active in the Indian city of Hyderabad and who funnels illicit funds offshore. The official says there are about 25-50 such individuals, known as "settlers", serving India, mainly from Singapore, Dubai and London. The scale of activity is "immense". By cross-checking India's trade statistics with those of its trading partners, Global Financial Integrity, a research organisation, estimates that gross illicit outflows from India have averaged $US52 billion a year since 2007.

A key part of the tragedy is that Indian political machines have become dependent on corruptly-gained funds, and thus offer little hope of reform.

Read the full The Economist story and weep for the loss of future for so many talented people. And then realise that a per cent here or there in China doesn't matter much at all in the greater scheme of things.

Michael Pascoe is a BusinessDay contributing editor.