The instances of crass corporate corruption currently convulsing the American economy are certain to have an impact across the globe. At one level, we can derive small comfort from the fact that crony capitalism is not confined to countries like India or even Asia as a whole.
After all, the scams that have taken place the world's most advanced capitalist nation now threaten to lead all the way to the White House, to the doorstep of the US President George W Bush and Vice President Dick Cheney.
More importantly for India, these American scandals actually offer a chance to the authorities here to clean up the muck in our own corporate sector, to empower lax regulatory bodies, make accounting norms far stricter and ensure greater transparency and accountability.
Whether, of course, this will happen is a separate question. Nevertheless, the time is certainly opportune for a major overhaul of the working of the country's financial systems for at least one obvious reason: unlike his predecessors, the new Union Finance Minister Jaswant Singh is also in charge of the Department of Company Affairs (that was earlier a part of the Ministry of Law and Justice.
He can conceivably push through a clean-up operation because he would be in better position to coordinate the activities of the Department of Revenue, the Banking Division (both of which are part of the ministry of finance) with those of the DCA.
Financial scandals are hardly new to India - or, for that matter, to the US. There have been scams galore over the last half-century. The significant differences lie in the sheer scale and audacity of the acts of malfeasance and graft.
In India, scamsters starting from Haridas Mundhra to Harshad Mehta and Ketan Parekh have managed to get away with major acts of corruption because of poor vigilance and an even worse legal system that takes many years, if not decades, to punish the guilty.
At this juncture, it is impossible to ignore the series of corporate scandals that have recently rocked America Inc. And this is because these episodes have had a direct impact on this country.
There are at least four American corporations, Enron, Arthur Andersen, WorldCom and Xerox, whose associates in India or operations in this country have been adversely affected by the series of scandals that have erupted.
Take the case of Xerox Corporation and its Indian affiliate Xerox ModiCorp. The US-based multinational corporation told the Securities and Exchange Commission: "In India, we have learnt of certain improper payments made over a period of years in connection with sales to government customers by employees of our majority-owned subsidiary…"
The statement added that an amount varying between $600,000 and $700,000 had been 'improperly' paid - presumably meaning bribes - during the year 2000. Xerox Corp claims it asked particular employees in its Indian associate to quit their jobs after it learnt about the 'improper payments.'
Finance Minister Jaswant Singh has reportedly ordered a detailed inquiry into the affairs of Xerox ModiCorp. But it is likely that there would be pressure on the minister from some of his ideological fellow travellers to hasten slowly while digging up the dirt on the company.
The reason for such an apprehension stems from an important fact. Xerox ModiCorp is headed by Bhupendra Kumar Modi who also happens to an important office-bearer of the overseas wing of the Vishwa Hindu Parishad.
And who does not know the VHP's links with the Rashtriya Swayamsevak Sangh, the parent of the ruling Bharatiya Janata Party.
The other Indian company that has been hit on account of developments in the US is the recently privatised, long-distance telecommunications service provider, Videsh Sanchar Nigam Limited.
The American telecom bigwig WorldCom is said to owe VSNL roughly $90 million and the former public sector Indian company, now controlled by the Tata group, is predictably quite jittery about getting its dues back after the US firm files for bankruptcy.
WorldCom was VSNL's single biggest partner for telephone calls to and from the US and since many more calls are made from the US to India rather than from India to the US, WorldCom would be paying around Rs 1.50 billion every month to VSNL. WorldCom has not settled its dues with VSNL since April.
Another Indian company, Mahindra BT, the Pune-based joint venture between the Mahindra group and British Telecom, has unwittingly also become a victim of WorldCom's accounting scam. It had developed software for the US company and its dues have not been settled.
Other Indian companies that have been impacted by corporate scandals in the US include the Indian affiliate of the auditing firm, Arthur Andersen that has now been merged with Ernst & Young, India.
Then, of course, comes the infamous Dabhol Power Company promoted by the Enron group that has been lying idle for more than a year since its payments dispute with its only customer and stakeholder, the Maharashtra State Electricity Board.
Volumes have been written on the Dabhol fiasco. Nevertheless, for those with short memories, it may be worth recalling that a former Enron employee, Linda Powers, had told a committee of the US Congress seven years ago that the US group had spent a sum of $ 20 million to 'educate' Indians about the Dabhol project.
A lot has been written and stated - and much more will surely be said - about the current crop of corporate scandals in the US.
Economist Paul Krugman has said these scandals would prove to be a more important turning point in American history than the cataclysmic events of September 11, 2001.
Even die-hard supporters of capitalism are having second thoughts about its ability to reform and regenerate itself. One example would suffice.
Writing in Business Week, Robert Kuttner raised serious doubts about the 'supposed self-cleansing nature of the markets.' He hit out at the Chicago school of what he described as 'market fundamentalists' using the following words: "…for three decades now, the dominant strain of economics from the University of Chicago has been teaching gullible undergraduates and journalists that there is no such thing as the public interest. Efficient outcomes are just the aggregation of selfish private interests and government's main job is to get out of the way."
Kuttner felt that 'after Enron, these theorists should learn some other useful trade.' At a time when nearly 100 employees of the White House starting with Vice President Cheney are being probed for their links with Enron, it is not surprising that the chief executive of Goldman Sachs, Henry Poulson, remarked: "I cannot think of a time when business overall has been held in less repute."
Back home, a study conducted by the Credit Rating and Investment Services of India Limited has revealed that during 2000-01, the official profits declared by 226 reputed Indian companies - including quite a few blue-chip concerns - were at a variance with the calculations of profitability done by CRISIL.
Will various agencies of the government of India, like the DCA and the watchdog of the capital markets, the Securities and Exchange Board of India, now sit up and take notice? Or, as in the past, will they wake up only after a couple of corporate scandals break out?
Is it not time that an organisation like the Institute of Chartered Accountants of India becomes more proactive and starts hauling up the black sheep in their midst? Such actions are long overdue. Is this asking for too much from the ICAI?
One should not be unduly pessimistic about the lethargy that is the norm as far as the functioning of the country's regulatory authorities are concerned.
Hopefully, this writer will be proved wrong by the concerned government bodies getting their act together.
