Seven big Indian corruption scandals

India has been rocked this year by a series of corruption scandals that have embarrassed the ruling Congress party, rattled markets and delayed reform bills as the opposition stalls parliament.

The country, 87th in Transparency International's rankings based on perceived levels of corruption, is no stranger to scandals.

Here are some of the biggest in the last two decades:

2010—Loan bribery case

The case broke after a year of investigation on November 24 when the Central Bureau of Investigation (CBI) arrested eight people, accusing them of bribery for corporate loans.

The arrests included the chief executive of state-run mortgage lender LIC Housing Finance and senior officials at state-run Central Bank of India, Punjab National Bank and Bank of India.

While the size of the scandal is not yet known, local media have reported it could run into hundreds of millions of dollars.

The CBI is probing 21 companies involved in India's booming infrastructure sector for links, but has not named them.

The bribes were allegedly paid by private finance firm Money Matters Financial Services, which acted as a "mediator and facilitator" for the loan beneficiaries, the CBI said.

Companies whose officials have been arrested have all denied any wrongdoing. Individuals arrested have not yet commented.

Government officials, including ministers, have said this is a case of individual wrongdoing and not a widespread scam.

2010—Telecoms licence row

Telecoms Minister Andimuthu Raja was sacked after a report by India's state auditor said his ministry sold licences and spectrum below market prices, depriving the government of up to USD 39 billion in revenues.

The scandal swept up as high as Prime Minister Manmohan Singh, who had to explain to the Supreme Court why he sat on a request for permission to charge Raja with corruption.

In its report, the Comptroller and Auditor General of India (CAG) also said rules were flouted when the licences were given in 2007-08 which led to many ineligible firms getting them.

The CBI has launched an investigation into alleged corruption at the ministry. Nobody has been charged yet and Raja has denied any wrongdoing.

The CAG said Unitech units got licences despite having inadequate capital, Swan Telecom got a licence even though there were monopoly issues and Reliance Communications got undue benefits as it sought permission to offer services under the more popular GSM technology.

Revenue authorities have questioned Nira Radia, a top lobbyist, as part of an investigation into whether money laundering and forex laws were broken when the licences were purchased. Radia has denied any wrongdoing and has said she is cooperating with the probe.

2010—Commonwealth Games

Allegations of corruption over the international sporting event that took place in Delhi in October are being investigated by several bodies including the anti-corruption watchdog, the state auditor, the CBI and a special committee set up by Prime Minister Singh.

The Congress-party led coalition government came under fierce criticism for mismanagement and ineptitude over the sporting extravaganza which cost up to USD 6 billion.

Allegations of corruption spanned a broad spectrum including issuing of contracts and purchase of equipment -- from treadmills to toilet rolls.

India's anti-corruption watchdog has identified more than 16 projects with possible irregularities.

The Congress party eventually sacked Suresh Kalmadi, chairman of the organising committee, as secretary of the party's parliamentary wing.

Aides have been arrested and local media has said Kalmadi could be arrested once he returns back from a foreign trip.

2010—Housing scam

Congress party politicians, bureaucrats and military officials have been accused of taking over land meant for building apartments for war widows. The CBI has begun investigating the case.

Local media say apartments with a value of USD 1.8 million were sold for as little as USD 130,000 each in the apartment block, which faces the Arabian Sea in one of the world's most expensive stretches of real estate in Mumbai.

The government has sacked the chief minister of western Maharashtra state, Ashok Chavan, who is a member of Congress.

The apartment block is also being investigated for several violations of norms, including environmental laws and land-use rules.

The government has now effectively taken back permissions allowing owners to occupy the apartments, which are required for water and power supplies, leading to the disconnection of these services.

2009—Satyam

The founder of Satyam Computer Services, one of India's top software firms, resigned in January 2009 after admitting profits were falsely inflated for years.

The fraud, estimated at USD 1 billion, was India's largest corporate scandal and was dubbed "India's Enron".

With clients abandoning it, shares were hammered down to near-penny-stock levels.

The government stepped in to save the firm by appointing a new board of directors and midwifed its sale to Tech Mahindra. The firm is now called Mahindra Satyam.

The founder chairman of Satyam, Ramalinga Raju, and other officials including the then chief executive officer and chief financial officer, were arrested under several charges including fraud. The cases continue in court. The defendants have said they were not involved in the fraud.

1992—Securities scam

Several Indian stockbrokers were accused of siphoning off over Rs 3,500 crore (USD 778 million) of funds, mostly from inter-bank transactions, to fuel a rise in the Mumbai stock market in 1992. It involved top officers of state-run and foreign banks and financial institutions, bureaucrats and politicians.

News of the scam led to an over 40% fall in shares over two months, wiping millions of dollars from market value.

Harshad Mehta, the main accused, died in 2002, convicted in only one of the many cases filed against him, for misappropriation of funds in a case involving the use of money from the bank account of carmaker Maruti Suzuki for trading in stocks.

Several bank executives were convicted for fraud in allowing bank funds to be used for trading stocks.

1986—Bofors gun deal

India's purchase of artillery guns from Swedish firm Bofors in 1986 was rocked by allegations that Rs 64 crore (USD 14.2 million) -- a huge sum then -- was paid as bribes to people close to then prime minister Rajiv Gandhi to swing the deal.

The scandal caused an uproar in parliament, led to a split in the ruling Congress party and the defeat of Gandhi in federal elections in 1989.

Its fallout has stymied India's defence expansion, with officials for years unwilling to take decisions on purchases that could later be probed for corruption.

Amongst the people probed were the London-based Indian business family of the Hindujas, who were later acquitted by a court of any involvement.

The case has dragged on for years without any result.

A Comeback in Sight for Satyam?

Satyam Computer Services – normally the black sheep of Indian IT – was having a field day in India’s stock market on Tuesday, at a time of market volatility for the country’s IT industry .

On Tuesday Satyam’s stocks held steady- while its bigger IT competitors Tata Consultancy Services Ltd. and Infosys Technologies kept swaying in the Bombay stock market.

In an interview with Dow Jones Newswires, Satyam’s president of business development and customer relationships Atul Kunwar said he expects revenue from the U.S., its biggest market, to show growth from the second half of next year as it starts cashing in on increased spending in technology outsourcing .

Mr. Kunwar said the company is working on closing several deals. He said that before Thanksgiving, the company saw “a lot of action in the U.S.,” in terms of deal proposals, which the clients are likely to consider in the next month.

He added the company is also chasing large contracts worth more than $50 million over three to five years, and several smaller deals worth $30 million or less. If Satyam bags these deals in the US - which analysts agree is the biggest market for India’s IT industry - this is likely to give a big boost to the company’s revenues.

Satyam stock closed up 2.3% at 62.25 rupees ($1.35) in a Mumbai market where the benchmark Sensex was up 0.6%.

Investors were busy booking profits on larger outsourcing firms Tata Consultancy Services Ltd. which closed marginally up 0.9% at 1,076.70 rupees, while Infosys Technologies closed down 0.5% at 3,049.45 rupees.

Until recently, things were not looking so rosy for Satyam. Satyam – once India’s fourth largest software exporter by sales – plunged into turmoil in January 2009, when its founder and then chairman, B. Ramalinga Raju confessed the company had been overstating profits for years. This delayed earnings reports from the July-September period of 2008 . Last September, the company reported its first ever results after the scandal, posting net losses for the last two fiscal years. The company is still in the process of restating accounts for the previous six to seven years.

Shares of the software outsourcer had been suffering losses ever since the company posted its first quarterly earnings in November , the first since the balance-sheet scandal. The Hyderabad-based company posted a 76% drop in its July-September net profit from the preceding three months, hurt mainly by salary hikes and foreign-exchange losses as it struggled to add new clients.

With the latest quarter results, the company has become current with is financials. The makes the outsourcer eligible to bid for several contracts which it was previously barred from doing.

Investors will be keeping a close eye to see if the stock will sustain this positive sentiment in the longer term.

India's Economy Grows 8.9%

NEW DELHI – India's economy grew 8.9% in the quarter ended Sept. 30, maintaining its dramatic expansion when many western economies are struggling to resuscitate growth.

The rise in Gross Domestic Product, following on from an 8.9% on-year rise in the previous quarter, marks India as one of the world's fastest growing economies and will likely allow the Reserve Bank of India to raise interest rates again soon, seeking to tame inflation, without fear of a major hit to growth.

It also prompted Finance Minister Pranab Mukherjee to revise higher his growth forecast for the year ending next March 31, to 8.75% from a previous estimate of 8.5%.

The benchmark 30-share BSE Sensex rose following the strong GDP data, ending up 0.6% at 19,521.25. Government bonds fell as investors saw a greater chance of interest rate hikes by the RBI. The benchmark 7.80% bond due 2020 ended at 98.25 rupees, compared to the previous close at 98.59 rupees.
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"Inflation is still the number one policy focus, and we continue to expect more rate hikes in the months ahead, perhaps as soon as the next meeting in December," said Brian Jackson, senior emerging markets strategist at Royal Bank of Canada. The central bank has raised its key interest rates six times since March as it tries to control inflation. It last raised rates by 0.25 percentage point Nov. 2.

The growth was confirmation that India, which is less reliant on exports for growth than many smaller Asian nations, has been able not only to shrug off the global downturn but accelerate growth while other nations are struggling to emerge from the downturn.

That's thanks to robust domestic demand. In the three months ended Sept. 30, farm output, which constitutes about 16% of GDP, rose 4.4%, quicker than the 2.5% rise in the previous quarter. Services like trade, hotels and transport grew 12.1%, while manufacturing output rose 9.8%.

The government hopes to return to its pre-crisis growth rate of 9% in the year beginning April 1, 2011. Ultimately it hopes to achieve double-digit growth and outpace its larger northern neighbor, China, the only major economy growing more quickly than India's.

The rapid expansion is expected to continue to attract a hefty inflow of foreign funds into India's stock market, which has risen sharply this year as investors worldwide seek fast-growing markets.

But some analysts say growth may be curtailed in the next year. Robert Prior-Wandesforde, a Credit Suisse economist, predicted that growth will remain strong through March but then "a combination of higher oil prices, a strengthening real exchange rate and, most importantly, the lagged impact of higher interest rates is likely to take its toll on economic activity."

He predicts GDP growth of 7.7% in the year ending March 31, 2012.

For now, however, the GDP growth will come as a fillip for the government of Prime Minister Manmohan Singh, which has faced tough times in recent weeks. A government auditor found that an allotment of second-generation mobile telephone spectrum sold in 2008 deprived the government of as much as $40 billion in potential revenue because the spectrum was sold to a few favored companies, vastly underpriced.

The government's legislative agenda has been stalled in Parliament amid opposition protests and demands for a wider probe into the scandal, which forced the telecommunications minister to resign.