Effect of Corruption on Indian Economy. Introduction In simple terms, public corruption can be defined as the abuse of public office for private gain. Corruption is a result and reflection of economic, legal, cultural and political institutions. Transparency International (2005,2008) found that over 65% of Indians have had direct experience of paying bribes and nearly 45% have used contacts to get the job done. Institutionalized corruption has long been prevalent in India. Big businesses and individuals dictate bureaucratic rules by breaking the law, paying public employees just to gain access to elements of governance. In 2012, Transparency International's Corruption Perception Index ranked India 94th out of 176 countries. “These are no longer small bribes (bakshish), but scams running into billions of rupees that highlight a political-industrial nexus that, if left unchecked, could have a far-reaching impact” (KMPG,2012). the risk to India's GDP growth and continued level of corruption will lead to an unstable political and economic environment. Nearly half of India's economy operates in the informal or black market sector, "shadow economies" permeate the lives of every citizen. What appears on the surface to be a broken and dysfunctional system runs smoothly with ease for those with money and power. While, for an average citizen, access is limited and reminiscent of a failed democracy. I will look in more depth at the problem of corruption and its impact on the Indian economy. payments crisis” (Ahluwalia 2002). Being a simple idea, there was a need to… middle of paper… find an acceptable form of transaction. Governments need to be more transparent to the public. Many "under the counter" transactions take place as part of the most basic daily services (passport, driving licence, taxes). Such services have the ability to go online reducing bureaucracy as money is only used through online transactions. In this essay, we have seen evidence that corruption leads to instability in the economy, increases transaction costs, decreases efficiency, hinders the growth of a healthy market, and harms social and economic development. Therefore, it is fair to say that corruption has had a serious effect on the Indian economy. If left unchecked, India is bound to lose FDI as investors will lose confidence in the economy. “Opportunities lost due to corruption in terms of growth, jobs and investment; India has lost up to 45-50 billion dollars a year” (Singh 2010).