Gandhi warns Indian growth comes at a price

India’s faster economic growth is coming at the price of a “shrinking moral universe”, Sonia Gandhi, president of the ruling Congress party, said in the wake of a telecoms scandal that engulfed her government this week.

The warning on Friday by a woman widely viewed as the most powerful person in India that “graft and greed” were on the rise adds to the drumbeat of scandals puncturing India’s glowing status as an emerging political and economic force.

The furore surrounding the state’s allocation of licences to telecoms companies also acts as a counterpoint to the way India is held up in the west as a model democracy in contrast with authoritarian China.

Earlier this week, Andimuthu Raja resigned as telecoms minister after an official report highlighted “serious irregularities” in the awarding of 2G mobile phone licences on a “first-come, first-served” basis to new entrants in 2008.

The report claimed that as much as $40bn had been lost in potential government revenues.

Manmohan Singh, prime minister, faces severe criticism for turning a blind eye to the ministry’s controversial dealings, controlled by a coalition partner of the Congress party from the southern state of Tamil Nadu.

Mrs Gandhi’s pointed intervention highlighted her concern over corruption allegations surrounding last month’s Commonwealth Games in New Delhi, the unravelling of the Indian Premier League, a high profile cricket championship, and a Mumbai land scam involving the top brass of the Indian army.

“We are right to celebrate our high rate of economic growth ... [but] let us not forget that growth is not an end in itself. Much more important to my mind is what kind of society we aspire to be,” she said at a conference in memory of her slain mother-in-law and former prime minister, Indira Gandhi.

“The broad mass of people must believe in the fairness of the system, if it is to survive.”

Mrs Gandhi’s concerns are shared by some of India’s most respected business people who warned that the business environment is deteriorating.

Ratan Tata, chairman of the Tata Group, disclosed this week that he had been asked for a hefty bribe by a government official when considering establishing a domestic airline.

Sanjay Nayar, head of Kohlberg Kravis Roberts, a leading private equity company, said it was becoming more difficult to do business and that the failure to execute projects was a threat to its appeal. “Getting business done has become more difficult,” he said.

Pranab Mukherjee, the finance minister, on Friday questioned the estimation of the losses from the telecoms licences as a calculation made with the benefit of “hindsight” and said its report needed parliamentary scrutiny before conclusions could be drawn.

Kapil Sibal, new telecoms minister, praised Ms Gandhi for speaking openly about corruption. “Graft is a big problem in this country. The political class should start to introspect,” he said.

The government is now considering a proposal made by the country's telecoms regulator to cancel licences held by mobile operators – including foreign ones – that have been accused by the nation’s auditor-general of violating licensing regulations.

The Telecom Regulatory Authority of India has asked the telecoms ministry to cancel 62 licences given to five companies in 2008, including those held by the Indian joint ventures of the UAE’s Etisalat, Norway’s Telenor and Russia’s Sistema. Other groups that risk losing their licences include Loop Telecom and Videocon.