The quarterly survey by J.P. Morgan Asset Management and ValueNotes, an Indian equity research firm in Pune, polled three classes of investors across eight cities in December. Overall, investor confidence is up slightly because fears about the global economy are easing. But among the investors’ worries, corruption has suddenly emerged into the top-tier of concerns.
Corruption and inflation were each cited by 19 percent of retail (individual) investors as the “most negative” economic indicators, with other issues trailing. Among financial advisers, corruption ranked third, at 16 percent, topped by inflation and global economic instability. Most corporate investors, meanwhile, picked inflation, but 8 percent cited corruption as the biggest issue.
Offering his personal views via e-mail, ValueNotes project manager Arjun Bhuwalka says that “although the Investment Confidence Index improved marginally in December 2010 reflecting moderate optimism among the Indian financial community, surprisingly the outlook on the Indian economy has sobered. Corruption may not be the key factor but it is a growing concern [and] if not corrected [it] can have a far reaching impact on domestic and international confidence towards investing in India.”
In the previous three quarters, corruption did not show up in the top three concerns in the quarterly survey.
“Worries over the global economy recede, while domestic worries re-surface; corruption joins inflation in killing confidence in India,” the report summarizes. Mr. Bhuwalka cautions that the survey does not correlate investor decisions and corruption, but just flags it as a rising concern among investors.
In his press conference, the prime minister both praised and chastised the media for their dogged focus on corruption, suggesting that too much coverage may be distorting India’s image.
For many years, Singh enjoyed an almost George Washington-like reputation for personal integrity. While the scandals have so far not involved him personally, his sluggish handling of his underlings’ misdeeds have tarnished his image.