Last month the government of India finalized an important law that aims to add another weapon in its fight against corruption. The proposed law says that any foreign national who gives or takes bribes with Indian officials will be liable for prosecution.

Even as the law awaits formal approval from Parliament, it plugs an important gap in India’s legal framework. As India is one of the biggest importers of defence equipment, the country has seen frequent allegations of kickbacks and corruption in defence deals, especially by foreign companies and domestic middlemen. Once enacted, the law could help deter acts of corruption.

This is yet another example of India’s fight against corruption. Domestic and foreign companies operating in India complain that excessive red tape, delay in approvals and official lethargy create a perfect environment for corruption. Lack of transparency in some government processes make it difficult for companies to stay straight.

This atmosphere seems to be changing. The government is deploying technology to reform several processes to increase transparency. For example, there is a law that enforces electronic delivery of services, ensuring that many licenses and approvals are given online. Such steps have brought the focus back on corporate India. There is increasing pressure on companies to strengthen their internal processes to curb corrupt practices. Companies are now feeling encouraged to take a formal pledge against corruption.

While many companies are ready to take ownership for their actions, they are reluctant to be held responsible for their vendors and associates. The real success will lie in creating a corruption-free supply chain.

The steps being taken are slow but sure. Government efforts to improve transparency and tighten laws must be matched by increasingly ethical practices by corporate India. Transparency International ranks India a poor 94 out of 174 countries in its 2012 corruption index. A combined effort by government and business can improve its ranking over the next few years. 

Author: Pranjal Sharma is a Consulting Editor for Business World and a Member of the Global Agenda Council on India. 

Image: A worker at a fuel station checks a 500 Indian rupee note in Kolkata REUTERS/Rupak De Chowdhuri