Business

What the world press say

NEW DELHI: Massive financial fraud in Satyam Computer Services has led to the Western media questioning India’s weak corporate governance and risks involved in doing business in India. Some pink papers have even gone ahead to challenge the inherent strength of India’s booming IT industry, while a few have doubted the sustainability of India’s growth story.

In its editorial ‘Satyam scandalises’, the British international business newspaper Financial Times said: “India is rarely as shiny as its fans insist. The $1 billion fraud perpetrated by Satyam Computer Services will not only throw the $40 billion software and outsourcing industry into a tailspin, it will also raise disturbing questions about the risks of doing business in India — and even the sustainability of the country’s much-vaunted growth miracle.” Raising doubt on Indian corporate governance as well as the credibility of companies’ balance sheet, it says: “Overhauling auditing rules is now a matter of urgency. Of course, India is hardly alone in such failings, as U.S. and other regulators are in a position to appreciate. But India, with a per capita income of less than $1,000, has more to prove. Its extraordinary success in IT over the past decade was based on the trust and credibility it established with globalised companies; the Satyam scandal has now put that at risk.”

Terming the fraud as ‘India’s Enron’, U.K.-based The Economist said now the task of rehabilitating corporate India would be daunting. Quoting Sharmila Gopinath of the Hong Kong-based Asian Corporate Governance Association (ACGA), it says India has long basked in the reflected glory of its IT firms, which employ India’s brightest youngsters and serve the bluest of blue-chip companies. “But that reputation rests largely on the efforts of one or two companies, such as Infosys, which are impeccably run. Investors delude themselves if they think standards in most Indian technology firms, let alone the rest of its 9,000 listed companies, are close to those set by Infosys. The illusion persists because it is not easy to gauge corporate governance objectively.” Similarly, American daily The New York Times said: “The scandal threatened to gobble up not just Raju, who resigned, but his company, Satyam Computer Services. Far beyond Satyam, it raised fears that similar problems might lurk in other Indian companies, particularly in its vaunted outsourcing industry.”

The Wall Street Journal said the entire incident has sent “shock waves across India and likely prompting investors to question other corporate results as the once-hot economy slows.”

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