CORRUPTION

Industrialists spend a lot of money trying to clinch business contracts from the government. They maintain flats in Delhi or rent hotel suites to entertain politicians and officials. In addition, most employ liaison men -- or fixers -- to buy favors from the government. Says a Bombay accountant: "Some companies have bought politicians outright."

That corrupt arrangement, however, is no longer so cozy. More than 6,000 candidates are vying for 543 seats in the lower house -- general elections begin April 27 and conclude May 30 -- and all the old equations have been upset. Virtually all the nation's major parties have been jolted by a $36-million corruption scandal that has both politicians and businessmen running scared.

The scandal involves 115 politicians and bureaucrats who allegedly took bribes or campaign money from Delhi businessman Surendra Kumar Jain over a three-year period. Twenty-five politicians, along with Jain, have been indicted so far, and the Supreme Court has ordered a speed-up of the investigation.

The Congress party of Prime Minister P.V. Narasimha Rao has the most to lose. Of the 39 politicians implicated in the scandal, 25 are from the Congress, the dominant party since independence in 1947. Although Rao himself has not been indicted, 84% of respondents in a recent nationwide poll favored a probe into his possible role.

The scandal has industrialists and their armies of fixers confused. In the past, they would be preparing for business as usual: pouring secret funds into the coffers of the party most likely to win. (It is illegal for companies to contribute significant amounts of their declared wealth to parties.) But there are no clear winners this time. No single party is expected to get a majority, and the next government is likely to be an unstable coalition.

In an attempt to clean up its tainted image, a shaken Congress has appealed to corporations to make campaign donations by check -- a practice that was stopped by Premier Indira Gandhi in the 1960s. The ruling party has also proposed an election tax on big business, the proceeds of which would be distributed equally among all parties. That was promptly rejected by business leaders.

Vowing to keep the campaign clean, Election Commissioner T.N. Seshan, a resolute independent, has warned that he will vigorously enforce a law that disqualifies any candidate who spends more than $13,250 to contest the polls. But will politicians comply with the regulation? To win an election, a candidate needs to tour at least a sample of the 500 to 600 villages that make up an average parliamentary constituency. He also has to mobilize workers, distribute liquor or cash among voters and transport them to polling booths on election day. Many candidates hire power-brokers and musclemen to lure or intimidate voters. The cost of elections in a single constituency can be as high as $600,000.

Little wonder that the collection of campaign funds is a perennial process for parties. Whenever a politician visits an area for a rally, his workers squeeze contributions from businessmen. The pressure increases in the months before elections. And as there are major loopholes in laws governing campaign contributions, all parties, except for the Communists, have long neglected to account for their campaign money.

Consumer activist H.D. Shourie, an 84-year-old former magistrate and civil servant, heads the New Delhi-based group Common Cause. He recently petitioned the Supreme Court to order all parties to submit details of their campaign funds. The Congress and two major opposition groups filed their returns. The court also reviewed a law that requires a candidate -- but not his party or associates -- to disclose the amount spent on campaigning. Remarked Justice Kuldip Singh: "As the law stands, anybody, including a smuggler, criminal or anti-social element, can spend any amount on the election of any candidate."

What's at the root of political corruption in India? Shourie blames it on the layers of government bureaucracy: "The population has grown, the demand for goods and services has increased, but our systems are still the old ones." Until the early 1980s, the state owned basic industries and had absolute control over the private sector. Manufacturers were issued licenses and raw materials to produce goods in certain quantities at certain prices. And since an industrial license was, in effect, a license to make money, businessmen were constantly obliged to bribe ruling politicians, who used the money to stay in power. In theory, most industries have been delicensed since 1991. But because a range of approvals is still needed to do business, and since only the government can award major commercial contracts, bribery continues unabated.

Few business or personal transactions in India -- from obtaining water, electricity and telephone connections to getting a driver's license -- are completely above board. The nation has a huge undisclosed, or black, economy. A 1985 government-sponsored study on the black economy concluded that 10% to 50% of expenditures for many public works projects disappear into the pockets of contractors and bureaucrats.

While Indians tend to tolerate small-scale graft, they are less understanding of big-time corruption. That has politicians from all parties worried. Last week, Prime Minister Rao filed to run for parliament in two constituencies -- a move that suggests he is worried about his own election chances. With the vote only weeks away and the corruption probe still in progress, many politicians must be wondering whether they will be judged by the voters or by a court.