The economics of a slap on the wrist.

Six long years after he confessed to a fraud of Rs 71.36 billion at Satyam Computer Services ltd, Ramalinga Raju was sentenced to 6 months in prison and was fined Rs 1.05 million by an Economic Offences Court in Hyderabad. Some other directors at Satyam were fined Rs 20,000 each. Today, a vegetable seller in India has a daily turnover in excess of Rs 20,000 so why bother with this mockery of justice. Employees lost their jobs, creditors lost money and the taxpayer has wasted millions on the investigation, for this insult. At about the same time in the US, Bernard Madoff confessed to a ponzi scheme for which he was sentenced to 150 years in prison. His brother received 10 years and others are still being put away. The Saradha scam, which is India's own ponzi scheme, is providing great entertainment, with one fellow getting admitted to a hospital and then escaping bare foot while another staged a mock suicide. To add to the insult Raju's lawyers are planning to appeal his sentence. While Raju is guilty of outright fraud almost all companies in India hide information about their finances or present the information in such a way that it is incomprehensible to small investors. It is no wonder that retail investors avoid the stock market and most of the money is concentrated in a few top companies. Thus, 50 of the BSE 500 companies contribute 60.9% of the total market capitalisation of our share market while in the US the top 100 companies of S&P 500 contribute 63% of total market cap. Why bother with false information, 78 companies vanished altogether after raising Rs 3.10 billion from investors. And why not? If you are caught, which depends on your friends in high places, a beaming judge will promptly set you free on bail to avoid any inconvenience and another judge, after many years, may sentence you to 6 months in prison but then send you home till your appeal is dealt with. No other country offers such risk-free path to great wealth. But where do you invest this booty? After all other fellows maybe bigger crooks than you. The best returns are to be had in real estate where up to 50% of the price is paid in cash. The amount of black money generated in real estate in eye watering. Builders buy land with cash. Bribes are paid to officials to obtain various permits, electricity and water connections and to increase covered area illegally. Builders compensate by cutting on quality so that the buildings are unsafe. Finally, builders take a portion of the price in cash. All this black money gets invested in real estate again so that the cycle repeats itself. Infinitely. Unless our judges get serious.