India is known for its Information Technology capabilities, due to its huge English educated skilled labor. Over the last decade, top Indian IT companies have been able to garner more business than their technically superior US and European IT companies only based on their cost efficiencies.

The Indian IT industry has been able to grow at an astounding 35% annually for the last decade or so, even during the Y2K problem and the internet bubble burst. And Satyam computers limited, ranked fourth largest in India, was amongst the best rated companies in terms of corporate governance.

Now, the Satyam Computers chairman Ramalinga Raju himself has confessed to defrauding the company to the tune of over 1.5 billion dollars. He said in a written communication to the stock exchanges that he was forced to inflate the top line and bottom line figures of the company to make it look big and gain more business. He said that over the last few years the problem has grown beyond his control and hence he has accepted his mistakes now.

This fraud episode is indeed expected to force the already fearing Foreign institutional investors out of India and that does not augur well for the Indian economy. The government on its part has gone swiftly into action and arrested the Chairman and few more senior directors.  More arrests and investigations are likely in coming weeks, but given the Indian history towards such scams, people are not expecting anything tangible to come out of the investigations.

It is important to note that India has the record of getting into some scam or the other once every few years. The famous scams of the past include Harshad Mehta scam , IPO scam