The Modi government's action against indirect ownership of foreign assets, the crackdown on shell companies, the enactment of the Insolvency and Bankruptcy Code and the decisive diplomacy that has helped nab alleged middleman in the Augusta Westland deal - Christian Michel - and put fugitive liquor baron Vijay Mallya on notice is cleaning up the Indian business landscape and bringing in transparency. Two out of four... Is that good enough An important element that would enable people to provide an informed answer was missing in that first sentence. It should have read: Two out of four and counting... And it's all coming together well for India's Narendra Modi government on the fight to cleanse the system of corruption, unaccounted money and crony capitalism. Close on the heels of the British Home Secretary signing the order to extradite fugitive one-time King of Good Times Vijay Mallya to India, came news that a court in Mumbai had taken up the case to auction his assets under the Prevention of Money Laundering Act (PMLA), which allows the forfeiture of assets of any economic offender who flees the country. These follow the success of the Modi government in convincing Dubai to extradite alleged Augusta Westland middleman James Christian Michel and his associate to India. This is especially significant because the UAE accepted India's request to hand over Michel in spite of him being the citizen of a third country - the United Kingdom. In the past, the Gulf kingdom has refused to repatriate even Indian citizens who had taken refuge there after fleeing the Indian justice system. And from what one reads in the Indian media, the noose is slowly tightening on the fugitive uncle-nephew duo of Mehul Choksi and Nirav Modi, with the Indian High Commissioner to Antigua and Barbados, V. Mahalingam, asserting that the former's alleged purchase of an Antiguan passport does not imply that his Indian citizenship stands revoked. Joining the dots They are merely the most high-profile of the economic fugitives from India and their fates serve as important milestones in the Modi government's relentless fight against all forms of corruption. The actual work of fixing the nuts and bolts of the system is being carried on below the public radar. A lot of ground has been covered over the last five years. The foundation of many of these measures is the determined diplomatic effort put in by the Modi government. Historically foreign governments have paid lip service to requests from New Delhi to extradite fugitives back to India. But in a clear sign that the government's robust foreign policy initiative is working, this time countries like the UK and the UAE have reacted with alacrity. Overcoming the Swiss challenge A major breakthrough achieved in 2016 has helped the Modi government take an important step towards fulfilling its 2014 election pledge of “Na khaoonga, na khane doonga” (Neither will I take bribes, nor will I allow anyone else to do so). That year, the Indian government signed an agreement with Switzerland on the automatic exchange of information relating to accounts held by Indian nationals in that country, subject to some conditions. It also has provisions that will facilitate Swiss authorities sharing information on individuals or companies under investigation. The provisions of the treaty will kick in this year and information on Indians holding Swiss bank accounts that may hold laundered money or even proceeds of crime will begin to flow to India from this year. Swiss banks are notoriously secretive when it comes to sharing information about their clients. They are helped in this process by Switzerland's banking laws that have made the Alpine country one of the world's leading tax havens. In fact, India expects to receive information on Indians holding unauthorised accounts in HSBC very soon following a landmark judgment of the Swiss Supreme Court. Over the years and especially over the past five years, India has been at the forefront of the global fight against money laundering and has signed pacts with several countries to facilitate mutual assistance and sharing of information on cases being investigated. Chasing indirect ownership Indirect ownership of overseas assets is another significant method used to stash money abroad or launder proceeds of crime. But that may be changing. India's Income Tax Department has said beneficial ownership of all assets underlying a primary holding abroad will, henceforth, have to be declared. This is how it will work. A resident Indian, who can legally invest $250,000 a year in foreign countries under the RBI's Liberalised Remittance Scheme pools this money with some other members of his family to invest $1 million in Company A in a tax haven such as Singapore, Dubai or Panama. This company then receives investments, either in the form of debt or equity, of say, $9 million, from another company owned by him or his associates and also registered in a tax haven in a way that enables the original investor to retain control over it. This corpus of $10 million is then invested in various other companies and assets, effectively giving the resident Indian 10 times the funds he has legally repatriated from India. The Indian investor will now have to declare the downstream investments made by Company A. Earlier, such an investor had only to declare his investment in Company A, thus, keeping significant material information on his total investments from the tax authorities. Cracking down on shell companies The Modi government has also launched an all-out offensive on shell companies that have traditionally been used to launder unaccounted money (called black money in India) or to evade taxes. This war, which was initiated in the aftermath of the demonetisation exercise in November 2016, with the deregistration of more than 200,000 shell companies, has now been joined in right earnest. At present, the term shell company is not properly defined from a legal perspective. It is loosely used to describe small companies that have no business or assets of their own that are used by their owners to generate black money, pay bribes, launder unaccounted cash and obscuring the true ownership of assets. The absence of a standard Indian definition of a shell company is hampering many investigations launched by the Income Tax Dept, the Enforcement Department and other wings of the government. This loophole will be plugged when a legal definition of the term is adopted. In India, though they are not illegal per se they come under the radar of investigation agencies if they are found to be violating the Companies Act 2013, the Prevention of Money Laundering Act 2002 and the Benami Transaction (Prohibition) Act 2016 or any other law. Cracking the bankruptcy code The Modi government's enactment of the Insolvency and Bankruptcy Code (IBC) was seminal moment in the drive to clean up the way business is conducted in India. At one go, it transferred the risk of a delinquent loan from the lender to the promoter of the company. This completely upended the traditional practice in India of influential business people running companies to the ground by siphoning out funds and then leaving the lenders and other creditors high and dry. This culture was facilitated by what has come to be defined in India as “phone banking”, wherein influential politicians from ruling parties of the past would call senior bankers and give them instructions either to extend loans where banking prudence warranted caution or to restructure existing loans where best practices dictated surgery. This effectively meant that large promoters who took billions of dollars as loans from public sector banks operated in an almost unregulated manner and had no fear of defaulting as helpful politicians were invariably at hand to either write off those loans or evergreen them. But the IBC and RBI's norms on classification of non-performing assets (NPAs) have combined to completely change the lending and borrowing culture in India. Even as the headlines are being hogged by several high profile corporate insolvency cases such as Essar Steel, Bhushan Steel, Monnet Ispat, Lanco and parts of the Jaypee Group, there is a quiet and under-reported revolution taking place in bank branches and in smaller companies that the media does not report on. Since the enactment of the IBC, and more so since the RBI's stringent new NPA classification circular came into force, banks have been flooded with offers to settle dues that had for years been considered sticky. About $15 billion of once-sticky loans have been repaid or classified as regular as promoters now fear that the new rules-based system, as compared to the previous relationship-based one, could strip them of control of even their flagship companies if they were to default on loans. This is already showing results. Indian banks' recoveries and upgrades have improved over the last few quarters and the growth in NPAs have slowed down. These changes are taking place away from the public glare but once they attain a critical mass, Indian business culture will suddenly seem much less daunting for all investors and especially foreigners. Under the arc lights These changes may have come too late to stop many high-profile fugitives from leaving the country with money looted from banks but these measures will definitely pave the way for their eventual return to the clutches of the Indian justice system. Mallya, who had mocked the Indian government by sneeringly saying “Dream on” when asked if he thought the Indian government would succeed in extraditing him to India, now wants to settle his dues peacefully - if the banks to which he owes $1.5 billion don't auction his assets under PMLA before that. That said, the Indian government is unlikely to get custody of Mallya anytime soon. Under English law, he still has the right to layers of appeal - in the High Court and possibly to the Supreme Court. But the sheer optics of this “glamorous, flashy, famous, bejewelled, bodyguarded, ostensibly billionaire playboy” - as described in the UK court judgment in favour of his extradition - speaking the language of reconciliation will go a long way in convincing many others that the Modi government's concerted efforts to clean up the Indian system is fast leading to a situation where alleged economic offenders can only run for a while but can't hide forever. That will be the big takeaway for analysts and investors tracking the direction in which the Indian corporate sector is heading - towards a great big clean-up.