India tops black money list

By VK Singh



INDIA tops the list of black money in the entire world. While there is no official estimate available for the magnitude of India’s black money, unofficial estimates put the figure at around $1.4 trillion (over Rs 70 lakh crore). This amount is more than one year’s GDP of India. Most of this money has been stashed away in banks in ‘tax havens’ abroad over the last 60 years by corrupt politicians, industrialists, bureaucrats and middlemen.

The bulk of India’s black money is stashed away in secret bank accounts in Switzerland, according to data provided by the Swiss Bankers Association. India has more black money than rest of the world combined. India tops the list with almost $1,456 billion in Swiss banks, followed by Russia $470 billion, the UK $390 billion, Ukraine $100 billion and China, with $96 billion. Indian Swiss bank account assets are worth 13 times the country’s national debt.

India is ranked 6th on the black money top-ten countdown for illicit outflows monitored during 2002-2006. The estimated average amount stashed away annually from India during 2002-2006 is $27.3 billion. Switzerland is the top destination for illegal funds because of its strict secrecy laws. Also, Swiss banks sell additional masks to hide the identity of their rich clients, like trusts in the Cayman islands, shell companies in Panama, or foundations in Liechtenstein, all run by nominees.

Political and bureaucratic corruptions in India are major concerns. Transparency International, an international organisation that ranks countries on a Corruption Perception Index (CPI), ranked India 86th out of the 180 countries ranked by it in 2009. The CPI rates countries on a scale of zero to 10, with zero indicating high levels of corruption and 10, low. India’s CPI score was a measly 3.4 out of 10, indicating fairly large levels of corruption. A 2005 study conducted by the organisation found that more than 15 per cent of Indians had first-hand experience of paying bribes or influence peddling to successfully complete jobs in public office. Taxes and bribes are a fact of daily life and common between state borders. Transparency International estimates that truckers pay US$5 billion in bribes annually. According to Transparency International, judicial corruption in India is attributable to factors such as “delays in the disposal of cases, shortage of judges and complex procedures, all of which are exacerbated by a preponderance of new laws”.

A 2009 survey of the leading economies of Asia, revealed Indian bureaucracy to be not just least efficient out of Singapore, Hong Kong, Thailand, South Korea, Japan, Malaysia, Taiwan, Vietnam, China, Philippines and Indonesia; further it was also found that working with India’s civil servants was a “slow and painful” process.

The total share in FDI of Mauritius is 55,203 million or Rs 2,47,092.30 crore. Indeed, they are believed to be the ones leading the boom in the stock markets. But the Mauritius angle does not end there. Reports in the financial media indicate that a substantial part of FII investment is believed to be coming from Non-resident Indians (NRIs) bringing back funds to participate in the ongoing speculative orgy in the Indian stock markets, much of which is said to be routed through Mauritius-based paper companies. Black money stashed by Indian abroad has found way in India through this route. The Capital Gains Tax exemption giving to this Tax Haven has given the national exchequer on account of lost capital gains tax in the decade ending 2003 would amount to a whopping Rs 28,139 crore. Even if it is an admitted policy of the state to woo foreign capital at any cost, the question is whether losses of this kind are acceptable to the polity at large.

In a most recent example of corruption, even as the Enforcement Directorate (ED) probes US$8 billion worth transactions allegedly involving suspected money launderer Hasan Ali Khan, evidence available with a news source in India shows that he had transactions of over Rs 112,000 crore (US$24.86 billion) between years 2005 and 2006. This amount is enough to fund the national drinking water project in all the six lakh villages in India for the next 10 years. Even as the Hasan Ali case has hit the headlines and the Enforcement Directorate claims that India’s biggest tax offender has as much as eight billion dollars stashed away abroad, he is only one of the big tax offenders and this stash is only a part of the huge illicit outflow from India. Documents seized by ED reveal that Hasan Ali transferred $700,000 from Sarasin Bank, Switzerland to the account of SK Financial services UK maintained with Barclays Bank, London through Citibank, New York.

If the estimates of Rs 70 lakh crore of Indian black money parked abroad are brought back this money can surely lift the 40 crore Indians living below poverty line out of poverty, or it can fund entire infrastructure building for the next 15-20 years. It can also educate all Indian children for next 50 years.