8 Jun 2014

Black Money: The Colour of Economic Terrorism !

Black-Money
In year 2010-11, $19 Billion was invested in India through FDI. In the same year, according to a Global Financial Integrity report, a whopping $85 Billion dollar was siphoned off India in the form of black money! This data hides within itself the great state of muddiness in the Indian Economic affairs.

A country’s financial well-being follows from its government’s ability to control the contours of economy and have an iron grip over the flow of money within and across the country. Once a trend of unaccounted black money starts plaguing the economy, historic evidence suggests that the magnitude of problem has only one way to go – up!

Black-Money-world-ranking-india
Various sources define Black Money as ‘Income illegally obtained or not declared for tax purposes’. India’s tryst with black money doesn’t have a well document history, but one need not to go too far to carefully study its genesis and impact on today’s society. With the onset of post liberalization age, during early nineties, various Indians of economic affluence suddenly found themselves with more money they could put to use. So they started to seek foreign ‘tax havens’ to safe guard their money and to have it available in liquid form as and when they desired. Between 1948 and 2008, official reports suggest that $468 Billion has been stashed away, more than two third of it post 1991.

This portion of unaccounted money, which finds its genesis as a fringe element in global economy, has now morphed into the global financial kraken which both drives and threatens the existence of modern economic structure. It has developed into a beast that runs parallel to the legitimate economy and has its tentacles deeply immersed in all economic sectors across the globe.
What we colloquially term as ‘Black Money’ can be broadly divided into two parts. One is money not declared to evade the government taxes but kept within Indian boundaries, another is in the form of money parked in the foreign tax heavens.

Black-Money-GDP-india
While the black money which is in India would still be injected back to Indian economy through one means or the other, it’s the money parked outside India that is poised to be lost from the Indian aegis forever.  The latter form of practice to park money outside India was aptly termed as ‘economic treason’ by S. Gurumurthy. More than 72% of Indian black money is allegedly stashed abroad!

Mr. Gurumurthy has heralded an unwavering fight against black money and unethical corporate practices for decades and came to limelight through his pioneering investigations against dubious practices of Reliance Industries. His role was essayed by R. Madhvan in a Bollywood Movie named Guru. He has produced some of the path breaking studies and reports which incriminate both the government’s incompetency and its reluctance to set the Indian economical watchdogs after the scourge of black money.

In a conversation between Mr. Gurumurthy and a Swiss banker in 1986, it was revealed that India had about $300 Billion as black money in Swiss Banks. During those days, it was a sum that was greater than US and Europe’s liquid money put together!


Black-Money-corruption-index-india
From the global perspective, Asia accounts for 39.6 percent of the total ‘illicit outflow’ from Developing countries – Mainly driven by India and China. With India having the dubious distinction of finding itself among top five nations from where money is hemorrhaging through various hawala channels.

Between all these big numbers and even bigger implications that are lurking to come out in the open sooner than later, the political will of the Government of the day to curb the menace had been nothing short of stunning. Sometime ago, German Tax Department secured a CD containing the names of all tax defaulters who have had their money in Swiss banks and offered to share it with any nation that approached it. Indian government was conveniently unmoved from this development. It was only after Supreme Court stepped in, chiding the government for displaying ‘softness of the state’ in these matters that the government decided to ask for the information. But it asked for the information under India Germany Tax Treaty – treaty that warrants top secrecy for all the information exchanged between nations. And in one fell swoop it converted the information that could be made readily and publicly available to a classified government dossier. This indifference and possible collusion by government is even more appalling with recent evidences suggesting that the black money channel has been increasingly used to fund terror activities on Indian mainland.
      
The scourge of black money can’t simply be wished away from our nation’s basket of myriad problems. It has integrated itself into the Indian society and has formed an incredibly complex web that needs to be untangled with surgical precision and unquestionable commitment.

Black-Money-corruption-bribe-india
With increasing evidence of political parties taking hawala route to fund their election campaigns in recent elections, it will be interesting to see how our legislative set up under the current Prime Minister Narendra Modi will set off to take on the issue. But if recent developments are anything to go by, we may after all see some development in this direction.

With announcement of SIT in its first day in the government to ‘fast track’ black money related cases, the giant but unwilling government machinery has finally churned. The road ahead for the committee and its patrons will be feisty but bumpy – as it is poised to have run-ins with the high and mighty in the power corridor during the course of investigation.

Among other steps that the committee can take in the direction of controlling the menace of black money are
       1)   Provision for heavily penalizing economic institutions found colluding with the money launderers as US recently did with Credit Suisse AG in a landmark judgment
       2)   Partnering with other nations and showcasing more intent to take the issue head on by sharing intelligence information
       3)   Providing incentives to people who would want to bring the money back to Indian economy voluntarily

Black-Money-corruption-scams-india
With a change of guard in Indian government and early signs from it in the direction of recovering black money, a citizen watches with a mix of resigned political reality and invigorated hope for the times ahead.

Watch this space for more updates on the actions SIT take to fast track black money related cases.

How black money transfer to ‘safe-heavens’ can be checked and stopped effectively?

How black money has been affecting the nation?

As a citizen of India, what we can do on an individual level to curb the corruption on grass-root level?

(Written by Manish Jha, an Alumnus of IIIT Hyderabad and currently working with Microsoft as Program Manager. He is also associated with a social initiative 'Joy of Reading')

References:







Comments
0 Comments

0 comments:

Post a Comment

Please note: Comment moderation is enabled and may slightly delay your comment to get finally published. There is no need to resubmit your comment.

ShareThis

Related Posts Plugin for WordPress, Blogger...

 
badge