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!
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.
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!
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.
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
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:
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