V.K.Singh

India tops the list for 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 middle-men.

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 US dollars. 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% 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.

Independent reports have recently calculated India's traditionally ruling family's (Gandhi's) financial net worth to be anywhere between $9.41 billion (Rs 42,345 crore) to $18.66 billion (Rs 83,900 crore), most of it in the form of illegal monies. Harvard scholar Yevgenia Albats cited KGB correspondence about payments to Rajiv Gandhi and his family, which had been arranged by Viktor Chebrikov,which shows that KGB chief Viktor Chebrikov sought in writing an "authorization to make payments in US dollars to the family members of Rajiv Gandhi, namely Sonia Gandhi, Rahul Gandhi and Paola Maino, mother of Sonia Gandhi" from the CPSU in December 1985. In November 1991 the respected Swiss magazine, Schweitzer Illustrate, published a report alleging that Rajiv Gandhi had 2.5 billion Swiss francs, equivalent roughly to two billion US dollars, in numbered Swiss bank accounts. Dr. Yevgenia Albats a Soviet journalist who officially investigated the KGB when the communist regime was still in control. She was also a member of the official KGB Commission set up by President Yeltsin in 1991. She had full access to secret files of the KGB. She authored a book, The State within a State: KGB and Its Hold on Russia. In 1989, she had received the Golden Pen Award, the highest journalism honor in the then-Soviet Union. After translating official KGB documents Dr. Albats disclosed in her book that KGB chief Victor Chebrikov in December 1985 had sought in writing from the Central Committee of the Communist Party of the Soviet Union (CPSU), "authorization to make payments in US dollars to the family members of Mr. Rajiv Gandhi, namely Sonia Gandhi, Rahul Gandhi and Ms Paola Maino, mother of Sonia Gandhi." CPSU payments were authorized by a resolution, CPSU/CC/No 11228/3 dated 20/12/1985; and endorsed by the USSR Council of Ministers in Directive No 2633/Rs dated 20/12/1985. These payments had been coming since 1971, as payments received by Sonia Gandhi's family and "have been audited in CPSU/CC resolution No 11187/22 OP dated 10/12/1984.' In 1992 the media confronted the Russian government with the Albats disclosure. The Russian government confirmed the veracity of the disclosure and defended it as necessary for 'Soviet ideological interest'. The Hindu of July 4, 1992 carried this report.

The black money that was stashed away abroad in the 1970s and 1980s by money laundering has now multiplied manifold due to rupee depreciation and the interest earned on such funds. Now the same black money is being round-tripped for investment in India by some quarters, through FDI by shell companies, investment in the stock market through participatory notes (PNs), etc. Participatory notes are instruments issued by FIIs to investors whose identity is not revealed even to SEBI (Securities and Exchange Board of India). However, this is only a small part of the black money stored abroad, that is flowing back to India, mostly through Mauritius. Mauritius is the single biggest source of foreign direct investment (FDI) in India - amounting to $534 million in 2002-03 (about one-third of all FDI). But that is not all. Mauritius-based foreign institutional investors (FII) are also believed to be major players in the Indian bourses. FII investment in Indian stock markets between April and October 2003 year amounted to almost $5 billion - almost ten times what they invested in the whole of the financial year 2003-003. 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 trade 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 last decade would amount to a whopping Rs.28,139 crores. 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 12,000 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 (600,000) 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 S K Financial services UK maintained with Barclays Bank, London through Citibank, N.Y.

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.

Published in Organiser weekly

the RSS mouth piece magazine on 14 August 2011

BY V.K.Singh Executive Member to BJP National Trade Cell, Prabhari Assam

V.K.Singh

Corruption In India

Mauritius as a tax haven

The Hindu : News / National : India sitting over Rs. 1 lakh cr of unused external aid: CAG