Tax evasion, crime and corruption have combined to remove a staggering $462 billion from India, says a new book based partly on scholarly studies.
"From 1948 through 2008, India lost a total of $213 billion in illicit financial flows (illegal capital flight)," says the book, The Darker Side of Black Money (Konark Publishers)by B.V. Kumar.
A former highly regarded member of the Indian Revenue Service, Kumar in his book deals with organized crime, drug trafficking, economic crime, terrorism and money laundering, among other things.
"These illicit financial flows were generally the product of tax evasion, corruption, bribery and kickbacks, and criminal activities," the author said.
"The present value of India's total illicit financial flows is at least $462 billion."
India's aggregate illicit flows were even more than twice the current external debt of $230 billion, said the book, which will be released next week Monday. From 2004 to 2008, India lost assets at a rate of $19 billion a year.
"The total capital flight out of India represents approximately 16.6 percent of India's GDP as of year-end 2008.
"In present value terms, India lost an equivalent of about 36 percent of its 2008 GDP which represents a staggering loss of capital.
"Some 68 percent of India's aggregate illicit capital loss occurred after India's economic reforms in 1991, indicating that deregulation and trade liberalization actually contributed to/accelerated the transfer of illicit money abroad."
Kumar says that as economic reforms gathered momentum, some vested interests used it to amass wealth in the shortest possible time by resorting to "sharp practices".
"Controls and socialism were replaced by crony capitalism. In other words, the battle was between hard and diligent work resulting in sustained growth as against quick results obtained through corruption, manipulation and fraud.
"In fact, quite a few companies with an impeccable track record were compelled to cut corners and indulge in fraud to keep themselves in the black, in the flight of stuff competition faced from a legion of influential middlemen who would not hesitate to bend the rules with the sway of corruption."
The author says that corruption can have an adverse impact on the country's economic development "that can lead to dissatisfaction and disconnect amongst its population".
The author has sought legislation to punish corruption in the private sector.
"This is particularly necessary because of the corrupt practices indulged by the multi-national companies.
"A corrupt government and a clean private sector cannot coexist. Vice versa a clean government and a corrupt private sector cannot co-exist.
"In government, we expect accountability, which is not just a regime of punishments but a system of governance. Similarly, the private sector should have a code of corporate governance and a corporation philosophy for social commitment.
"When a public servant accepts an illegal gratification, he is charged for corruption and conduct unbecoming of a government servant.
"When a businessman or a corporation indulges in corruption, it is termed as business acumen resulting in profit... Time has now come to evolve a proper definition of 'corruption' so that these distinctions are removed."