$104 billion black money taken out of country
A new report by Global Financial Integrity (GFI),a US-based think tank,states that illicit financial flows from India between 2000-2008 were approximately $104 billion. Abhijit Patnaik reports.india Updated: Jan 18, 2011 16:00 IST
A new report by Global Financial Integrity (GFI),a US-based think tank,states that illicit financial flows from India between 2000-2008 were approximately $104 billion (approx Rs. 4.8 lakh crore). This figure comes close on the heels of the Supreme Court instructing government authorities to disclose the names of Indians with money deposited in foreign banks, renewing the interest in bringing back Indian money stashed in foreign accounts.
To put it into perspective, the figure is ten times the government of India's total allocation to education in 2010-11.
"Politicians, bureaucrats and businessmen who benefit most from the black economy are also the ones in power, hence there is no urgency to check this," says Arun Kumar, professor at Jawaharlal Nehru University and author of "The Black Economy in India".
The report ,titled " Illicit Financial Flows from Developing Countries: 2000-09", states that the proliferation of high net worth individuals in the post economic reform period drove these flows, given the absence of an improvement in public and corporate governance. Trade liberalization, which resulted in more openness, also provided more opportunities for parties to misprice trade and shift billions of dollars in illicit capital from the country.
India, which was the fifth largest exporter of illicit capital in the 2008 version of the report, is now ranked 15th among developing countries. But there is little reason to cheer. India's improvement in the country rankings has nothing to do with policies and conditions required for the curtailment of such outflows. Illicit outflows from several oil producers such as the United Arab Emirates, Kuwait, Venezuela, Indonesia etc outpaced those from India. There were substantial inflows of illicit capital into India that were not accounted for in the figures. and Finally, United Arab Emirates and Qatar, which have the sixth and ninth highest average illicit outflows respectively, were excluded from the 2008 report due to lack of data.
Another report released in 2010 by GFI estimated that from 1948-2008, India has lost a total of $462 billion in such illegal flows. Between 1991-2008, deregulation and trade liberalization accelerated the outflow of illicit money from the Indian economy. Expansion of the global shadow financial system—particularly island tax havens like the Cayman Islands and Mauritius —helped.
"Even after over 40 committees, thousands of recommendations and hundreds being implemented, the size of the underground economy has grown from 4-5% of GDP in 1955-56 to 50% of GDP today.This clearly shows weak governance and lack of any real political will. A lot of noise is made every time figures like this come out, but this is to divert the public's attention" says Kumar.
"The question on who will bell this cat clearly remains", he added.