Black money trail:

April 30/2014: Too little, too late -- and of little consequence. The Centre has submitted a list of 26 names to the Supreme Court Tuesday of Indian citizens who have money stashed in foreign banks. Those who are fairly knowledgeable about illegal deposits abroad must be extremely dismayed. What adds to the dismay is also a statement that there was no proof of wrong-doing against eight of them, effectively bringing down the list of offenders to just 18. It has also been explained that these names were provided by the German authorities, and cases have been registered against the guilty.

By one widely publicized estimate, as high as $462 billion have been stashed abroad from India through multiple, unauthorised sources by Indian citizens since Independence up until 2008. The flow was bound to have further intensified thereafter, but the latest estimates are not available. The figures were not based on guesswork. They were released by Global Financial Integrity, a non-profit research organization that has been on a push against illegal capital for many years. It is reckoned that this amount formed about 40 per cent of India’s GDP. Hundreds of super-rich Indians are believed involved in the stashing, that seriously undercuts the nation’s financial integrity and growth process. According to estimates, illegal financial outflows from the country recorded over 11 per cent growth per annum in recent decades.

It is also noted that over half of the total illegal financial outflows occurred after 1991. This was a period when, on the one side, liberalization and globalization came in; and on the other, our systems of governance and financial controls largely came to naught. The effects are there for all to see in different sectors even as the nation claimed high economic growth for a few years. That growth is now a thing of the past, be it due to faulty economic policies or due to a cooling down process or due to the impact of the global economic meltdown. This in turn has resulted in the poor becoming poorer, the youth of the nation losing out on job opportunities and our markets getting flooded with cheap (mainly Chinese) goods.

On the black money front, perceptions are that the UPA II was not serious in getting the money back. The issue however is not new. The previous NDA government, which was also aware of the problem, did precious little to proceed in the matter. The Manmohan Singh government had, in August last, signed an agreement with Switzerland – the main haven for black money deposits – for information on such funds. It had also held talks with several other tax havens including Mauritius for similar information. But, there has been little of success on these fronts. Getting information from these countries through normal channels is a tall order. For, those nations are benefiting immensely from this kind of an illegal financial deal. These nations choose not to spill the beans and let go of a major means of income. Talking of the Manmohan government also reminds us that when the change does take place in India’s national government in the near future, it is very unlikely that someone like Narendra Modi would ever wish to ruffle the feathers of the same rich Indians who have so willingly funded his extravagant campaign. 

On its part, and for unexplained reasons, the present Central Government has stonewalled a Supreme Court directive to hold an SIT probe into the black money scourge. A change of government by itself is not going to change the scenario. There have been bad experiences from both the sides of the political spectrum in the past two decades. BJP’s PM nominee Narendra Modi’s promise of bringing back the stashed funds and matching it by reducing the income tax burden on people should be seen as nothing more than an election rhetoric.

UPA II is now virtually on oxygen and its days are numbered. What it did at this late hour means little and it would be seen as nothing more than a drama. At best, it was done for effect and the Congress cut a sorry figure. There has to be a way forward. There is no strong public opinion in this matter. Supposedly meaningful intervention by the Supreme Court will hardly have any effect on this mammoth that treads the soil of India. Black money is a by-product of a criminal activity. Rationalising the tax structure on the select few Indians who pay tax would be one probable method to discourage flow of funds abroad. If a common citizen watches the type of draconian advertisements being put forth by the Income Tax Department, it would only result in scaring away the small and medium income group from voluntarily opting to be a tax payer. This reminds us of the oft repeated ‘tax the rich’ statement of P Chidambaram. This has been the sick attitude of India’s tax pundits. It is time to say, ‘tax less but tax more number of people’. With more people paying less amounts, the country would not only create more wealth but also foster responsible citizenship amongst a larger spectrum of people.