Tackling India's Black Money
Image Credit: Jon Smith

Tackling India's Black Money

0 Likes
8 comments

It’s hard to know what to make of some of the revelations from WikiLeaks. So when I read Julian Assange’s claims earlier this year that Indians have more money tucked away in Swiss bank accounts than any other nationality – and that India has more black money there per capita than Germany – I admit I was sceptical.

But regardless of what other countries are doing, Indian tax evaders have clearly piled up substantial assets in Swiss banks. The general consensus is that between $1 trillion and $1.4 trillion—or around 40 percent of India’s GDP—is held in black money. This is at a time when the nation’s attention is focused as much as ever on the issue of corruption following the activities of civil society leader Anna Hazare.

Last year, I was embarrassed when foreigners talked about the corruption scandals that plagued the Commonwealth Games. These days, though, I can feel some pride in the fact that Hazare’s non-violent protest has brought about a historic awakening. With this in mind, I feel extremely hopeful that a strong Lokpal (Ombudsman) bill will become a reality over the next few months and help curb corruption in India.

Such a bill won’t on its own be enough. Over the past four decades, the Indian state has suffered enormously as taxpayers’ money has been funnelled to various tax havens around the world – funds that could have been used to bolster this country’s growth and development. Meanwhile, India is one of the few countries in Asia that has a budget deficit – a particularly shameful state of affairs when so much wealth is being stashed overseas.

Under pressure over the issue last year, India last August signed a revised Double Tax Avoidance Agreement (DTAA) with Switzerland. The revised DTAA will allow Indian investigators to obtain access to bank account information in specific cases, and will work retrospectively from April 1 this year (although it’s unclear whether the treaty allows India to make that information public).

Of course, with such vast amounts of money at stake, the issue is an emotional one in India, and the repatriation of the funds is easier said than done. But we don’t need another fast by Hazare to make progress. What we do need is public pressure on the government to come up with a plan of action that provides strict timelines for procedures that will bring the tax evaders and money launderers to book. An independent committee representing civil society will be needed to monitor progress.

In backing Hazare’s call to action, Indians decided to take their destinies in their own hands and rebel against sub-standard governance and widespread corruption. But we need to take the next few steps to rectify what has essentially been robbery. With the US economy teetering, and with the future of the euro uncertain, now seems a good time for India to set a shining financial example for the world.

Tanuj Khosla is a Research Analyst at 3 Degrees Asset Management, a fund management firm in Singapore. He can be followed on Twitter @Tanuj_Khosla. Alternatively he can be reached at khosla.tanuj@gmail.com. Views expressed are personal.

Comments
8
Neville
September 28, 2011 at 18:44

Dear Frank,

First of all, you sound like you have THE biggest post-colonial hangover I have ever had the pleasure of meeting. All I have to say is, thank god it’s virtual. You’re either an octogenarian with a failing bladder that’s reminiscing about the “good ol’ days of the raj” or you’re from a family that lost land/money/”servants” when India won her (rightful) freedom. Every story definitely has two sides, but yours is entirely prejudiced. Yes, I’m aware of the power and pseudo-sexual gratification that might arise in you on discovering that the GBP to INR ratio is currently 1:76, but right now, India could probably bail out your country twice over, without the help of the trillions in black money stashed away.

Furthermore, we’re called Indians, not East Indians. East India, correctly known as Bangladesh is an entirely different country. The British, when they first arrived in India, began colonising and plundering under the guise of the East India Company, which was set up as a trading company. That was just a name. This is India, we are Indians. We don’t call you North-French do we? We call you British. You don’t have to respect us – which you clearly don’t – but at least get your facts right. Also, right about now, your country would be more than happy to sell off other locally-owned establishments to powerhouses like India because it would mean extra cash.

I’m not denying the fact that Britain is one of the greatest places on earth, I love the place myself. But it’s ignorant people like you, who speak without reason that give it a bad name. Yes India is corrupt, but we are doing our part in helping to change that. Unfortunately in a country with over a billion people, which possesses such a low literacy rate as well as a minimum daily wage of Rs 100 (which equates to about 1GBP & 30p for you) … it’s a herculean task. Additionally, Indians by nature are very hard-working. It’s why your countrymen came, sat, ate, drank, plundered, got fat and rich before going home. In part it was our fault because we were too trusting and we let them. In principle, there’s very little we won’t do as far as a job goes. Even being “servants” is viewed as doing something productive, and a service. It’s not viewed as a contemptible occupation, so stop sneering. As a people, we’re very enterprising.

Let me sign off by saying that I don’t care if my comment is deleted, but yours most definitely should be. You my good sir, are a bigot!

Frank
September 28, 2011 at 15:17

BigOil:
You have a typical servant mentality. Servants always have illusions that they are actually the real masters. They do not understand servants are servants. Masters are masters.

Master can do anything to servants. Servants have to serve the master with benefits.

If you want to know who is the master of Tata/Land Rover, check who do they pay tax too.

Tata and Land Rover have to pay tribute their masters. Their master can shut them down anytime.

That is why you East Indians were always being ruled by masters. You cannot even tell the difference.

BigOil
September 27, 2011 at 15:14

Chris :
“When will India find its own Tahir square?”

It just happened, or did you miss the whole Anna Hazare event? The middle class is still only about 20% of the population. In the early 2020′s, it will cross the 50% barrier, that’s when I believe the real change will occur. Regardless, corruption doesn’t really slow down GDP growth (China is about as corrupt as India per the corruption index). Even countries like Italy are very corrupt (relative to other OECD countries like U.S./Japan, who in turn are significantly more corrupt than Denmark).

BigOil
September 27, 2011 at 15:12

Frank:

Is that why Brits are now working for an Indian company (Tata/ Land Rover-Jaguar)?

Frank
September 27, 2011 at 15:00

Chris:
Indians have been like that for thousands of years. That is the reason that Indians can do well under a master. They cannot achieve anything by themselves.

If Indians want to have better life, they will find a master in USA or EU.

Sonal Saket
September 27, 2011 at 13:54

In my point of view the democracy like India where the scale of corruption has drastically increased, we need a strong draft like Right To Information(RTI) which has created a lot of panic in the walls of governing bodies. The janlokpall has all futures embedded in it. But it also takes great political will and statesmanship within the citizens of India particularly in politicians which is lacking. Until, unless the people like Anna Hazare will stand for the upheaval of the society, the Indian administration continues to be in the state where it is. The Newton’s first law do applies here.

Chris
September 27, 2011 at 04:03

As I’ve traveled to India now on and off for the past four years, working both at the behest of the Indian government and the private sector, I always find it astonishing that I can’t find anyone from the middle classes — the group who arguably have the most to game from effective governance — who will step up and protest in earnest against the state. All I hear is plenty of anger and no action. When will India find its own Tahir square?

Frank
September 26, 2011 at 22:57

Like I said before.

If the deal is good, East Indians will sell their mothers.

Share your thoughts

Your Name
required
Your Email
required, but not published
Your Comment
required

Newsletter
Sign up for our weekly newsletter
The Diplomat Brief