Indian Decade

Tackling India’s Black Money

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Indian Decade

Tackling India’s Black Money

The problem of black money stashed overseas has cost India’s government billions. It’s time to do something about it.

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 [email protected]. Views expressed are personal.

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