G20: India’s dirty money dilemma

Sanjay Kapoor Delhi, Hardnews

The Indian delegation attending G-20 summit does not seem to be keen on supporting the French demand to make tax havens transparent and create a new global financial architecture that has more regulation, as it could hurt India's economy. The big question is: can we allow the country's development to be bankrolled by dubious funds.

Prime Minister Manmohan Singh's reaction to the growing chorus for getting back ill-gotten wealth, squirreled in tax havens, has been quite casual. This makes it quite clear that he would not back the demands of French President, Nicholas Sarkozy, and others to regulate and tame the global financial system ahead of any coordinated stimulus. Their contention is that they fight protectionism and would not want anything to impede the flow of capital to emerging countries. And, this attitude is worrisome.

Indians, Swiss bank sources claimed in 2006, have more than $ 1.4 trillion squirreled in their bank vaults. This figure could reach astronomical levels if the funds of Indians in other tax havens are added up. Experts estimate that the total quantum of money that has flown out to safe vaults abroad could go beyond $ 2-3 trillion dollars. So substantial is this amount that if it returns to India then it could make a serious difference in alleviating poverty and transforming its inadequate infrastructure. More importantly, it will also bring out in the open the identity of those who perpetrated this organised loot for so many years. Most of the illegal funds are sourced from defence deals, corruption and large scale siphoning off from development programmes. If the details of the Swiss bank account holders ever come out in the open, it will be a fascinating story of how India has been pauperised by its ruling elite.

From this standpoint it makes ample sense for, first the Communists, and more recently, Bharatiya Janata Party's prime ministerial candidate, LK Advani, to demand from Prime Minister Manmohan Singh, bound for G-20 summit, to lobby for the return of Indian money from tax havens. To establish his credentials, Singh claimed that he had written to former Finance Minister, P Chidambaram, to find out from the German authorities the identity of those Indians who had parked their funds in the LTG Bank in Liechtenstein. The German authorities, through a discreet operation, had managed to lay their hands on a list of depositors. Indian government had claimed that they were in touch with the Germans, but had received no details. Opposition claims that these leads were not pursued seriously.

For more than three years now, they have not been able to make much headway in tracing the $ 8 billion found in a mysterious Pune-based stud farm owner's account in UBS, Switzerland. The money trail led to Virgin Island and to Saudi arms leader, Adnan Khashoggi, but the enforcement agencies have drawn no conclusions as one of the partners of the stud farm owner is a close relative of a big business family with close ties with the ruling party. This old business family, besides other interests, also serves as agents of some arms manufacturers. The belief is that pressure from this powerful group has prevented government to take its probe with the UBS to its logical conclusion.