Published: November 6, 2014 - 13:30

Once you go black, you never go back. But, jokes aside, where is India’s black money? It’s in Switzerland and other tax havens — we were informed by those agitating against the United Progressive Alliance (UPA) government’s criminal lethargy in bringing the moolah back from abroad. It was claimed that the amount stashed away was so colossal that it could literally rid India of its poverty, and also transform all of it into a bustling Shanghai. Some conservative figures put it at about $1 trillion, while the liberal estimate hovered at just over $16 trillion. The Global Financial Integrity firm settled at a relatively measly figure of $462 billion, that had flown out of India since 1947. Much, though, had returned through ‘round tripping’. The sobering truth, however, is that there’s more black money being hoarded in India than abroad.

The UPA government did not bring back the dirty funds but, instead, gave a white paper on what black money was all about. This report was contemptuously dismissed as an attempt to protect their own ill-gotten funds or those of their fat cat lackeys. The BJP was assiduous in its demand that the UPA government retrieve the illegal money squirrelled away in tax havens. Former BJP President LK Advani travelled all over the country in 2009 to campaign against black money in foreign accounts. He stated that if India managed to get those funds back, much could be achieved. Advani resurrected the Bofors kickback probe and Hasan Ali Khan’s dubious funds to ram home his point. It didn’t make an impression as his party lost.

But during the run-up to the election campaign in 2014, the BJP government promised to initiate action on this contentious issue again. The Supreme Court, reacting to a Public Interest Litigation on the matter, set up a Special Investigating Team (SIT). The government even got names of 800 account holders from various foreign banks and European countries. However, the government had told the Supreme Court that it was bound by confidentiality agreements with the countries concerned; therefore, it could not betray their trust. The Finance Ministry’s statement drew strong criticism from lawyer Ram Jethmalani, who reminded the BJP leadership that it had hammered the Congress-led  UPA government precisely for taking a similar position. Even the white paper that the UPA issued a couple of years ago mentions the circumstances in which the identity of account holders could be exposed. The naming and shaming of those who scooted with funds earned through bribes, kickbacks from defence deals and dubious exports was needed to strike fear into those who have scant regard for our institutions.

Now, the BJP government wants to reveal the identity of these account holders. But will it do so? As those who figure on the list cannot all be politicians and many of them would even be close to the BJP, this move had the potential to destabilise the economy. Finance Minister Arun Jaitley  suggested that there were former ministers too on the list, but he has held the names back. Who are they?  Speculation is rife in government circles about who these gentlemen could be, who contributed to a 40 per cent hike in Indians investing in Swiss banks between 2012 and 2013. The total amount that was parked in Swiss banks during this period rose to a staggering two billion Swiss franc CHF, which amounts to $12,000 crore ($120 billion). The bulk of the funds has reportedly found its way to these bank vaults in the last six months of the previous government, when it became clear that it was not returning to power. This migration of cash shows the desperation of these account holders to conceal and protect their ill-gotten wealth.

Since 2000, having a foreign bank account was no longer deemed a cognisable offence. Even if the account in a foreign bank was found out, at best the Income Tax department would impose a penalty and make the account holder pay tax on it till it attracted the provision of money laundering, or it was collected through criminal proceeds.

Black money hidden in foreign accounts might be important to retrieve, but what about so much unaccountable wealth that is visible in India? A plethora of properties, palatial houses, fancy cars and other conspicuous consumption is fuelled by this illicit wealth. One of the costliest parliamentary elections in 2014 was largely funded domestically. Some economists estimate the black money generation to be 25-35 per cent of the GDP, which is a mind boggling figure. What should worry the government is why people don’t pay taxes and why they need black money to run their businesses. Simply put, people don’t trust the government!  


Editor of Delhi's Hardnews magazine and author of Bad Money Bad Politics- the untold story of Hawala scandal.

Read more stories by Sanjay Kapoor

This story is from print issue of HardNews