Black money haunts Congress
The manner in which a bold initiative to unearth Indian black money lying abroad was aborted by the then Congress Government in the 1980s was suggestive. Then, as now, the party leadership acted as if it had skeletons to hide
Switzerland was accused of giving shelter to black money and there has been a lot of inflow of such wealth from India and other countries of the world.” This is not Mr LK Advani speaking in an election rally but the Swiss Ambassador to India briefing the media in New Delhi last year. The occasion was the 60th anniversary of Indo-Swiss Friendship Treaty. Admitting that Indian black money gets hoarded in his country, he added that the new law in Switzerland would not stop it but control it “up to a certain limit”.
The Swiss diplomat authentically answered the first of the FAQs, that is, whether lots of Indian monies are really stashed away in Swiss banks. Swiss banks are not the only secret destination. There are 37 such shelters in the world, says US Inland Revenue. The secret owners of the monies operate in secrecy — venal businessmen, corrupt politicians and public servants, drug lords, and criminal gangs like the D-company. These slush monies are the financial RDX for terror, besides weapons of mass destruction of national and global finance. That there is secret money is no more a secret. Only the amounts and the owners of that money are secret.
But how large could be such stolen Indian wealth hoarded in Switzerland so far? Specific estimates of this later. Before that, here is a side show, but a relevant one.
An apology would be in order. For, I figure in this show. In late 1980s, at the behest of an English national daily, while investigating a corporate scam, I had attempted to trail the Indian currencies stashed abroad. In the course of the probe, I had contacted Fairfax, a US investigative firm. Impressed by its skills, I persuaded the Government of India to engage the firm for the task. Fairfax agreed to work for a slice of the black wealth uncovered by them as fee. According to the Swiss sources then, the Indian money stashed in Swiss banks was estimated around some $300 billion. That was enough to excite the Fairfax to go for the kill.
But, soon my efforts landed me in jail on March 13, 1987, when the Central Bureau of Investigation arrested me on charges that later turned out to be bogus, but were enough to stop the probe. The whole nation knew then that real reason why rulers struck was their fear that the probe had targeted the Bofors pay-off and secrets monies of the ruling family abroad. Rajiv Gandhi, the then Prime Minister, moved honest and bold civil servants like Vinod Pandey and Bhure Lal out of the probe and eventually sacked the then Finance Minister VP Singh, who had authorised the efforts.
The chain of events that followed led to corruption emerging as the major issue in the 1989 poll in which Rajiv Gandhi, who had wiped out the Opposition in 1984 election, was defeated, and VP Singh became the Prime Minister. But there is a big lesson in these developments that often goes unnoticed. And that is the way the bold national interest initiative to unearth the Indian black wealth abroad was aborted clearly confirmed that the ruling party was mortally afraid of any probe into secret monies abroad. This fear haunts the Congress even today. That is why the 1987 episode is relevant now.
Now cut to the main story.
Illicit monies are the dirty outcome of modern capitalism. But, after the 9/11 terror attack, the United States realised that not just the buccaneers in business but terrorists like Osama bin Laden could hide their funds in secret havens and use them to bomb the world. Campaigns against dirty money as high security risk commenced with the path-breaking research done by Raymond W Baker, a Harvard MBA and a Brooking scholar. His research was published in a book titled Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market System in 2005.
This set off intense debate in the US as the exposure linked dirty business and black money with terror and national security. Raymond Baker had estimated, using authentic data, tools and reasons, the tainted wealth stashed in banks at $11.5 trillion to which, he found, one more trillion was getting added annually. He added that in the process the West was getting an annual bounty of $500 billion from the developing countries, including India.
Global Financial Integrity, a global watchdog headed by Baker to curtail illicit money flows, has recently brought out detailed estimates of the black money hoarded in secret havens from different countries. GFI research shows that during the period from 2002 to 2006, annually $27.3 billion was stashed away from India, making a total of $137.5 billion for the five-year period (the Executive Report of GFI in http://www.gfip.org on ‘Illicit Financial Flows from Developing Countries 2002-2006’ Economists’ version). That is, in just five years, Indian wealth amounting to Rs 6.88 lakh crore was smuggled out of India. This gives clue as to how much Indian money would have slipped out of India in the last 62 years, particularly during the Nehruvian socialist regime when the income tax (97.5 per cent) and wealth tax (almost equal to the income earned on investments) together constituted double the income earned!
It is undisputed that the Nehruvian socialist model had forced huge sums of Indian money out of India. So the amount of Indian black money stashed away in the last 60 years — estimated at from $500 billion (Rs 25 lakh crore) to $1400 billion (Rs 70 lakh crore) — do not seem to be wide off the mark. Economists call it flight of capital. This is the Indian people’s money stolen away from them.
See the consequence even if part of it is brought back. A portion of it would make India free from all external debts which is now over $220 billion; India will transform into an economic superpower; some 10 or 15 Indian Rupee could buy a US dollar which today 50 Indian Rupees cannot. A litre of petrol on our roadside would cost some Rs 15 or even less, against today’s 40 plus; the cost of imports in rupee terms would be down to a third or half; India’s entire infrastructure needs can be funded; India will become so energy efficient and cost-competitive that exporters may need no sops at all; India will lend to — presently it borrows from — the world. India’s housing can be funded at affordable cost; rural poverty can be wiped out… The list is endless.