Black Money: Trillions stashed abroad is fantasy, says government

Various estimates of black money stashed abroad have been doing the rounds in recent years. According to a white paper tabled in the LS on Monday, most appear to be fabricated with malicious intent, with some bordering on the bizarre.

The paper relies on figures provided by the Swiss National Bank to dispel the common belief that Indians hold the maximum deposits in Swiss banks.

Flight of capital

A revised estimate of an IMF study pegs the flight of capital from India at $88 b over the 1971-97 period. Another report, by Global Financial Integrity, estimates the outflow of accounted money from India at $104 b.

However, the paper notes that the GFI & World Bank models do not capture significant illicit outflows, such as through mispricing; smuggling; & hawala-type swap transactions.

The GFI reports also do not consider money that has come back through legal channels such as FDI & investment through PNs.

Round tripping?

The white paper cites DIPP data to show that Mauritius and Singapore accounted for 51% of the entire FDI received by India between FY01 & FY11, noting that the two countries cannot be the source of such huge investment and it is apparent that the money was routed through these jurisdictions to avoid taxes or for concealing the identities of the ultimate investors, many of whom could be Indian residents. Investment through PNs is another way in which the black money is reinvested in India.