India’s ‘black money’ in Switzerland

Black money from India in Swiss banks amounts to as much as $1,456 billion.

I do not think there is any top civil servant or a leading politician in South Asia without the blemish of having a foreign bank account. But the pressure in India on the Manmohan Singh government to bring back the black money stashed abroad has been relentless. But instead of taking any concrete action, the government seems to be trying its best not to let the gamut of black money come to light. Therefore, it is understandable why it is seeking clarifications on the Indian Supreme Court’s indictment: “The issue of unaccounted monies held by nationals and other legal entities in foreign banks is of primordial importance to the welfare of the citizens.”

It had warned the government not to presume that the money hidden in Switzerland was a result of tax evasion. It could be money that has been laundered after being earned from gun-running, drugs, terrorism, etc. The government is yet to give a justification why it has taken the route of entering into double taxation pacts with foreign countries in order to have the names of the tax evaders. Black money from India in Swiss banks, according to the Swiss Banking Association report in 2006, amounted to as much as $1,456 billion. The amount is reportedly more than the deposits of all other countries put together. And it is 13 times the country’s total foreign debt. With this amount, it is estimated, some 450 million people in India could get Rs 100,000 each.

After clearing its foreign debt, India will be left with a surplus almost 12 times larger than its total foreign debt. If this surplus is invested, the amount of interest will be more than the annual budget of the central government. So even if all taxes are abolished, the central government will still have a cushion. My calculations are on the basis of the 2006 figures given by the Swiss Bank Association. The amount must have risen considerably since then.

Expressing lack of faith in investigations this time the Supreme Court has constituted a Special Investigation Team headed by two retired SC judges to probe all black money-related cases. The court itself is supervising the pace of investigation. While announcing the verdict, the court has observed that “politicians, bureaucrats and businessmen are known to park their funds abroad and then try to get them into the country through foreign institutional investors’ route”.

Very pinching remarks but every word is true. I wonder if there would be any effect on the government which has shown little agility to pursue the cases of black money abroad.

The government has been caught on the wrong foot. It received some time ago as many as 26 names from Germany under the double taxation treaty. Berlin had got hold of names of hundreds of beneficiaries and had offered them to the country. New Delhi could not afford to say no. But why is Finance Minister Pranab Mukherjee saying that the names of beneficiaries cannot be disclosed? The SC has overruled the contention and has asked the government to make the names public. Still the government does not seem ready to comply.

Fortunately, Congress Secretary-General Rahul Gandhi, has said that the money stashed abroad belongs to the poor and must be brought back to India. He has said that once his family takes up a matter, it carries it to the logical conclusion. The nation waits for the results.

The Bharatiya Janata Party and its allies in the National Democratic Alliance have said that they have no money abroad. This statement should act as a pressure on the Congress and its allies. Some of the allies may begin to keep distance from the Manmohan Singh government. It has no option except to make the 26 names public. Then the fat will be on fire.



Published in The Express Tribune, July 19^th, 2011.