India’s ‘black money’ in Switzerland

Published: July 18, 2011
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The writer is a syndicated columnist and a former member of India’s Rajya Sabha.

The writer is a syndicated columnist and a former member of India’s Rajya Sabha.

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 19th, 2011.

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Reader Comments (33)

  • Meekal Ahmed
    Jul 18, 2011 - 9:37PM

    This is what Pakistan should be doing as well.

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  • Noman
    Jul 18, 2011 - 9:56PM

    It is pleasing to know the Indian government is pushing the case to bring back money from Europe, but at the same time, India’s neoliberal reforms purse policy of capital-extraction once again transfer money back to Western metropolis. It is ironic.

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  • Paras Vikmani
    Jul 18, 2011 - 10:08PM

    Manmohan Singh does not bother to solve issues of prime concern to India i.e corruption and terrorism. He wants to solve problems that matter to Pakistan. And that is why he keeps talking peace with Pak when Indians are awaiting justice for those two issues which he has not yet resolved.

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  • Khalid Ahmed
    Jul 18, 2011 - 10:17PM

    And that figure simply looks impossible, given the entire Indian GDP itself is around $1400 billion now. The more realistic black money estimation is $350-450 billion.Recommend

  • Tanoli of karachi
    Jul 18, 2011 - 10:27PM

    @ salaam mr kuldip nayar sahab of sialkot i allways read your articles in diffrent news papers and i really like the deep message of writing there is lot chore money of south
    asian thieves but why western crooks allow this money in there banks or is there any
    U.N.O say on this is nil

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  • john
    Jul 18, 2011 - 10:45PM

    Why does pranab mukherjee says no?

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  • Vicram Singh
    Jul 18, 2011 - 11:13PM

    “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.”

    Mr. Nayar, if you have access to the Gandhi family, do tell them that if they really have love for India, they must not perpetuate dynastic rule. Very string sentiments are brewing against them.Recommend

  • Rajesh
    Jul 19, 2011 - 12:13AM

    http://articles.timesofindia.indiatimes.com/2011-07-17/india/297838821swiss-banks-swiss-government-swiss-francs

    So, what happened to the remaining $1454 billion Mr Nayar is claiming to be abroad?

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  • Indiah
    Jul 19, 2011 - 12:42AM

    We don’t share any kind of culture[not even0.000001%] with pak and we have no emotional attachment with ’em,pak is just another neighbor country[same thing holds true for pakis] to us.So please stop all these ‘Peace’ and ‘aman ki aasha’ drama.& focus on corruption and ‘iTerrorism‘.

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  • Spud
    Jul 19, 2011 - 4:58AM

    @Khalid Ahmed: Indian elite have been taking money money overseas over the last 60 years to bank it in Swiss banks, therefore it is not imposible that it has become such an astronomical sum. Just goes to show how large is the corruption consider this, it is estimated that the British during their 200 years in the subcontinent looted from it 100 lakh crore Indian rupees while it took the independent Indians only 60 years to take 280 lakh crores out of what is India today.

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  • John
    Jul 19, 2011 - 11:08AM

    It is somewhat funny to see the what figures some Indians take to make the amount of Indian black money in Swiss banks more impressive. The author should read the documents of the Swiss banking association again. For the Swiss financial centre, India is not one of the most important countries of origin. In fact, Indian money plays a minor role in Switzerland so far and is mostly openly invested by Indian companies.
    The total amount of black money from India is around USD 2 bn and not USD 1456 as mentioned in the article. Journalists should take their responsibility more serious…

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  • harkol
    Jul 19, 2011 - 12:07PM

    @Khalid ahmed

    Indian Budget isn’t $1,400billion. That’s the nominal GDP (in US$, not Purchase parity). The Indian Union budget is to the tune of about $245billion.

    But, many economists say that the amount of $1.5trillion of Indian black money in swiss bank is unlikely!

    Swiss banks have total assets (not just deposits) of about $6trillion. Swiss banks, with their privacy laws, were the magnet of illicit money from world over. Illicit money normally is done in countries that are either ruled by despots or countries that have high corruption.

    India’s real GDP is estimated to be far higher than its nominal one (because of parallel black market). And this money typically gets hidden in one way or the other. Big sink of black money is real-estate. But, the other one is foreign banks.

    So, it is entirely likely that assets in excess of a trillion$ are in foreign banks, but swiss banks? That’s hard to say. Even if it was the case by now there would’ve been flight of money, as there is higher scrutiny of swiss banks.

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  • Asad
    Jul 19, 2011 - 12:23PM

    @Indiah also stop coming to Pakistani news sites. Spend your time on things which concern you.

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  • Sam
    Jul 19, 2011 - 12:43PM

    @Paras Vikmani:

    “He wants to solve problems that matter to Pakistan. “

    u mean like the time when he opened the damns which caused further flooding and quite frankly i dont think such cases can be calssified as deaths.. they should be classified as murder.. india knowing very well about the floods in pakistan whcih were the worst in its history did this….

    so is this the problem manmohan singh solved for us? pls do share ur list with me .. (in case u dont get it im being sarcastic!)

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  • Indiah
    Jul 19, 2011 - 2:48PM

    @Asad: I came here to let you know.
    Ciao

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  • Suresh
    Jul 19, 2011 - 9:00PM

    These days, estimation of black money is becoming hottest subject in economics, world over. Indian govt. has too commissioned committee to estimate exact black money in circulation and its genesis. As far as the some people speculating the volume of Indian origin black money in Swiss bank being less, it is possible that, the culprits might have routed the money through third country possibly from Mauritius or St Kittis etc. Morover, as I know ( not sure) only in case of individual account, the country of origin is traced, not in case of companies.

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  • Gautam
    Jul 19, 2011 - 9:18PM

    The US$1.4 trillion in Swiss banks is a total fabrication. In my correspondence with the Swiss Banking Association, they have denied that they have ever released such data or information. I don’t know who releases such sensational “news” in India. A lot of baloney passing off as “investigative journalism”.

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  • Gautam
    Jul 19, 2011 - 9:47PM

    Actually I know exactly how someone came up with the US$1,4 trillion number and I also know the person who did this. But I will not name him here. The figure was arrived as follows:

    Take GFI’s estimate of US$22.7 billion per year average outflow from Illicit Financial Flows from developing Countries: 2002-2006, published by Global Financial Integrity in 2008.

    Multiply US$22.7 billion times 61 years (1948-2008) = US$1.4 trillion.

    Then just say this amount is in Swiss Banks. The fellow knows that this is a nice stick to beat the government over the head (he belongs to the BJP party). Why Swiss banks? Because he knows that the Swiss banks are most secretive and they will never confirm or deny the information. It is safe from verification. But he should have known that no bank or offshore center will confirm or deny any deposit information anyway. All this has become a political football in India and the media is playing along depending upon which side they are on. The media is also politicized to a large extent in India. It is difficult to find well-researched and non-partisan newspapers in India.

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  • Sajida
    Jul 19, 2011 - 11:11PM

    It is not only in Switzerland, it is also in the various tax havens run by former colonial ruler Great Britain. I assume they were inspired by the Swiss.
    You should read Treasure Islands by Nicholas Shaxson:
    http://treasureislands.org/
    The other Indian problem is massive tax evasion by even middle class, let alone the wealthy and the corporations who have been off sharing their wealth (latter which is also causing problem in the US and is suddenly being noticed).
    Land Reform in India: Issues and Challenges
    The Great Betrayal : Indian Land Reforms
    Also, despite boom tax collections have been going down, so governments have been increasing debt!
    See:
    “Over the years, Central transfers to States as ratio to GDP stagnated and consequently, in view of the growing expenditure needs the dependency on own revenues increased. However, the growth of own tax revenues of almost all the States has been on the decline which has aggravated the pressure on the fiscal balances, and in course of time, became responsible for the decline in the quality of expenditure.
    http://www.adb.org/documents/reports/consultant/tar-ind-4066/govtbudget/sarma.pdf
    All told with growing population, this is not a sustainable situation.Recommend

  • Dev Kar
    Jul 20, 2011 - 4:53AM

    Being the Lead Economist at GFI, I led a staff team to produce the report:

    The Absorption of Illicit Financial Flows from Developing Countries: 2002-2006. This has been the only study ever conducted on the destination black money flows from developing countries. The paper can be downloaded from the GFI website.

    Depending on the definition of offshore financial centers and based on estimates of illicit flows as well as deposit data from the OFCs and banks, the paper concluded that banks absorb about 75.9-55.8 percent of black money while OFCs absorb about 44.2-24.1 percent of these flows. The study showed mathematically that it is impossible for banks not to be a player in this game.

    I have written on Indian fiscal issues in Indian media (based on my long experience as a Senior Economist at the IMF). They fiscal issues are too technical and numerous for me to go into here.

    Dev Kar

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  • Dev Kar
    Jul 20, 2011 - 4:55AM

    @Sajida:

    By the way, Nick Shaxson is a friend of mine and we are intimately familiar with each other’s work.

    Dev

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  • harkol
    Jul 20, 2011 - 11:47AM

    @Asad:

    Pakistan concerns India a great deal. It has the potential to spoil our welfare and cause great harm to our nation. Should something really bad happen in Pakistan (like what has happened in Afghanistan), there’d be huge number of refugees that’ll swarm into India.

    Think that’s impossible? See what is happening to Pakistan because of what’s happening in Afghanistan. Also, remember 1972?? There was a genocide in East Pakistan by West Pakistan army, and the Refugees from East Pakistan to India was estimated to be more than 10million people.

    Which sane nation won’t be concerned about such outcomes in its neighborhood?

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  • Tony Singh
    Jul 20, 2011 - 1:37PM

    @Asad:
    If articles concerning Indians appear in the newapaper. Indains will voice their views.
    1. If you are so concerned ask ET not to have an online version of their newspaper.
    2. You see the LIC advt. below the article and club Mahindra on the side? It only means ET wants Indians to read their newspaper.Recommend

  • Naeem Siddiqui
    Jul 20, 2011 - 1:56PM

    Harkol,

    Could you enlighten us actually what ‘welfare’ India is providing to her masses :) with farmers suicides, home of world largest malnutrition children, 40 % population living worse life then sub-Saharan African countries, Delhi a rape capital of world and mega corruption!!! :)

    I met many indians and they always talk about exploitation, corruption and worsening law and order situation in their country. I wonder why they dont see the ‘welfare’ India is providing to her citizens. :) LoL

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  • Naeem Siddiqui
    Jul 20, 2011 - 2:07PM

    Tony Singh,

    I have seen many Pakistan specific articles in other online news papers of the world and found that 90% of commentators are Indians with their typical Pakistan bashing :)

    BTW! I don’t agree with asad’s view.

    Indians are most welcome!Recommend

  • Tanoli of karachi.
    Jul 20, 2011 - 6:48PM

    Thanks to world thieves for lights and shining of europe.Recommend

  • Adeel759
    Jul 20, 2011 - 7:35PM

    @Asad. I believe its you who should stop reading quality news. Words and writing belong to everybody, it travels beyond borders. Coming to the article, its a matter if shane that such a huge amount is being taxed overdress(except fire few countries). Since India is growing at tremendous pace, Indian government should entice and force the indians to bring the some money back, it could certainly alter the indian economy for the better.Recommend

  • Jul 20, 2011 - 7:45PM

    Any body who says ‘do not blogg in Pakistan news service is very short sighted,close minded,one should be proud how many folks from all over the world have respect for T/E and consider it worth while to write?When are we going to grow up,do we see ourself in the mirror,or how silly we sound.?We take pride in our hertiage,our Prophets,our pirs and Mahatmas,but we do not think of anything when we show absolute no respect less of tolerance,but most people write in English,so they have some schooling,so it goes without saying some basic etiquette and manners.Life is,besides live and let live,about listenning and expressing once point of view,thank god due to this simple goggles and yahoo,and internet some in Iceland,Bosnia or in Tasmania can read what I am thinking?My blog in the matter of Finance is read all over the world and when one extra person is added,I’m thrilled,not that Mr Geithner is going to take my advice,but public opinion matters,not every one is the sharpest tool in the tool box.Pl do not ask others to shut up,it is bad eticate and bad manners,’TAHZEEB”matters,so does good “ADAB’,we being civil to others are doing no one favor,we only bring respect to “SELF’,Know thy SELF,all good scripture insist,and teach.. AS regards how much money is in Swiss Banks,no one knows and GOI is determined not to disclose,that makes it all the more suspect and suspicious.Do you expect any other course of action from powers of South Asia?I don’t,nor should you be’.Sab chaltha aya hey , 63 sal say’Recommend

  • harkol
    Jul 21, 2011 - 1:33PM

    @Naeem Sidique:

    Agreedly, India isn’t a welfare state in conventional sense, and there is a long gap.

    But, it did pull out a huge section of population from poverty in past 2 decades. All international reports bear this out. Programs like NREGA ensure 6 months of work to everyone, and result has been the average wage has gone up by 50% in past 2 yrs.

    But, overall things have been not too bad (could be a lot better). It will never be perfect (witness troubles in every country in past few decades)…

    Recommend

  • b.murlidhar
    Jul 22, 2011 - 5:00PM

    If the statement attributted to Mr. Rahul Gandhi in the penultimate para of the above article is true then it goes to show how arrogant is Mr. Gandhi.He seems to have more faith in the capabilities of his family rather than the congress party of which both he and his mother are functionaries.

    Recommend

  • Gautam
    Jul 22, 2011 - 9:08PM

    @Vicram Singh:

    Yes, I think Rahul Gandhi, if he has the decency, should promptly end all speculation that he is running for the Prime Minister’s post. He should be embarrassed about this dynastic rule. This is one of the most absurd political fact about India. Don’t we have anybody besides this Gandhi family in our nation of 1.2 billion people! I don’t know when will our villagers grow up a little bit and stop supporting the Gandhi family as the permanent savior of India?. Lack of education is really such a terrible thing. Recommend

  • Gautam
    Jul 22, 2011 - 9:13PM

    @Indiah:

    Absolutely true. We have nothing in common with them. Certainly not the philosophy, not the way of looking at the world, not the sectarian divide, not the treatment of minorities, not the constitution, not the treatment of women, not the love of violence, not the state sponsor of terrorism, not the failed state, no nothing at all thank goodness.

    Recommend

  • Sajida
    Jul 22, 2011 - 11:28PM

    @ Gautum
    You have demonstrated the smugness of ignorance. You do have a religious /communal divide and worse you have caste divisions. Indians treat fellow Hindus as subhuman and their lives ad dignity are constantly at stake. The Indian constitution is limited by fact it is overly dependent on constitution drawn under British rule. This was inferior to the ones drawn under its independent settler colonies of Canada and Australia. Indians remain captives of that. And like yourself demonstrate ignorance of that fact as well! Are you by any chance a BJP/RSS supporter?
    http://infochangeindia.org/Governance/Conflict-Resolution-Governance/Why-atrocities-against-dalits-and-adivasis-continue.html
    Why atrocities against dalits and adivasis continue
    http://www.inthesetimes.com/issue/27/04/feature2.shtml
    BROKEN PEOPLE, BROKEN PROMISES
    India is a “flailing state” and it has lower purchasing power parity than Pakistan and is the republic of hunger. Pakistan has less hunger than India. India’s wealth is in very small circle and its growth has only befitted tiny portion of country.

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