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Secret Indian Wealth Aboard - S Gurumurthy -02-04-09

Switzerland has been 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 L K Advani, on election mode, speaking last Sunday, but the Swiss ambassador to India briefing the media in 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 answers the first of the FAQs, that is, whether a lot of Indian money is 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 secreted monies operate in secrecy — venal businessmen, corrupt politicians, public servants, drug lords, and criminal gangs like the D-company. The 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 persons are secret. But how much of India’s stolen wealth could be stashed in Switzerland? Specific estimates of this later. Before that, here is a sideshow, but a relevant one.

In the late 1980s, at the behest of The Indian Express, while investigating the Reliance scam, I had attempted to trail the Indian monies secreted abroad. In the course of the probe, I had contacted Fairfax,a US investigative firm, to uncover the Indian wealth stashed abroad. Impressed by their 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 Swiss sources then, the Indian money secreted in Swiss banks was some $300 billion. That was enough to excite Fairfax to go for the kill. But, soon my efforts landed me in jail on March 13, 1987, when the CBI arrested me on charges that later turned out to be bogus, but were enough to stop the probe. The whole nation knew then that the real reason why rulers struck was their fear that the probe had targeted the Bofors payoff and secret money of the ruling family abroad. Rajiv Gandhi, who was the prime minister then, moved honest and bold civil servants like Vinod Pandey and Bhure Lal out of the probe and eventually sacked V P Singh who, as finance minister then, had authorised the efforts.

The chain of events that followed led to corruption emerging as the major issue in the 1989 polls in which Rajiv Gandhi, who had wiped out the opposition in 1984 elections, was defeated, and V P Singh became the prime minister. But there is a great 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 family was mortally afraid of any probe into secret money abroad. This fear haunts the family-led Congress party even today. That is why the 1987 episode is relevant now.

Now back to the main story.
Illicit money is the dirty outcome of modern capitalism. But, after 9/11, the US realized that not just the buccaneers in business, but Osama bin Laden could also hide his 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 Brookings scholar. He published his research as a book Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free- Market
System.

The book was published in 2005. This set off intense debate in the US as the exposure linked dirty business and dirty money with terror and national security.
Raymond Baker had estimated, using authentic data, tools and reasons, the dirty wealth secreted in banks at $11.5 trillion to which, he found, one more trillion was being added annually. He added that in the process the West was getting an annual bounty of $500 billion from the developing countries, India included.

Global Financial Integrity (GFI), a global watchdog headed by Baker to curtail illicit money flows, has recently brought out detailed estimates of the black wealth hoarded in secret havens from different countries. GFI research shows that during the period 2002 to 2006, annually $27.3 billion was stashed away from India, making a total of $137.5 billion for the five-year period. That is, in just five years, Indian wealth amounting to Rs 6.88 lakh crore has been smuggled out of India. This gives a 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 forced huge sums out of India. So the amount of Indian black wealth secreted away in the last 60 years — estimated at from $500 billion (Rs 25 lakh crore) to $1400 billion (Rs 70 lakh crore) — does not seem to be wide off the mark. Economists call it flight of
capital. This is the people’s money stolen 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 rupees could buy a US dollar which today 50 Indian rupees cannot; a litre of petrol on our roadside would cost Rs 15 or even less, against today’s 50 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 — not, as it does now, borrow from — the world; Indian housing can be funded at affordable cost; rural poverty can be wiped out... The list is endless. But, then, is it possible to bring back the secreted monies? What are the roadblocks to such efforts?

Continued …

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Great blog here! Also your website loads up very fast!

What web host are you using? Can I get your affiliate link to your host?
I wish my website loaded up as quickly as yours lol

Here is my web page: deflator

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