The chairman of the Indian Supreme Court’s appointed special investigation team on black money, M.B. Shah, wants tax evasion to be made a serious criminal offense so that it becomes obligatory for foreign nations to reveal the names and account details of Indians stashing illicit wealth abroad. “While adding more teeth to India’s pursuit of black money kept abroad, this would also check generation of unaccounted wealth within the country,” asserted Shah whose team submitted its latest report on black money menace recently.
Though Premier Narendra Modi’s government has so far desisted from making public an official estimate of unaccounted money amassed illegally abroad, a study conducted by Global Financial Integrity, a Washington-based research and advisory organization, reveals that India recorded an outflow of approximately $439 billion black money between 2003 and 2012. Astonishingly, the total illicit financial outflow from India stood at $94.8 billion in 2012 alone, which, according to the report was five percent of India’s economic size pegged at $1.85 trillion that very year.
Modi says fighting the menace of black money is an “article of faith” for him. But how can he effectively commit himself to the cause of preventing black money generation when a sizable chunk of the very amount that went into his election campaign is not white? Modi’s astronomical electoral spending has left even the most seasoned political analyst flabbergasted. The innovative 3D campaign had cost Modi Rs50 billion alone apart from other electoral expenses. Is it not surprising that Modi’s expenditure skyrocketed to a scale never witnessed in Indian electoral history even though his Bharatiya Janata Party’s declared annual income is no more than Rs9 billion? So, where do these extra illegal bucks — that the Election Commission of India glosses over happily — come from?
Obviously, from the same extraneous sources, whose business interests will remain secure under Modi’s regime as manifested in the State Bank of India’s (more than 6 percent of the institution’s gross non-performing assets are due to bad loans) billion dollar loan to a pro-Modi business group at depreciated interest rate for its Australian mining project. Interestingly, Modi pitched for this whopping loan (arguably the largest ever in India’s banking history) despite knowing that leading global financial institutions have distanced themselves from this particular venture citing potential environmental threats. And India’s largest public sector bank was virtually forced to finance a company with huge debt, zero revenue, high cash-burn and negative shareholder’s fund.
Moreover, this particular corporate house, having spent lavishly in means and kinds on Modi’s pre-election bombardment of the electorate with political propaganda, was also bailed out by the same Modi government in the form of providing environmental clearance to a special-economic-zone project declared illegal by the Gujarat High Court.
Surely, having faltered in his popular pre-general-election commitment of bringing back billions of dollars of black money within hundred days of attaining power, Modi now realizes that his inability to deliver has exposed him badly. In successive election rallies, Modi deliberately hoodwinked the public with all sorts of utopian promises despite knowing that once seated in prime ministerial chair he will be compelled to look after the business interests of the same lobby that brought him to power. Since, Modi claims to be sincere about repatriating the stashed illegal money from abroad, why did his government not promulgate an ordinance to nationalize the black money amassed in tax havens abroad by Indian nationals?
Such a step would have been in consonance with the Swiss Restitution of Illicit Assets Act, 2010 and also helped bring the unaccounted money back into the country’s mainstream financial system. Besides, Modi seems to be lethargic in arresting circulation of black money within the country. India’s revenue secretary has publicly stated that the “quantum of domestic black money is similar to what is stashed abroad.” For example, nearly $2 billion of black money is changing hands in the dark underbelly of Indian medical education annually with the blessings of politicians and even bureaucrats. And strangely, Modi decided to strip the very Cabinet minister — who confronted endemic corruption in Indian medical system head on — of the health portfolio abruptly. In fact, there are various practices, which promote generation of black money in India. But does Modi have the appetite to clamp down on shady real estate transactions — the biggest channel for black money circulation — or kickbacks on government contracts involving foreign procurement or for that matter common malpractices in international trade like under-invoicing? There is doubt. How could a person who has gone overboard to facilitate inflow of foreign capital lock stock and barrel, genuinely want to curb the black money menace?
Does his government have any plan to prevent round- tripping of funds made easier by relaxed foreign investment norms? Will the Modi regime put a ban on participatory notes (leveraged instruments involving Indian equity, debt or derivatives issued by foreign institutional investors to individuals and institutions investing in Indian stock market without registration) introduced during ex-premier A.B. Vajpayee’s tenure, so that the anonymity guaranteed by it cannot be exploited to generate black money or finance anti-India activities?
Most importantly, will Modi cleanup political funding to block infusion of black money and break the unholy nexus between donors and recipients of discretionary favors in the corridors of power? As Vajpayee once said, it is indeed difficult for somebody who starts his legislative career in parliament with a lie — of filing false election-expenditure return — to stay honest.
