Corrupt India is a national shame

in perspective

How serious is the government in battling corruption and black money? The UPA government on July 15 approached the Supreme Court seeking review and complete recall of its order – which pulled up the government for the "laggardly pace" in investigations into black money stashed abroad – for setting up a special investigation team (SIT) comprising retired judges to take over the probe of all black money cases including that of Pune studfarm owner Hassan Ali Khan.

The apex court had earlier observed that the unaccounted money going abroad is a reflection of the—“compromise of the government’s ability” and an indication of “weakness and softness”—of the state in managing its affairs.

There might be serious debates as to whether the spate of ‘satyagrahas’ organised by Anna Hazare or by Baba Ramdev in protest against black money and corruption amounted to blackmail or righteous indignation but that must not distract us from the real issue that Indians are the biggest depositors of black money in banks located in Switzerland. Our attempt to iconise (or demonise) Hazare as the only living bulwark against corruption is perhaps a pathetic outcome of our frustration over the endemic corruption among the high and mighty in India.

If data provided by one Swiss bank is anything to go by, India tops the list with black money worth $1,500 billion, followed by $470 billion of Russia, $390 billion of the UK, $100 billion of Ukraine and $96 billion of China. According to some estimates, India’s parallel economy has risen from a mere 3 per cent of the GDP in the mid 50s to around 50 per cent today. The existence of domestic black wealth within the country and the continuous generation of black incomes used in the domestic economic, social and political spheres is no less worrisome because the volume of such wealth is considered to be way larger than that stashed away in foreign banks. The components that run parallel to our ‘mainstream’ economy are many: tax-evasion, smuggling, bribe-taking, and foreign-currency racketeering. And we seem to be pretty smug about their existence.

Currently, there is a hue and cry over the funds that leave Indian shores for greener and safer pastures abroad and there is comparatively little focus on the domestic black economy, which is quite an active component of the legal part of our economy as both the legal and illegal or undisclosed components work in tandem. Hong Kong-based Political and Economic Risk Consultancy Ltd (PERC) has rated India (with Philippines and Cambodia) as the fourth most corrupt nation among 16 countries of the Asia Pacific region. India’s ignominious position must account for a national shame.

In 2006, a Global Financial Integrity study estimated that developing countries lost an estimated $858.6 billion (about Rs 43 lakh crore) to $1.06 trillion (about Rs 51 lakh crore) in illicit financial outflows. This report showed that the average amount stashed away from India annually during 2002-06 was $27.3 billion which, during the five-year period, amounted to a whopping $136.5 billion. Even if one comes to understand that besides Swiss banks, the money has gone to different tax and secret ‘havens’, the share of Swiss banks in dirty money being a third of the global aggregate, some $45 billion out of the $136.5 billion stashed away from India would have been hoarded in these years in Swiss banks.

Fight poverty

Former law minister and BJP Rajya Sabha member Ram Jethmalani asked the government to trace the black money stashed abroad and use it to fight poverty. Many believe that even with partial convertibility on capital account, astonishingly huge amounts are considered likely to be available in the hidden external accounts of India’s black money operators. Such an exercise would tumble out stocks of wealth large enough to banish poverty, if only the stashed away funds could be distributed among the poor in India.

Those who are afraid of a high-handed Jan Lokpal and the power that it seeks to draw upon itself, it bears recall that monitoring agencies/committees/offices seem to lack either the teeth or the will to address the issues of corruption and black money that are inextricably intertwined which accounts for the stridency in demand for a stronger Jan Lokpal Bill. India does not have a specific law to deal with corruption in the private sector, although there are elaborate safeguards in the form of the Prevention of Corruption Act, 1988, to check corruption in government. The issue of corruption and black money could well be the undoing of the UPA government if it continues to drag its feet on it.

It is quite late in the day that India started negotiating double taxation avoidance agreements (DTAA) with several countries with plans to sign tax information exchange agreements (TIEA) with tax havens. A Swiss parliamentary panel had given a go-ahead to a revised tax treaty with India, as per which, India can get information on secret bank accounts from Swiss authorities for cases dating from 2011. But the decision to end banking secrecy only from a prospective date and reluctance to exchange past banking information might shield the offenders.

Having ratified the United Nations Convention against Corruption (UNCAC) – the first legally binding international anti-corruption instrument – India stands committed to implementing a wide and detailed range of anti-corruption measures in her laws, institutions and practices.