India s Black Money: How to curb it?

State:

Estimates of illicit Indian funds abroad vary. According to Indian Institute of ManagementBangalore Professor R Vaidyanathan, the amount could be as high as $1,500bn since India gained its independence in 1947, while Washington DC-based Global Financial Integrity pegs the figure at around $462bn.
On Thursday, former minister Subramanian Swamy one of the primary petitioners in the unfolding 2G scam and chartered accountant MR Venkatesh, revealed to Punekars the intricacies of the scam and the parallel economy. Swamy has challenged the questionable participatory notes policy of the government which has led to the inflow of $90 bn (Rs2.5 lakh crore) into the country s stock markets. He has drawn attention to the fictional exports of $50 bn that have taken place between April and September this year. Causes: What is being done?

In 2008, when the German government offered to provide the names of foreign citizens with money deposited in Lichtensteins LTG bank, countries like the Czech Republic, Spain, Italy and Finland accepted. When India declined to pursue the accounts of its citizens, Transparency International India alleged that this money belongs to the rich and powerful politicians, industrialists and stock brokers and that is [the reason for] the reluctance on the part of Government of India. Says economics prof Arun Kumar of Delhis Jawarharlal Nehru University and author of the book Black Economy in India.
What will be its effect?

Even if there was political will, he added, actions like the Indo-Swiss MoU and DTAA would do little to curb Indias black money problem because the vast majority of untaxed income remains in the country. Of the total amount of black incomes created in the country, only about 10 per cent goes outside of the country, he said. The manner in which the money goes out of the country is via shell companies and under-invoicing over-invoicing and various devices, so its not as if its going out in some Indians name usually. So if we approach the foreign governments for the names of those who hold accounts abroad, all of the money held in shell companies and under the names of non-Indian individuals that is, the majority wont be discovered.

What needs to be done?

References: http://blogs.ft.com/beyond-brics/2011/10/04/india-cracking-down-on-black-money/#axzz1drZN1ixt http://www.dnaindia.com/analysis/editorial_edit-wake-up-get-angry-about-black-money_1611361 Read and take points from the article on firstpost: http://www.firstpost.com/economy/india-needsto-curtail-accelerated-outflow-of-black-money-107399.html Also the article from Hindu: http://www.thehindu.com/opinion/editorial/article2201457.ece