BY JOGINDER SINGH
The international watchdog Global Financial Integrity’s (GFI) report made public in December 2011 says that nearly ` 6 lakh crore was illegally siphoned out of India in the decade spanning 2000 to 2009. It has estimated the illicit flows by examining the data on two aspects of the economy.

The first category is calculated by comparing foreign funds generated by external borrowings and foreign direct investment with the uses to which these funds could be put to - bridging the country’s current account deficit or adding to it the foreign exchange reserves of the country.
The reasoning of Global Financial Integrity report on the black money is based on the simple premise that if the official data shows that the use of Foreign Direct Investment is less than the funds generated, there must be an illicit inflow. The GFI report calculates that over $6.8 billion (about ` 33,000 crore) was lost, in India, in this manner over the decade.
The second category of illicit flows is based on trade mispricing. If an importer declares a higher import value to the customs department than the value of goods recorded by the exporting partner country, it creates an illicit outflow. Similarly, if an exporter understates the value of goods actually exported in relation to the imports recorded in the importing partner country and keeps the balance of funds abroad, that too is an illicit outflow. It has examined the international trade data, which reveals such mispricing by comparing data from partner trading countries.
Illicit flows in India
It is this type of jugglery that accounts for the bulk of illicit flows in India - worth over $121.65 billion (` 5.8 lakh crore) or almost 95 per cent of the total, in India by Indians.  It is a peculiar kind of circular flow of funds called ‘round-tripping.’ In this trick of high finance, money illegally flows out and then illegally flows in, to be invested in the underground or black economy. This not only causes huge tax losses to the public exchequer but bolsters the illegal domestic economy. Apart from this, corruption, kickbacks, theft and bribery are another conduit for the unrecorded transfer of capital. In short, black money is generated only dishonestly or illegally.
According to a Swiss Banking Association Report (2006) “India has more black money than the rest of the world combined.” India has stashed almost $1.456 billion in black money in Swiss banks. This report was denied later on.
In fact, more black money is being generated almost on daily basis. No property deal or any major transaction is completed without a major component of black money. An ordinary person cannot buy any property or even register it without bribery or paying a minimum of 50 per cent as black money.
A colleague of mine, who retired as an ambassador, told me that he had to convert his white money into black to buy a house. My own estimate is and it is only a guess on the lower side that at least ` 10,000 crore of black money is being generated every day.
Corrupt bureaucracy
The black money is generated not only through tax evasion, which is very common, but also by massive corruption in the bureaucracy. I say it with a full sense of responsibility despite the Prime Minister giving a certificate of integrity and honesty to the bureaucracy in his speech on Lokpal on Dec 27, 2011.
The amount of total assets (a miniscule number) seized by the Income Tax Department during the Search and Seizure operations conducted in the last few years is as follows. In the year 2007-08, the total seizure was ` 427.82 crore while in the year 2008-09, the total seizure was ` 550.23 crore. In the year 2009-10, the total seizure was ` 786.27. However, there is no official estimate of the extent of unaccounted income/wealth or black money in the country as on date, or what is stashed abroad.
If we are to end the black money menace, it should be made a cognisable offence with a minimum punishment of life sentence and in very big cases, death sentence, apart from confiscating the entire illegal amount apart from three times the penalty of the items seized. In the case of government employees, apart from other action, there should be a summarily dismissal from service.
This black money menace cannot be ended at one go. But it can be controlled, but not with the kind of soft pedalling of the laws we have in the country. The leader of the Opposition in the Parliament is on record that “a few months ago the Swiss Ambassador to India said if the Indian government shows the political will, the Swiss government was willing to cooperate.” He added that in majority of cases, black money is the product of crime and corruption.
Agreements with Swiss banks
Countries like the USA, Germany, France and UK have entered into agreements and treaties with Switzerland which helped them extract information. The US got information of 4,000 account holders from the UBS Bank. It is worth reiterating that the US has been able to pressurise Swiss Bank UBS not only to agree to provide information about American citizens illegally hoarding money in it but also pay a fine of US$780 million, being loss to the US exchequer. Other countries have also managed to get substantial information.
The nature of the agreement which India has entered into is so worded that the government takes shelter under it to refuse to extract information. The extent of corruption and generation of black money can be gauged from the fact that in Dec 2011 itself, the UP chief minister dismissed ten ministers from the cabinet on charges of corruption, including misuse of their position. It must be so, all over the country; the only difference being that the UP chief minister has shown political will to act against the graft.
With abysmal poverty, our democracy cannot flourish half rich and half poor any more than it can flourish half free and half slave. However, a lot of responsibility falls on all of us as citizens, to keep the government on the right track. Everybody wants to eat at the government’s table but nobody wants to do the dishes. Dishes here means cleaning the ills. Gandhiji had rightly said, “Be the change you want.” We should perform our duty. No problem including that of black money and corruption is insurmountable. The law for seizure of ill-gotten gains is a must, and this must be the first step. The approach of treating economic crime as no more than a traffic violation must stop.