People of India did not forget PM Narendra Modi's poll promise of bringing back black money, neither did the Indian premier himself. His promise keeps propping up in almost all of his speeches, but where are the results? Everything has a reason and this one too is not an exception.
Evidently, there is no lack of efforts, given the measures that the government has taken to identify stashed money and prohibit any further illegal transactions abroad. According to a 2016 report by the Catchnews, illicit money from India averages Rs 3.3 lakh crore per year between the year 2004-2013. This was found based on an annual exercise done by the international NGO Global Financial Integrity (GFI). The same exercise further estimated that Rs 80 lakh crore is already stashed away abroad.
What has the Modi government done?
The steps that have been designed and executed are foolproof. Needless to say, after an order by the Supreme Court, the government submitted a list of 627 bank accounts held by Indians in HSBC Holdings in Switzerland. Furthermore, the list that was handed over by France in 2011 was handed over in a sealed envelope along with a report on the status of the investigations against the people mentioned in the list. To be specific, these are the steps that the government took:
However, the greatest of all achievements of the government is the voluntary disclosure stated to be of about Rs 3,770 crore, made by overseas account holders in the compliance window of 2015. Incidentally, this represents the largest single amount of black money "coming back" after a long time. However, it is less than 1% of the likely illicit financial outflow for that year. It is also a very insignificant amount to what is estimated to be stashed away in foreign lands.
Interestingly, a new theory has come up, which states that the money is now being stashed away in Asia and not in Sweden. According to a report by the Times of India, Indian crorepatis are now flocking to Asian havens to park their wealth.
The reality check
According to the data released by the Basel-based Bank of International Settlements on bilateral foreign holdings, it is said that offshore wealth held by Indians in tax havens has surged from 90% since 2007 to $62.9 billion (about Rs 4 lakh crore) in 2015. This is about 3.1% of India's GDP in 2015, which is the latest year for which data is available.
Latest reports suggest that Black Money is now stashed in Asian locations like Hong Kong, Singapore, Macau, Bahrain and Malaysia. Swiss banks hold 31% of Indian wealth, down from around 58% in 2007. Evidently, the struggle against hoarding is not making much headway. Economist Gabriel Zucman of UCLA and his colleagues Annette Alstadsæter of the Norwegian University of Life Sciences and Niels Johannesen of the University of Copenhagen, while preparing a research paper, found "total offshore wealth in the world was $8.6 trillion, which is about 11.6% of world GDP. It is up 54% since 2007. Non-financial assets like art or real estate are not included in these figures".
Reason behind shifting to other pastures
As Switzerland has become the main target for the investigating officials, and the Panama Leaks have strengthened their suspicion of other havens as well, the black money outflow has shifted to other Asian pastures. There is wide disparity among the countries in terms of what share of their GDPs is secreted away in offshore tax havens.
Zucman explains, "Among countries with a large stock of offshore assets, one finds autocracies (Saudi Arabia and Russia), countries with a recent history of autocratic rule (Argentina and Greece), alongside old democracies (UK and France).Among those with the lowest stock of offshore assets, one finds relatively low-tax countries (Korea and Japan) alongside the world's highest tax countries (Denmark, Norway)."