Consider this pithy quote of Canadian-Indian writer Rohinton Mistry on the extent and magnitude of black money and one would better understand the menace: “Black money is so much a part of our white economy, a tumour in the centre of the brain — try to remove it and you kill the patient.”
This quote is significant when considering the parliamentary standing committee on finance’s report tabled in Lok Sabha on June 24, titled: Status of Unaccounted Income/Wealth Both Inside and Outside the Country - A Critical Analysis.
The surprising thing is that the parliamentary panel’s report doesn’t give exact estimates of black money — though committee chairman and Congress leader Veerappa Moily claimed in media interviews that quantifying black money wasn’t a difficult task and that the panel would have done so if it had more time. Moily’s comments aside, three points need to be made about this report.
One, the report pegs the unaccounted wealth outside India held by Indians at anywhere between $216.48 billion to $490 billion over various periods between 1980 and 2010.
Two, it relies on three separate studies conducted by as many premier institutes: the National Institute of Public Finance and Policy (NIPFP), the National Council of Applied Economic Research (NCAER) and the National Institute of Financial Management (NIFM). All three have come up with varying figures of black money in India ranging from 7-120 per cent of GDP. The three institutes were asked by the erstwhile Congress-led United Progressive Alliance (UPA) government in 2011 to give an estimate on the quantum of black money abroad and in India.
Three, the panel wants Parliament to simplify and rationalise direct tax laws to prevent generation of unaccounted wealth.
An unfortunate thing is that despite the fact that black money was one of the major poll planks of the Bharatiya Janata Party (BJP) in the 2014 general elections, five years later the broad contours and the exact quantum of black money still remains as nebulous as ever. So much so that the issue disappeared from the party’s 2019 poll campaign. One of the reasons for this could be the unfulfilled promise by the Modi government to recover black money from outside India and use that money for the benefit of every citizen (Modi during the 2014 election campaign said that there was so much black money stashed abroad that if it was recovered Rs 15 lakh could be deposited in every citizen’s account).
Forget the recovery, the nation doesn’t even have a proper definition of black money. It’s quite akin to the international community fighting the menace of terrorism for decades without having a universally acceptable definition for it.
Generally speaking, ‘black money’ is commonly understood as the money which is generated through illegitimate means or by bypassing taxation system. The problem with black money is that it’s a double-edged sword with its two edges being crime and terrorism.
The parliamentary panel’s report also puts a question mark over the Modi government’s move of demonetisation, which had four stated objectives: checking black money, terror financing (coupled with money laundering), promoting digital transaction and weeding out fake currency notes.
A 2010 World Bank Report on shadow economies estimated the quantum of black money at 31 per cent of GDP of 162 countries. India’s estimate pegged at 22.4 per cent of its GDP. A 2015 FICCI report estimated black money in India to be as high as 75 per cent of the GDP.
It’s a pity that despite a laser beam focus on the issue of black money since 2013 (months before the 2014 general elections) we are none the wiser about it. Even a greater pity is that many recently unveiled important initiatives – such as constituting a Special Investigation Team (SIT) under the chairmanship a former Supreme Court judge, enacting a new law (The Black Money and Imposition of Tax Act, 2015) to deal with black money stashed abroad, and introducing the Benami Transactions Amendment Bill 2015 — have failed to bottle the genie.Rajeev Sharma is a senior journalist and political analyst. Twitter: @Kishkindha. Views are personal.