Vote for BJP if you have to, not because they will bring back Rs 25 lakh crore from Swiss banks
Even those well-disposed towards BJP leader LK Advani find him a bit of an enigma. If the Ram Mandir was what he always wanted, why did he say the day the Babri Masjid was demolished was the saddest in his life? If Jinnah was rabidly anti-Hindu and caused the Partition, why did Advani find it necessary to use a quote that gave the impression, even if incorrectly, that he was saying Jinnah was secular? Advani is too smart a politician to have said something like that without applying thought to it. So it is hardly surprising that Advani’s promise to bring back Rs 25,00,000 crore of Indian black money held in tax havens abroad should have evoked healthy doses of scepticism.
Former chief economic consultant in the finance ministry Ashok Desai spoke of ‘Advani’s faux pas’ and Congress MP Jairam Ramesh said Advani was distorting the studies he was quoting. In an article in this newspaper, Jairam said the Global Financial Integrity (GFI) report Advani was citing had a range of $4.7-22.7 bn as the yearly hoard of black money generated through over-invoicing/under-invoicing of imports/exports in 2002-06, but the BJP leader chose to cite only the top-end of the range. This got Clark Gascoigne of the GFI to write back to say Jairam had misquoted the report, and the actual range cited by the report was a range of $22.7-$27.3 bn — in other words, Advani hadn’t misquoted the report. Both, it turns out, are right. While the GFI methods give you the figures Advani/Gascoigne are talking of, the report also has a table citing a World Bank method which has the $4.7 bn figure! (Since the $27.3 bn figure gives you around Rs 680,000 crore salted away in just five years, Advani’s Rs 25,00,000 crore figure doesn’t seem out of this world. One of Advani’s election planks then is that he’ll bring this money back and spend it on development, lower taxes etc — it has clearly rattled the Congress since, in response to a public interest litigation in the Supreme Court, it has even said it will reveal its plan to get India’s black money back.)
Jairam also points to other flaws in the report itself. Apart from citing methodological issues, he says the GFI report only takes into account the outflows from mis-pricing exports/imports, but does not take into account the capital flows that come into the country — in other words, if Indian businessmen are bringing back their money from tax havens to invest in India, surely this needs to be netted out? This sounds evocative, but why would Indian businessmen first take out the money through mis-pricing of exports/imports and then bring it back? Desai has a lot more criticism of the GFI methodology (http://www.telegraphindia. com/1090421/jsp/opinion/story_10848448. jsp) — Dev Kar, GFI’s lead economist, in turn, rubbishes this and, for those who’re interested, I’d be happy to forward his correspondence.
But let’s assume GFI, and therefore Advani, are correct in their assessment. What then? How plausible is it to get this money back as Advani has promised he will. For the record, when the BJP was in power, the issue of tackling another tax haven, Mauritius, did come up since this is where foreign institutional investors bring their money in from to avoid paying taxes, but the BJP didn’t do anything meaningful about it. But more important, have Swiss banks really capitulated to pressure from countries like the US (much is made of UBS agreeing to pay a fine of $800 mn to the US and to share details of 300 tax evaders), and are they therefore likely to give India as many details? To use the famous slogan from the Babri Masjid days, is it just a case of ek dhakka aur de (just one more push)?
Even the BJP’s Task Force on this (http://gurumurthy.net/) says it is going to be an uphill task. Two quotes from the report are worth citing. “The west knows the details of whose account to ask for from Swiss and other tax havens. India needs an easier model of breaking the secret walls of the mystic banks”. “Unless the Swiss and other tax havens agree to change the laws, (there is) no way any government in India or elsewhere can attempt to bring back their wealth stashed away.” Raymond Baker, who heads GFI, adds another note of caution in an article in the Financial Times when he points out that even after all the G-20 getting various tax havens to exchange information, “the onus remains on the requesting nation to prove that the information sought is ‘foreseeably relevant’ to suspected crime or tax evasion …Under the OECD standard, all elements of the global shadow financial system can remain in place.”
In other words, the BJP needs to be able to prove the money kept abroad has been got through fraud. And even if you assume the names are made public by the Swiss and others, so what? Election affidavits of top politicians show their assets are way out of line with their known incomes — what has the BJP done about this? Indeed, the party did not even protest when, over the past few years, the UPA gave away tens of billions of dollars to favoured industrialists through airport contracts, telecom licences (the last one alone cost more than $10bn) and a host of other frauds.
Vote for the BJP if you have to, but not because they’re going to bring back Rs 25,00,000 crore and use this to develop roads or provide piped water to India’s villages. That’s a pipe dream.
In spite of the RBI's rate cut and the Centre's reforms, any recovery will only be half-hearted