Vote for BJP if you have to, not because they will bring back Rs 25 lakh crore from Swiss banks
Sunil Jain / New Delhi Apr 27, 2009, 00:46 IST
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.
Mr. Jain:
I got confused because of the following:
"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."
Which both are you referring to?
Posted by: Sunil.Jain
May 02 , 2009, 14:08 IST
Ok, let me resolve the confusion. Jairam said Advani never cited the $4.7 bn figure in the GFI range. Clark wrote to say the GFI range was $22.7-27.3 bn and that Jairam had got it wrong. So, in my article, I said Clark's numbers were right. I also said the reason why Jairam thought GFI had given a $4.7bn figure was that the figure was cited in the GFI report ? but, I said, it wasn't cited as a GFI estimate, it was cited as a World Bank figure. And to ensure we don't go on making the same points ? I do not doubt the GFI estimates, I don't know enough about how to make such estimates. I've asked readers to read Ashok Desai's comments on them; I've said you've written to me to say the comments are unjustified; I've offered to forward your comments to readers who want them; I've done that to a few already.My column was about the BJP's ability to get the money back, assuming that the GFI numbers are correct. Hope that clears things?
Mr. Jain:
I am the author of the report on illicit flows. If you have technical questions, please get in touch with me in order to avoid confusing the public further. Please note the following:
1. Mr. Ramesh quotes the range in error. I have explained this in other newspapers. The $4.6 billion (not $4.7 billion) which Mr. Ramesh quotes is only one part of upper end of the range ($27.3 billion). One cannot take only one component of illicit outflows and call that a lower end of the range. That would be totally incorrect.
2. It makes no sense to net out illicit outflows against official capital inflows. No economist would ever recommend doing this and I have not seen anyone doing it. That would be like trying to take out apples from oranges.
Dr. Dev Kar
Lead Economist
Global Financial Integrity
Washington DC 20036
Posted by: Sunil.Jain
April 30 , 2009, 17:19 IST
My column does not say the $4.7 bn figure is correct. It says there is a World Bank estimate cited in the report which is $4.7bn ? it makes it clear this is different from the GFI estimates which are $22.7-27.3 bn. I categorically say Jairam's issue of netting inflows makes little sense since it's unlikely people will first take the money out and then bring it back. My argument, in fact, is not about the numbers. I say that Mr Advani will find it very difficult to get the money back and I quote Raymond Baker's FT piece as well as the BJP's own report to buttress my point. To be honest, I can't figure out what your objection is.
Firstly, why is Sunil Jain writing on this subject, this is not his forte.
Anyways, Mr. Jain, Mr Jairam Ramesh display that standard Indian skepticism and a lack of sociology as well as international politics.
Today, India is more important to world than Switzerland. Exposing names of wrong doers will put sufficient pressure on the govt to act.
As soon the corrupt know they can't hide their money safely, there will be a visible reduction in corruption.
Information age will make it easier to shame the criminals.
As pun to Mr Jains last line, you may vote for anyone, but come out your pipe, as there is no light at the end of pipe.
Dear Sunil,
Your comment sounds very political in nature. Are you affiliated with any political party? Are you implying that one should try out an approach if not already tried in the past. Are you saying that there is no point in reading the parties' manifestos - because if they haven't done something in the past means they will not be able to do it in the future. In the course of elections parties will try to dig up new courses of action - whats wrong in that.
Firstly, why is Sunil Jain writing on this subject, this is not his forte.
Anyways, Mr. Jain, Mr Jairam Ramesh display that standard Indian skepticism and a lack of sociology as well as international politics.
Today, India is more important to world than Switzerland. Exposing names of wrong doers will put sufficient pressure on the govt to act.
As soon the corrupt know they can't hide their money safely, there will be a visible reduction in corruption.
Information age will make it easier to shame the criminals.
As pun to Mr Jains last line, you may vote for anyone, but come out your pipe, as there is no light at the end of pipe.
Sir - at the outset my congratulations on such a well written and well researched piece. While we all know that there is goodd chunk of indian money outside India and the intent of Mr.Advani ( though certainly not his timing ) is laudable, why is it that Mr. Advani and all other political parties for that matter choose to stay silent on black money circualting in the Indian economy for that matter. Why is it that now task forces / efforts / strategies are being made around same ?? Would look forward to your views on this as well.
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