Capital flight of black money can add $30-35 bn to forex reserves

India’s efforts to bring back unaccounted money stashed in tax havens could help in shoring up foreign exchange reserves by $30-35 billion, said a report of Bank of America Merrill Lynch, on Wednesday.

This would be three to four months of current import cover.

“In this report, we have worked with an estimate of $200 billion based on (Raghbendra) Jha’s estimate of capital flight. If even half of this is unearthed and taxed at 30-35 per cent, this could add three to four months of current import cover to foreign exchange reserves, over time, when the import cover is running low at 8.3 months,” said Indranil Sen Gupta and Abhishek Gupta of BofA-ML, in a note to clients.

According to the study, Raghbendra Jha and Duc Nguyen Truong, of Australian National University, estimated total capital flight of more than $186 billion during 1998-2012.

The note also points out that the Reserve Bank of India will need to buy $30-35 billion to maintain eight-month import cover by March 2016.

The Supreme Court had earlier ordered the government to pass on the information of Indians holding Swiss bank accounts.

On Wednesday, the government handed over a list of 627 names, in a sealed envelope, to the apex court.

The court asked a special investigation team, set up to probe the black money issue, to give its report by November 30.

The country's foreign exchange reserves stood at $13.682 billion as of week ended October 17, according to Reserve Bank of India's data, said a PTI report. According to one estimate, the report said, Indians’ deposits in Swiss bank accounts was in the range of $2 billion to $2 trillion.