A Swiss revelation

Now, bring black money debate into 21st century

The results of an international project to investigate a leaked list of Swiss account-holders were made public on Monday, doubling the number of known Indian names. The project, run by the International Consortium of Investigative Journalists (partnered in India by The Indian Express) had obtained a list, dating from 2006-07, of those with accounts in a Geneva branch of the private bank HSBC. Overall, 100,000 people had accounts there, from 203 countries, holding over $100 billion. These are not small numbers. According to the list, as revealed in the Indian Express report, there are almost 1,200 names of Indian origin, holding Rs 25,420 crore. That comes to just over Rs 21 crore per person. It is important to note several things. First, not all this money need be "black", or unaccounted for by the taxman. It is also not known what proportion of this Rs 25,420 crore was held illegally. Second, this sum dates to 2006-07; many of these account-holders may since have acknowledged to the appropriate tax authorities the existence of these accounts. (Certainly, some denials from supposed account-holders make the claim that they have currently no such accounts, while not directly addressing past actions.) It is, thus, not known what proportion of the unaccounted component of this Rs 25,240 crore has subsequently been brought into the sunlight.

In other words, as revelations go, the numbers on these accounts do not look as impressive as some would have expected. Naturally, it is not useful to assume that this is all the money that there is in Switzerland. But if it is a useful indicator of what can be expected, then it appears that Swiss accounts are not as much of a haven for illegal money as the popular imagination would have it. The idea, propagated during the last election campaign, that there is Rs 15 lakh per Indian citizen of black money stored abroad just waiting to be brought back is revealed as extremely unlikely. Going by the current estimate, the amount is closer to a few hundred rupees per citizen. While remaining alert for possible overseas stashes, India and its popular discourse should make the long-overdue shift to a more reasonable estimation of the size and location of black money.

The black money debate has long been politically salient in this country. More than one election campaign has made it an issue. However, the discussion is stuck in the 1970s, when Swiss bank accounts were the cutting edge of international finance. Unaccounted money now has many other ways of hiding. In fact, Swiss bank accounts are no more the preferred place for parking unaccounted money. If re-routed back into the Indian equity markets through Mauritius, or illegally invested in constantly appreciating Mumbai real estate, it earns a more than handsome returns. It is reassuring that the government has made a statement in the wake of Monday's revelations that it would examine all these details. But the real lesson of the HSBC leak should be that India must learn to plug 21st century leaks, such as the Mauritius route and cash payments in real estate. Swiss bank accounts belong to an earlier era.