Bangalore: India accumulating illegal wealth is way too common that even children find it as ‘no big deal’, yet it has a contrary effect on the state of the nation. The government commissioned a study last year on assessing black money produced in the country. It was estimated in the report that the illicit wealth is most probably over10 percent of the country’s Gross Domestic Product (GDP)or it could be somewhere above Rs 10 lakh crore, considering the size of India’s economy.
R Kavita Rao is the head of NIPFP's tax policy and research, who headed the study along with SS Khan, the former director general of income tax investigation. The report has reported black money in sectoral break-ups as in telecom, real estate sector and mining etc.
Further a similar study was last carried out by NIPFP in 1984 at the instance of the finance ministry. The black money generated back then in the country was estimated by NIPFP to be 19 percent to 21 percent of GDP or approximately Rs36,000 crore. This time it took an enormous effort by the Parliament and a civil society movement to initiate the project. In 2011 March three ‘think tanks’ were selected to estimate the quantum of black money, which includes NIPFP, National Council for Applied Economic Research (NCEAR) and National Institute of Financial Management (NIFM). Three reports were prepared, only the first report prepared by NIPFP has been submitted where as officials in the finance ministry rebuffed to release the status of other two reports.
In the earlier study carried out by NIPFP in 1976 and 1981 showed that the black money estimated in the country then was around 15 percent to 18 percent of GDP and 18 percent to 21 percent of GDP respectively.
As listed on a white paper about black money in the Parliament last year, one of the major areas for generating of black money was tax evasion through transfer pricing, as expressed by the then finance minister, Pranab Mukherjee. A private study report was quoted on the white paper stating, “developing countries may be losing over $160 billion of tax revenues a year, primarily through transfer pricing strategies,” as reported by TNN. The white paper also said, “The illicit money transferred outside India may come back to India through various methods such as hawala, mispricing, foreign direct investment (FDI) through beneficial tax jurisdictions, raising of capital by Indian companies through global depository receipts (GDRs) and investment in Indian stock markets through participatory notes.”
As formulated in May 2012, the white paper expressed that it is quite possible for a large amount of money which was transferred outside India could have returned by same means into the country.
In the last three reports in the past the black money estimated by NIPFP are 1975 to 1976 9,958 to 11,870 or 15 percent to 18 percent of GDP; in 1980 to 1981 9,958 to 11,870 or 18 percent to 21 percent and from 1983 to 1984 31,584 to 36,784 or 19 percent to 21 percent. Each time the generated black money has gone up than the previous estimates, indicating scams and corruption spreading at an exponential pace in the country.