Thursday, November 18, 2010

$462,00,00,00,000...that is $462 bn..! Mother of all black money figures...


India Drained Of 20 Lakh cr During 1948-2001: Study
Binoy Prabhakar NEW DELHI
IN A season of swindles, kickbacks and scams, here is some more on the mother of them all. Black money — the popular moniker given to the billions seeded by dirty deals and whisked away abroad from the taxman’s prying eyes — has received much attention in recent years.
The opposition never tires of screaming foul at the government. The government, for its part, is at pains to say it is doing all it can to track down the illegal stash.
Despite the cacophony, an estimate of the scads of black money in secret bank vaults overseas has long been one big unknown, resulting in a great deal of speculation and glib talk around the subject. Finally, some help is at hand.
A new study by an international watchdog on the illicit flight of money from the country, perhaps the first ever attempt at shedding light on a subject steeped in secrecy, concludes that India has been drained of $462 billion ( 20,556,848,000,000 or over 20 lakh crore) between 1948 and 2008. The amount is nearly 40% of India’s gross domestic product, and nearly 12 times the size of the estimated loss to the government because of the 2G spectrum scam. The study has been authored by Dev Kar, a lead economist with the US-based Global Financial Integrity, a non-profit research body that has long crusaded against illegal capital flight.
Mr Kar, a former senior economist with the International Monetary Fund, says illicit financial flows out of India have grown at 11.5% a year, debunking a popular notion that economic reforms that began nearly two decades ago had tempered the creation and stashing away of black money overseas.
Outflows accelerated after reforms
IF CAPITAL outflows were a child of the independence era, the problem came of age in the years after the reforms kicked in. Nearly 50% of the total illegal outflows occurred since 1991. Around a third of the money exited the country between 2000 and 2008.
“It shows that reforms seem to have accelerated the transfer of black money abroad,” says Mr Kar, whose study titled ‘The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008’ sifts through piles of data on the issue over a period of 61 years. The study, which Mr Kar says is the most comprehensive one yet on illicit financial flows from India, will be made public on Thursday.
His report comes amid a renewed government push in recent months to pursue black money stashed abroad. In late August, the government signed an agreement with Switzerland — its banks top a list of usual suspects — that will enable exchange of information on tax evaders. New Delhi is also in talks with at least 20 tax havens, particularly Mauritius, to extract similar information.
The government is also attempting to gain a measure of the total unaccounted money circulating in the economy. The finance ministry last week approached the National Institute of Public Finance and Policy to get a fix on such money.
But M Govinda Rao, director of the institute, says his think-tank is yet to decide on going ahead with the exercise because it is not an easy task. “A study on this subject is a huge challenge because one is dealing with a very big problem that covers hordes of money from many sectors,” he says.
Black money turned into an election issue during the 2009 general elections, with the BJP harping on the issue throughout its campaign. Its leader LK Advani has been the most vocal critic of the government on this issue, time and again questioning the government’s resolve to chase illegal funds. Mr Advani recently urged the government to publish a white paper on the issue.
While Mr Advani was unavailable for comment, the government’s detractors on this issue say there is more talk than action to address this issue.
“Everybody knows about the gravity of the problem, but the government has not shown the political will to bring the money back to India,” says Prakash Karat, general secretary of the Communist Party of India (Marxist).
The government has, however, received praise from Paris-based Organisation for Economic Cooperation and Development, which has been at the forefront of the fight against tax evasion. OECD, whose relentless offensive is largely credited with lifting the veil of secrecy over umpteen tax havens, hailed India’s efforts to crack down on tax evasion and sign information exchange agreements earlier this year.
These are but short-lived answers, say experts, adding that an overhaul in the global financial system is central to a lasting solution. New tax havens will spring forth when pressure mounts on existing ones.
That is not to say there are only a few tax havens out there. Indeed, at least 91 such hotspots flourish across the globe. Asian countries, particularly Thailand, Singapore, Hong Kong and Macau, too are emerging as new destinations for parking illicit funds.
Besides Switzerland and Mauritius, Indian money is also said to end up in Seychelles and Macau. Due to the illicit nature of these deposits, pinpointing the journey’s end of the bulk of India’s black money is tenuous at best.
The GFI study gives a measure of the amount of money that the government is chasing, but it is only a fraction of the $1.4 trillion that the BJP claims is the illegal stash.
GFI acknowledges as much, saying its figure is conservative and hasn’t taken into account smuggling and certain types of trade mischief. It also admits to gaps in available statistics, lamenting the lack of data on the consolidated fiscal balance with the government, which has hampered research. If these indicators were counted, India’s total illicit outflows would well be half a trillion dollars.
But Mr Kar says the $1.4 trillion figure was an “estimate”, while the numbers in the latest report are based on real data.
Still, GFI says that by no stretch of imagination is its calculation insignificant, more so when viewed against the country’s existing external debt at nearly $230 billion.
“It means India could not only have contracted less debt or even paid it off, but another half would also have been left over for poverty alleviation and economic development,” says Mr Kar. “There is no question that this huge loss of capital has set India back in its struggle to eradicate poverty and illiteracy.”
The study has based its findings on the World Bank Residual Model that tracks illicit outflows by measuring the disparity in a country’s recorded source and use of funds. It also delves into IMF’s ‘trade-mispricing’ model that compares a country’s recorded imports to what the world says it exported to the country as well as the recorded exports against its global imports. The gaps tell the story.
The perpetrators of illicit outflows, says the study, are wealthy individuals and private companies. Black money is also abetted by the existence of an ’underground’ economy that emerged out of illegal activities and assets spawned by such activities.
The unabated growth of slush funds is borne out of a growing affinity of culprits for offshore financial centres, or tax havens, at the expense of banks in developed countries such as the US, France and the United Kingdom. The study finds that the share of deposits in offshore tax havens grew to 54.2% in 2009 from 36.4% in 1995.
The study is as much an indictment of feckless government action as it is about shedding a light on the nature of illicit financial flows. “The sharp rise in illicit flows means that tax evasion (which is part and parcel of such flows) is also increasing sharply,” says Mr Kar.
“In the absence of good governance and poor institutional oversight, the desire for the hidden accumulation of wealth drives more of such transfers,” he adds.
Though India cannot end its black money problem alone, there are challenges it must address by itself, says the study. Legal institutions and procedures need to be strengthened and streamlined. The guilty should be punished --the architects of the Commonwealth Games scam, for example -- swiftly. And tax policies must be rationalised.
“Sure, black money is there in most countries but if it worsens poverty, robs human rights and drives centrifugal forces such as naxals, it becomes a problem that can no longer be ignored,” says Mr Kar.

And this is another Clip:A Raja still allotting Spectrum overruling Ministry Decision! What an aduacity!And Congress is unable to deal with anything!.........making money doing nothing at its BEST........Madhu Koda( 900 cr CASH in Bank), Sharad Power ( Sugarcane scam)and now A Raja....


Raja’s kingdom of spectrum ran till his last days
Ex-Minister Tried To Allot Airwaves To 3 Telcos, Overruling Ministry Decision ( Uski himmant dekho, see his courage.....he is not at all bothered of anything......)
Joji Thomas Philip & Rohini Singh NEW DELHI
IN THE midst of the 2G spectrum controversy, and just days before his resignation, the telecom ministry (DoT) under A Raja was pushing for the allocation of airwaves to three companies — Tata Teleservices, Uninor and Videocon—in Delhi, overruling its own decision of not issuing fresh 2G spectrum until a new allocation methodology was finalised.
The move to allot spectrum to these companies also contradicted sector regulator Trai’s recommendation that airwaves be given first to existing operators in a circle, and companies that don’t have operations in a city should be the last in the queue for getting spectrum. Trai’s recommendations were endorsed by DoT’s legal wing as late as last month.
But documents accessed by ET show that on November 10, the telecom department was pushing for awarding airwaves to Tata Teleservices, Uninor and Videocon. “Since defence has released 8 MHz of spectrum recently ..., we may allot initial 4.4 MHz to Tata Teleservices in Delhi… Since total available spectrum is 11.6 MHz in this service area, including already available spectrum of 3.6 MHz, we may consider allotment of 4.4 MHz to Datacom (Videocon) and balance 2.8 MHz to Uninor, subject to acceptance of the same by Uninor,” the telecom department’s assistant wireless advisor said in an internal note endorsed by top ministry officials on November 10.
Uninor and Videocon were among the new companies that were controversially granted mobile permits by Mr Raja in 2008. Tata Teleservices is awaiting GSM airwaves in Delhi and many other circles. The telecom department had so far been unable to award start-up GSM airwaves in Delhi, the most lucrative circle in the country, to these three companies as it had exhausted all spectrum in the National Capital Region. Following the recent vacation of airwaves by the armed forces, the government now has about 11.6 MHz to allot in Delhi, but existing operators such as Reliance Communications, Bharti, Vodafone Essar and Idea have first preference over this resource, as per Trai recommendations. The government is yet to take a call on Trai’s recommendations, as the empowered group of ministers headed by finance minister Pranab Mukherjee has not met on this issue. In June, the Prime Minister’s Office had asked the telecom ministry to refer all issues related to Trai’s proposals, including the methodology for addition of 2G airwaves, to the EGoM.
DoT’s earlier attempt failed
THIS is not the first time the telecom department has tried to allot spectrum to new entrants, despite the freeze on spectrum allocation. In September, DoT had sought to place new entrants such as Tata DoCoMo and Uninor, which are yet to receive start-up airwaves in many circles, first in queue for airwaves, but the move failed since the department’s own legal advisor refused to endorse it.
Mr Raja, who was at the centre of the 2G spectrum allocation scam, resigned on Sunday night. On Tuesday, India’s chief auditor, in its report tabled in Parliament, said Mr Raja flouted almost every rule in the book, ignored advice from the prime minister down and indulged in blatant favouritism while awarding mobile licences to mostly undeserving companies, causing a loss of nearly 1,77,000 crore to the government.

My Comments:
Now what is the meaning of this?$462 bn! That is HUGE Amt and I just read in ET that A Raja still went on as seen in today ET which I have pasted here........
These money are need to go to the POOR people of India.These are their money.These money needs to be used for electricity and water and canals in distant villages where there is no electricy and no water for miles togather.Woman has to go to 4-5 miles OR EVEN MORE to fill a pot of water on head and come back to home and then cook something.
These are the money that are to be used for poor people residing in rural part and very interior part of India where the India growth story has not reached.In the remote area people are starving without FOOD and dying and these politicians are having field day.
CBI needs to check all a/c of their friends , relatives of all politicians.The questions still arises how much INDIA  can depend on CBI as well?
What is the meaning of helps and grants we get from the Philanthropic Institution like Bill Gates?Bill Gates need to tell INDIA  that untill INDIA  don't bring down corruption there can be no HELP FOR POOR IN INDIA.


  1. Mr Rajeev,

    This time you not guess the market , i think this time Shankar sharma is correct in saying that market has no fundamental to reach high level. We already know Indians had their a/c in swiss bank , their is lot of black money in their a/c ... yet this thing is coming time after time and suddenly market crash. A raja scandal is not new it is already two year old but yet market has not factored this. The fact is that market is controlled by some 100 people (as it is published in some paper 2 to 3 month ago)they take market on ride .. sometime they show everything is right and some time everything is wrong. The fact is that their should not be so much volatility that traders should enjoy that . Another fact is that if we think that these corruption is gona stop then it is never. It is admitted .it is never. If a retail investor think it as asset class ... it is never(because it deserve that). If these companies really care for poor .... never (for their profit stake they never care for poor ).

  2. hi shaifali

    I pity at your poverty of ideas...If Shankar Sharma becomes right every time market comes down...then he will be correct 1000 times. H e said market will go below 14000 ?did it ever go.. when market touched 8000 he predicted it will go down below 5000 ? did it ever go..

    There are a lot of dominant players in the market.. that doesnt mean market is controlled by few 100 people..

    Has corruption ended in USA ,, there are still Madoffs who take people for ride . I agree its more rampant in India and there is very poor accountabilty.. but I believe with media under their will be partially controlled ,,, it will never go away..

    Stock markets will come back roaring.. I bet and time has taught us this is and will always be the best asset class barring some very big calaimity.


  3. Dear Shaifali,
    Timing the markets every upmove or downmove is not necessary to make money. Big money is made by buying cheap and holding for long as Rajeev sir always points out.
    And for shankar sharma, we all know what a fool he has made of himself for the last one and a half years.

    Markets are showing nervousness which has been created by a few people with vested interest. Watch where it goes after a year

  4. Corruption has gone into the blood of Indians. We accept it happily if we can get our work done by bribing someone.. whether we wish to get done something lawful or illegal, it doesn't matter. But I am pretty much hopeful that the younger generations will realise the mistakes being made by their predecessors and will herald India into a new era, where Indians will enjoy all the goodies of Nordic societies.

  5. ravi/Mitz,
    It looks like Shaifali's mind is not going back more then couple of months as she is not able to see how many times Shankar Sharma proved wrong.
    And I still write here that we will see new high before the end of this year and that is Dec 2010.
    If one keeps saying correction correction everytime , once you are going to get correct.
    There was no correction in market since 3-4 months and people were asking for correction so that they can buy low, but when that has come no one buying and actually scared of market...
    and that is market/operators game.They will scar you to death and you will not buy anything instead u will sell seeing further downside and market will come back again.
    I feel from next Monday market should start going up.....

  6. Hi Rajeev

    Today FIIs and Domestic institutions were net buyers and still market fell. What can be the reason for this and secondly among your Diwali Picks I feel Srei Infra has the potential to be a a good multibagger over next few (4-5)Years. Sandip Sabharwal an eminent fund manager has also predicted sensex to touch 100000 by 2020. I believe in policy of "BUY RIGHT AND SIT TIGHT"

    Please Reply to my Queries



  7. Hi Rajeev and all other blog viewers,

    Go thru this link

    the media has a total black out on this one, this is breaking news.



  8. Manish,
    That is sensational.Praful Patel having stake in Indigo for rs 15,000 cr! That is $3 bn and for $1bn, 1/3, Rakesh has to be in the market for 25 yrs. and Praful Patel made 3 times more in just 3-4 yrs?
    I now think that $462 bn figure is also wrong , it should be around $1.5 gtrillion......Kudos to our politicians.....and we don't mind it, the people of India, so Kudos to them as well.....

  9. Manish,
    That is sensational.Praful Patel having stake in Indigo for rs 15,000 cr! That is $3 bn and for $1bn, 1/3, Rakesh has to be in the market for 25 yrs. and Praful Patel made 3 times more in just 3-4 yrs?
    I now think that $462 bn figure is also wrong , it should be around $1.5 trillion......Kudos to our politicians.....and we don't mind it, the people of India, so Kudos to them as well.....

  10. Astonishing figures. I think India can breed two US if all the BLACK MONEY from international bank accounts are released.
    List of tax haven countries

  11. Hi Rajeev,

    What a great article and very nice articulation from you. The corruption is the core of all the problems in India. I will shine only once each one of us understand his/her responsibility towards the country.

    What's your take on the microfinance sector now. The government is taking hold over the whole sector. Arman being the player in MF sector. What is your view on the same.

    I wanna thank you for all the hard work you are doing.

    Thanks a lot!!!


  12. Mr Rajeev,

    We are not intelligent as you are , I do see things very simply. As when I see USA , yes their govt had spent heavily on their infrastructure to make their citizen life easier. When I see programs on discovery channel like ...Ho do they made it ... I wonder is india is able to do that .... !. Scope is there but with no will . I just give you one example with my small knowledge.. earlier when metro platforms are build in delhi they are very spacious but now they are building very congested platform ... I dont know why they are doing this but now it is not comfortable to me. Long term thinking is not their even at this level. So when base is not strong it can go down anytime like building collapse in delhi . This is the truth of all delhi almost 70% building are made like this. Whenever they spent their congested mentality stop that.

  13. shaifali,
    I am not intelligent otherwise I would have not been here and would have been somewhere else with high salary.
    The point I wanted to emphasize to you was,just a good correction of 1000-1500 points and we become scared and feel Shankar Sharma is right but he is not.
    I wrote in one reply that on Monday we will see market going up and that has happened.That is experiance and not intelligence.
    Even with all the constrainst like you wrote about making the platform smaller then the previous one, India will still grow and the buliding will keep in falling even then.
    I see this growth coming good for atleast 3-4 yrs from here and so market is posied to go up with corrections coming inbetween and as sensex will move higher the correction will be bigger as with sensex going higher the percentage of correction will remain same but due to higher base , the points will be more.Like say, 7 to 10% correction at sensex 14000 would be 1000 to 1400 points but at sensex 20k, same percentage will have a correction of 1400 to 2000 points......