Dark days on India's cash trail
WITH the value of the rupee plummeting, India is trying to bring more of them home, with the government outlining a plan to tackle the country's rampant "black money" problem.
WITH the value of the rupee plummeting, India is trying to bring more of them home, with the government outlining a plan to tackle the country's rampant "black money" problem.An ill-defined but massive amount of Indian money and "illicit external assets" believed to run into tens of billions of US dollars is stashed in foreign accounts, the government believes, most of it routed through Singapore and Mauritius to secret European accounts.The government's colourfully titled White Paper on Black Money alleges some of the hidden money is ill-gotten, through drug-trafficking, corruption or other crime. But for the most part, it is legitimately earned and spirited overseas to avoid tax.The amount of hidden money is difficult to determine, and the estimates jump around significantly.The 97-page report by the Ministry of Finance cites a Swiss National Bank statement at the end of 2010 saying that Indians held about $US1.65 billion in Swiss accounts alone. Other reports suggest Indians hold more money there than any other nationality.An IMF study estimated the flight of capital at about $US88 billion between 1971 and 1997.The government concedes it has little idea of how much black money has disappeared and where it has gone.The paper proposes the establishment of Lokpal ombudsmen at national and state level, to investigate corruption and money laundering. India has been wrestling with that idea for more than a year to little progress.The report also favours tax incentives for the use of debit and credit cards for small day-to-day transactions to curb the underground economy.India's Finance Minister, and potentially the next president of the world's largest democracy, Pranab Mukherjee, said the massive black economy was crippling development. He said the poor were hurt most by corruption.Others said India's budgetary woes could be solved if only some of its hidden money could be retrieved.According to estimates, the total of rupees stashed abroad is roughly equivalent to $US797 billion, which is about 50 per cent of India's GDP, and nine times the size of the fiscal deficit, said Dr Rajiv Kumar, secretary-general of the Federation of Indian Chambers of Commerce and Industry."Even if 10 per cent of such black money is brought back to the system, India can generate a fiscal surplus."India's focus on getting back its lost rupees comes as the currency is worth less and less, almost every day.Yesterday, the currency fell to its lowest-ever level of 56.38 rupees to the US dollar, having lost nearly a quarter of its value 24.8 per cent since this time last year.Indian stocks have sunk with it. Investor confidence in the Indian growth story has disappeared as the world turns risk averse on the back of the eurozone crisis.On Wednesday, the Sensex closed below 16,000 points, the lowest figure since January, and follows a 2011-12 financial year loss of 10.5 per cent.The weakening rupee is damaging a broad swath of the economy, and many young Indians have abandoned plans to study overseas because it has become to expensive. But most dramatic so far has been the impact on domestic fuel.Already in Delhi, queues, some several kilometres in length, have been forming at petrol stations. The government announced on Wednesday a price increase of 7.54 rupees, thelargest jump in a decade. Cooking gas and diesel prices are also expected to be raised soon.The government says the falling rupee, combined with high crude oil prices internationally, left it with no option but to raise prices, a decision that has brought opprobrium on an already-unpopular government.Drivers in Delhi now pay 73.18 rupees ($A1.32) a litre for petrol.
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