By M H Ahssan
India's general election, which runs from April 16 through to the middle of May, is bringing out a streak of political self-righteousness that is exposing more than the hypocrisy that pervades a ruling elite whose position of power is dependent on the poverty-stricken masses.
The battle for votes is shedding light on wealth spirited out of the country and tucked away in Swiss banks and similar secretive hideaways. Businessmen, politicians and others living in India, the world's biggest democracy and home to one of the fastest-growing economies, have stashed away over the years a staggering US$1.3 trillion, according to a public interest petition filed this week before the Supreme Court. The petitioners sought judicial intervention to direct the government to seize the overseas loot.
Chief Justice K G Balakrishnan headed a Supreme Court bench that heard the petition on April 22, the first time such a lawsuit has reached the country's top court.
If this money is brought back, each Indian village could get $2.3 million for development, opposition politicians say. That might be rather optimistic - the petitioners' $1 trillion-plus figure represents dirty money accumulated over four decades. Even so, the Washington-based Global Financial Integrity Project says India suffers from the illegal outflows of $22 billion to $27 billion every year.
Global Financial Integrity (GFI) was launched in September 2006 "to promote national and multilateral policies, safeguards and agreements aimed at curtailing the cross-border flow of illegal money", according to the project's website.
India is not alone in suffering from such outflows. According to GFI, for every $1 poor nations receive in foreign aid, $10 in dirty money flows illicitly abroad. It says terrorist groups and drug cartels are the biggest beneficiaries of this dark economy. Efforts to counter the outflows are having little impact.
"Global corruption has not diminished despite 10 years of effort," a GFI report notes. [1] "Assets now stashed in tax havens around the globe are estimated at $11.5 trillion, and non-bank cash deposits outside the country of origin are rising."
Asia accounts for about 50% of illicit financial flows from developing economies, according to Professor R Vaidyanathan, a finance faculty member at the Indian Institute of Management, Bangalore, and a visiting Fulbright Scholar in Corporate Finance at the University of Illinois in the United States.
India's political classes are suspected to account for much of the black money, some of it tucked away to avoid tax, and so far a cynical general public appears unimpressed by the efforts of politicians to pose as concerned retrievers of this cash.
The petitioners pleading to the Supreme Court are led by former Indian law minister Ram Jethmalani. Already a controversial lawyer and still a politician, Jethmalani suffers credibility problems after having had as his clients India's biggest stock market scamsters, Harshad Mehta and Ketan Parekh.
Respondents to the petition include India's central government, the Reserve Bank of India, stock exchange regulator the Securities and Exchange Board of India, the Directorate of Enforcement - whose functions include enforcement of laws such as the Foreign Exchange Management Act 1999 and Prevention of Money Laundering Act 2002 - and the chairman of the Central Board of Direct Taxes.
While the sight of politicians falling over each other vowing to get back the loot if voted to power is possibly more mind-boggling than the unconfirmed, gigantic quantity of the muddy money they are chasing, of more immediate interest to the Indian electorate is who stashed away the funds in the first place.
Money and elections are as inseparable as pizza and cheese, but unlike in, for example, the US where electoral funding rules are detailed, the process for funding Indian elections is dangerously hazy and unspecified. While candidates are required to divulge their wealth and assets to India's Election Commission, how they first acquired this wealth is not necessarily made clear.
Rich individuals, the source of their wealth often swathed in mystery, appear all over the Indian political landscape. The second phase of general election voting, starting on April 23, fields 288 candidates considered to be crorepati the sub-continental equivalent of millionaire, the name derived from one crore, or ten million, rupees - about US$197,500.
The first phase of voting, on April 16, featured 198 crorepatis, according to election watchdogs such as the New Delhi-based National Election Watch (NEW), a nationwide campaign involving 1,200 non-governmental organizations pushing for electoral reforms. NEW says it studies information that candidates provide to the Election Commission.
Past governmental efforts at tracking black wealth have been half-hearted at best. "Given facilities such as online banking, hiding black money these days is much more difficult," says Ramesh Kumar [2], an accountant with 19 years of experience in various companies. "If governments are serious, it should be a relatively easy matter to track down black money. The problem is that corruption reaches from top to bottom, as when a single bribe is shared among many in the ladder."
Successive Indian governments have been part of the problem of not pursuing illegal money hoarders. The German government last year offered to reveal names of slush-money account holders in Liechtenstein, a tax haven in Western Europe. Germany's overseas intelligence agency, the Bundes Nachrichten Dienst, or BND, acquired a compact disc with names of 800 secret account holders in LTG, a Liechtenstein bank. The incriminating disc fell into BND hands during an undercover operation to unearth German tax evaders.
Countries such as the US, Britain, Canada, Italy, Norway, Sweden, Finland and Ireland reportedly took up the German government offer. Critics said the Indian government declined to react because powerful people including politicians, media barons, corporate chieftains and leading stockbrokers, are in the dirty-money list the German government discovered.
The Indian government's approach to black money contrasts starkly with the US, Vaidyanathan, of the Indian Institute of Management, said. For instance, the Swiss wealth management firm UBS in February this year paid a $800 million fine to the US government for withholding details of American account holders. But UBS actually paid the Indian government a small fee for reserving the right not to disclose names of its Indian account holders, Vaidyanthan said.
"Germany, France, the US are all exerting pressure [to get back black money]," Vaidyanathan told Asia Times Online. "Hence India also should join this effort to get its funds." The issue is not a new one for Vaidyanathan, who has been writing and talking about dark wealth since 1990s. "My finance courses at IIM - Bangalore included the issue of tax havens for a long period."
"There are more than 70 tax havens in the world, but as the Internal Revenue Service of the US reveals, around 40 of them aggressively market themselves," Vaidyanathan said. "Some have gone so far as to offer asylum or immunity to criminals who invest sufficient funds."
Additional Solicitor General Gopal Subramaniam told the Supreme Court on April 22 that the government was not asleep on the black money issue. The government promised to file an affidavit within 48 hours stating what steps it had taken to bring back funds from banks in Switzerland and elsewhere.
Even so, as the volume of claim and denial in the black-money drama rises, it is sounding more hollow than convincing. Opposition politicians, who started the latest act in the drama, have so far forgotten to explain why they did nothing to recapture the funds when they were running the government.
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