The famous SMS doing the rounds: Anna Hazare says bring back the black money. Do u know what will happen if Rs. 1,456 lakh crore comes back? No need to pay taxes or electricity bills for the next 20 years. Petrol will cost Rs. 25. India's borders will become more stronger than the China Wall. We can build 28,000 km of "rubber road (like in Paris). Houses for 100 million people, 1,500 Oxford-like universities, 2,000 free hospitals. Each village will get Rs. 100 crore! Let's start at the beginning. How much black money exists abroad? The answer is: NOT 1456 lakh crores. That would be equivalent to — let's see, USD 30 trillion. Our GDP is about $1.5 trillion. 20 times our GDP sitting abroad as illicit wealth? The total wealth in the US is about $60 trillion, and their GDP is more than 10 times ours. (GDP is a measure of value added in a year, not the total wealth) Remember, much of this so called black money was created when India's GDP was much lower —we were less than a $1 trillion in GDP just four years ago. Official Swiss bank figures show that only 0.07% of all the assets in Swiss banks is with Indians — a meager $2.5 billion out of USD 3.5 Trillion. Even you think that Indians if have used foreigners' names, 3.5 trillion dollars is the outer limit — of which we are fairly sure other countries have their share.
A Global Financial Integrity report in 2010 talks about total Indian illicit assets abroad being $462 billion. This is about Rs. 20 lakh crore and perhaps a more reasonable estimate. Not an amount to sneeze away, of course — 20 lakh crore is the total Indian government expenditure (budget estimates) in 2010-11, of the states and the central government put together. Is the money abroad at all? Swaminomics says, and I concur, that much of the black money has been brought back in. Investing in India after taking money abroad is very easy; you set up a company in Mauritius, send it the money from the Swiss bank account, and the Mauritius entity then invests into India. Mauritius has no (or low?) capital gains taxes, and with our double taxation avoidance treaty, gains made in India can be taken back into that Swiss account tax free, through the Mauritius entity. But it never is; it stays invested in India. Why not, when these people are politicians and can easily find company shares to purchase just before an interesting deal is announced. Much of the money has been ploughed into real estate as well, which explains why there are so many apartments quoting above Rs. 1 crore after being half that price a few years back, and those houses remain unoccupied or are rented away for tiny fractions of the market value. The house is the bank — it's a way to store value, because everyone knows that real estate prices don't fall in the long run*. (* Tongue in cheek; tell that to the Japanese, or the Americans) Okay, let's take 20 lakh crore. Isn't that good enough?
