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When the issue of black wealth stashed away by Indians became an election issue in 2009, thanks to the Bharatiya Janata Party leader L K Advani coming out with a white paper on black money, the knee-jerk reaction of the Congress was that it was a figment of imagination. Within a week the party had to abandon its denial mode. The prime minister was forced to assure that within 100 days the new government would take steps to bring back the monies stashed away. The Congress president Sonia Gandhi had to say that the party would address the issue of bringing back black money. The new government told Parliament through the President’s Address in June 2009 that it “was fully seized of the issue of illegal money of Indian citizens outside in secret bank accounts” which it “will vigorously pursue”. The next year, however, the president completely forgot the issue.

It was a year later, in 2011, that the Union finance minister remembered the issue. He said that a rigorous study would be carried out to get a reliable estimate of the black money stashed abroad. In March 2011 an MoU was signed between the Central Board of Direct Taxes and three expert bodies — National Council of Applied Economic Research, National Institute of Financial Management, and National Institute of Public Finance and Policy — to do the study and report within 18 months, by September 2012. Suddenly the minister announced in his budget speech on March 16, 2012 that he could come out with a white paper on Black Money soon. That white paper came out a few days ago on May 21. Three years after it promised vigorously to pursue black money, the government has thus produced a white paper on black money. What is the need, however, for the white paper now when ‘the rigorous study’ to get ‘reliable estimates’ of black money initiated by the government is scheduled to be over in September?

When the white paper says innocuously that there is no reliable estimate of black wealth in or outside India and so a rigorous study is on, it is no innocent statement. The intention is to undermine the estimates made by diverse sources. Also the white paper ignores that those estimates were time specific. The estimates of 1960s and 1980s and 1990s cannot be compared with one another and seen as conflicting. What the white paper leaves unsaid is that since there is no reliable estimate of black money it is not a serious issue. The unstated but obvious objective of the white paper is to trivialise the estimates of black money by such credible sources such as Global Financial Integrity (GFI) and the International Monetary Fund (IMF) as not reliable. Is it not how the Congress started in 2009, namely that the amount of black wealth of India abroad was a ‘figment of imagination’? Is the white paper implying the same without saying explicitly?

The white paper refers to black money estimates made in 1960s, 1970s, 1980s and in the early part of 1990s, till 1995. The amount of black money generated before early 1990s would be insignificant as compared to the post-financial liberalisation period from early 1990s. The GDP of India for 2012-’13 will cross `100 lakh-crore. Till 1980s, it was less than `1 lakh-crore — just 1 per cent of the size of today’s economy on rupee to rupee basis. The black money generated in the last 15 years and that what is being generated now is incomparably huge. The information in the white paper on the estimates of black money till 1995 is 17 years old and is irrelevant. Anyone familiar with recent economic history knows that there is no comparison between pre-liberalisation and post-liberalisation Indian economy. The GFI estimated that most of the black money has been stashed away post 1991. Applying the IMF estimates of the informal economy in India (at 23.7 per cent of the GDP mentioned in the white paper itself) the amount of black economy in India would now be about `24 lakh-crore. Against these huge numbers the white paper talks of `36,000 crore as black component of the GDP in 1983-’84 (page 12) as if the said figures are relevant now. This white paper is thus fit only for archives. It is an old paper to be junked, not a white paper to be preserved.

Actual money was only the source of white or black money till 1980s. Now new money known as derivatives (which are just speculative monies that turn into actual monies) are a bigger source of black money. The global speculative money stock of $82 trillion (`4,610 lakh-crore) in 1997 has multiplied by more than 10 times to $618 trillion (`33,990 lakh-crore) in 2009. As compared to the real global economy of $58 trillion (`3,190 lakh-crore) speculative money stock is 10 times more. Again, the cash wealth of the rich rose from $5.7 trillion in 1997 to $32.8 trillion in 2009. Some 40 per cent of it, `556.5 lakh-crore, is black money. This is managed by banks as trustees. Just one bank — UBS — alone manages $2.7 trillion (`148.5 lakh-crore). This is outside the balance sheets of banks. In India the total of forex, stock and commodity market speculative money stock is `685 lakh-crore. It has outstripped the real economy by almost seven times. Yet, the white paper totally omits this huge source of black money.

The most ridiculous claim made in the white paper (page 17) is that part of the black money stashed away abroad is ‘already returned’. It refers to the infamous PN or Participatory Note under which anyone, including an Indian, abroad can invest black money in the name of an approved investment institution. It shamelessly admits (para 2.8.3) that ultimately Indians could be the owners of the PN and therefore large parts of the PN and may represent ‘return’ black monies stashed away by Indians. It can’t be more ridiculous. The PNs are not Indian monies in India, but Indian monies abroad which have escaped tax. To claim they are return of Indian monies is a fraudulent claim as well.

The white paper is deafeningly silent on the names of those who have stashed away monies abroad. Ottavio Quattrocchi’s millions and Hasan Ali’s billions are standing examples. Not to speak of the suspected holdings of the Sonia Gandhi family, estimated at between $10-19 billion. When such suspects rule, how will black money come? Only white paper will.

(Views expressed in the column are the author’s own)

S Gurumurthy is a well-known commentator on political and economic

issues. E-mail: comment@gurumurthy.net