Monday, May 21, 2012




1.     NEWS :-A 100 page white Paper has been submitted by Government on Black money. It says, the illicit money parked outside India may have been brought back as FDI through Mauritius and Singapore and via stock Market Operations (through Participatory notes and GDRs etc). The swiss Banks Hoarding may not be more than Rs.10000 Crores. No Names of the Black money Holders are disclosed.

The sources of Black Money are identified as : Land and Real estate Deals, Bullion and Jewellery Market; Financial Markets; Public Procurement; Non Profit Organizations;  External Trade; International transactions involving tax havens; Informal service sector.

FDI INFLOWS (2001-11) :

Mauritius : 41.80%
Singapore : 9.17%
USA :7.28%
UK : 5.12%
Netherlands :4.39%
Japan : 4.07%
Cyprus : 3.71%
Germany :2.31%
France : 1.75%
U.A.E : 1.46%

Some of the measures proposed are : (i) Electronic Delivery of Public Services (ii)Law on Public Procurement ; (iii) Transparency in allocation of Resources (iv) Direct Transfers to the accounts of Beneficiaries; (v) separate Corporate Audit from Managements;  (vi) GST Implementation; (vii)Direct Taxes Provisions (those on International taxation and transfer pricing) (viii) preventing Benami transactions  (ix)Lok Pal and Lok Ayuktha Bill  (x) Prevention of Money Laundering


(i)                  If one treaty with Mauritius can give us so much of FDI – even assuming it is all Black money, what should we be doing? Have more such treaties with all the above mentioned countries and neutralize the advantage of routing through Mauritius. Countries like USA will be more stringent and transparent. And FDI flows into India will increase.
(ii)                The money coming back into India as FDI is welcome any way (from my view). We should only arrest the generation of Black money at its source in India. But, if it any way gets generated and goes out, let it come back in some way – as FDI. I think, it is sensible to welcome any FDI (except the likes of FDI in retail, which curtails Indian Jobs) from everywhere into desirable sectors.
(iii)               Making direct transfers to Beneficiary accounts in schemes like NREGS is good. But, the scheme is bad in several other aspects too. In many places, no, real, measurable, tangible work is being done at all. Make direct transfers – after you have a concrete proof of work done. Otherwise, NREGS will remain a charity, with no productivity. Have Independent, tough Audits on the scheme. Build up statistics of all the GREAT WORKS done under the schemes – and check them all annually. If this is not done, Most money under NREGS will become BLACK MONEY anyway, whether you give it across table or by direct transfer..
(iv)              Politics and Politicians – are one area / and source of Black Money generation. The Election commission, with very limited resources, has been catching huge moneys being used in Elections. But, that is only the tip of the ice-berg.  Most of the election expenses are obviously funded by Black money. And, this Black money funding of Elections increases unethical Governance at various levels all through the next five years. If Government has the will, it should monitor all expenses of ALL RECOGNIZED POLITICIANS through INDEPENDENT REGULATORS  like Election Commission. If Government is watching so many companies, why not watch so many politicians too.
(v)                The white Paper does not seem to identify Government Tenders and sub standard work – as a huge source of Black Money. The Telecom tender is just a sample case. The tenders of the CWG is also a sample case.  How funds move in the accounts of tenderers and their close associates  and the accounts of accepting authorities from the Junior most officer level up to the Highest level at the crucial times of OPENING & ACCEPTANCE  of tenders Is a necessity – to arrest generation of Black money in the process.6 months before and 6 months after the tenders are accepted – the Bank accounts of the accepted tenderers, their close relatives and the accepting authorities – will need special monitoring – to prevent Black money passing hands.
(vi)              All Land deals of all Politicians and their relatives and friends must be more carefully screened. Every case coming out in recent past shows the complicity of Political Authority in Land Deals.
(vii)             It is not that all people in India are, or are wanting to hoard black money. Even if about one percent of us are of this type, the whole country stinks of Black money. But, the key to curbing the generation of Black money is in the Hands of Politicians. As the saying goes, Doc, heal thyself first.
(viii)           All said – the preparation and presentation of a white paper  on Black money - is a good, laudable  initiative on the part of the Government. India would love to see some concrete action flowing from this white paper – to curb Black Money Generation. The one suggestion however is – if it is already generated and gone abroad, let it come back. Else, even existing FDI (about 50% from just Mauritius & Singapore) will also dry up.

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