To say that India's black money problem is a gargantuan one is stating but the obvious, but when some estimates peg the quantum of the parallel economy at USD1.4 trillion, it forces you to sit back and take notice. Remember Jim Carey in 'The Mask'? It’s almost as eyepopping, and then some. It’s a figure larger than the GDP of the country. Much of this wealth sits happily ensconced in tax havens and private banks, safe from prying Governments. While the Indian establishment tries its hardest to get its hands on some of this ill-gotten wealth (even recovering some part of it might significantly ease the country's fiscal imbalance), and even persecutes millionaire studfarm owner, Hasan Ali, not much headway has actually been made. And it’s unreasonable to expect any immediate results - some suggest another Voluntary Disclosure Scheme as a quick fix remedy, but that runs the risk of legitimizing the very scourge from which we need such an urgent cure. And the remedy must necessarily come from directly within the principal players in this sordid drama.
First, the government. It’s not particularly difficult to see why we have such a massive problem on hand. Clean business and clean money both need a clean financial and political ecosystem to flourish and circulate in, respectively. India clearly does not provide that ecosystem. The culture of corruption and gratification runs deep, so much so, that someone doing an honest day's work is looked upon with incredulity. So whereas in developed countries, while corruption exists, it seldom affects day to day life, in India it is all pervading and omnipresent, right from the traffic signal to the parliament. Successive governments have failed to show any degree of political will in tackling the problem and have never been close to showing zero tolerance for corruption. The current lot doesn’t even have disruptive coalition constraints to contend with, yet they have presided over the most damning series of scandals in memory. Clearly no one at the heart of government has been interested in reading out the riot act. And meanwhile...Rome burns. Some shrug and blame offshore havens, but it is important to note that we do have financial treaties with many of these jurisdictions, and the need of the hour is for us to work in more teeth into these treaties so that we can wield more than the current degree of power we possess to go after misappropriated funds hidden there.
An oft forgotten contributor to this problem is the private sector. It is easy to miss part that banks, tax evading corporations and greedy businessmen/professionals play in this monetary circus. Rich and unwilling to pay those worthless taxes with your hard earned rupee? You are almost certain to find an eager private banker willing to provide comprehensive 'solutions' to help you meet your needs. It is still not uncommon to overhear private bankers discussing customers walking in with suitcases full of cash. The profit motive in the private sector allows money, both legitimate and tainted, to escape the system, with willing customers ready to fork out hefty management fees to maintain the tax free status of their cash, which remains safe in complicated financial structures in off shore tax havens. In this regard, stricter Anti - Money Laundering legislation needs to be enforced and sometimes tenacious measures need to be taken against the big financial institutions, as seen in the case of the United States going after UBS AG. While most such institutions tend to remain on guard when it comes to links with drug money or possible terrorist funding, there remains a tendency to go soft when it comes to the rather vanilla issue of tax evasion. There are clear examples of willful collusion and examples need to be made of some of these 'reputable' names. Our rapacious capitalism, regardless of its nature, still needs to have morals, and just as the financial system seems to have learned from the 2008 financial meltdown (or has it?), we need to draw lessons from the constant use of the financial system both as a conduit for money laundering as well as a feeder of bureaucratic greed and tighten the gaps, fast.
The third and final corrective measure that needs to be put in place is one that needs to be directed towards ourselves. We cannot live as a nation of hypocrites. On one hand we pay lip service to Anna Hazare's or Baba Ramdev’s anti-corruption fasts, and on the other, we don't think twice before bribing the neighborhood policeman to escape a misdemeanor, a government clerk to move our file or the tax inspector scrutinizing our returns. We must remember that for every hand that takes, there is a hand that gives. And it is here that the bacterium of black money germinates, everything else is just a matter of scale and detail. We need to stop giving and we need to show patience. Only sustained action can lead to any sort of seismic shift in our embedded graft culture. While this might not bring back the billions already lost, it will at least help reduce this malaise in the ambit of our daily life. And that will be a significant battle won.
This article first appeared in the July 2011 edition of KINDLE