How black money can transform India
CNN IBN BLOG
Monday , June 06, 2011 at 17 : 14 (2 years back)
Intermittent talks about huge sums of
money parked by Indian nationals in foreign tax havens were doing the
rounds ever since a report attributed to Swiss Banking Association
started doing the rounds in 2006. The Wikileaks disclosures of Julian
Assange, however, provided the immediate context for Anna Hazare to step
in and rally the civil society against graft.
Indians,
cutting across caste, class, religion and social standing, are unitedly
voicing a demand for the black money to be brought back.
But how would
the money be used in case the UPA government, reeling under multiple
exposes of scams and financial irregularities, balks under popular
pressure and manages to bring it back?
At
ibnlive, we discussed this and the following is our suggestion.
However, our maths is based on recovery of the money from Switzerland
alone as no concrete figures are available for Indian money parked in
other places like Liechenstein, Luxembourg, Cayman Islands, Seychelles,
Mauritius, Macau, etc.
According
to several economists and financial experts, bank deposits in the
territory of Switzerland by nationals of India total upwards of $1.4
billion. That is close to the nominal GDP of India today. IT kind of
gives credence to the widely held belief that $1.456 trillion of Indian
money is parked in Swiss bank vaults.
India, as of December 2010, had external debt amounting to $ 237 billion, according to the CIA World Factbook numbers.
First
step should be to pay this debt off.
Assuming that with interest, the
figure rises to even $275 billion, the country would be left with $
1.181 trillion after paying off all its foreign debt.
A Goldman Sachs study in 2010 has reported that India would need to invest $1 trillion in economic and social infrastructure to sustain an 8 to 9 per cent growth momentum and to overcome its problems. However, in the report, the investment banker clearly mentions that this $1 trillion includes government funding, private enterprise as well as foreign investment.
The suggestions
of the report have been corroborated by Rahul Saraogi, managing
director at Atyant Capital in a 2011 interview with Value Investing
Letter.
Infrastructure in India,
unlike in the case of China, will be built only using a public-private
partnership model. In certain sectors like telecom, airports and power,
the model has been successfully working. In case of developments of
ports, roads, railways and urban transportation, the models are
evolving. Assuming up to 70 per cent of the funding comes from the
government and the rest from other players, India would invest $ 700
billion in this sector. The bulk of the government's investment should
be in water treatment, sanitation, waste management, renewable energy,
health, education, urban infrastructure and allied fields.
The
8 to 9 per cent YoY (year on year) growth will ensure that the
government has more than enough funds to pay for maintenance and salary
of workforce needed to maintain and run the expanded services.
Now, we are left with $ 481 billion.
India
is one of the hungriest nations in the world. It is ranked 67th out of
84 countries listed and ranked on the Global Hunger Index report, 2010.
India accounts for 42 per cent of the world's underweight children.
Unless
India ensures food security for all its people, its claim for greater
role in the world will be taken with a pinch, if not a lump, of salt. In
that regard, universalisation of PDS is the simplest and surest way to
ensure food security.
In that
regard, Dr Abhijit Sen of the Planning Commission had proposed a minimum
support price-linked PDS scheme, excluding 25 per cent of the
population who are not the target group. But this was shot down by C.
Rangarajan, chairman of the Rangarajan Committee, who thought that
streamlining the present PDS system would be enough.
Though
the government has made up its mind on the proposed Food Security Bill,
it is not too sure if universalisation of PDS would be a viable
measure.
A study by Praveen Jha,
Associate Professor at Jawaharlal Nehru University (JNU) and Nilachal
Acharya of the Delhi-based Centre for Budget Governance and
Accountability (CBGA), show that Universalisation of PDS is even
possible without the help of this magic money we are talking about.
Their study shows that an additional Rs 94,419 crore per annum will be
required to supplement the present provisions of food subsidy which
translates to roughly $21 billion.
Now
taking into account inflation over the next ten years, a figure of $
300 billion will be enough to take all Indians out of the hunger trap.
With quality healthcare and social infrastructure, India can then start
looking like a developed nation.
Out
of the remaining $181 billion, $60 billion should go in strengthening
our defence capabilities. Over and above the already-approved $100
billion procurement plan, that should give us one of the meanest
fighting forces in the world.
The
remaining $ 121 billion money should be used to fund higher education,
cutting-edge scientific and social research institutes and exclusive
scientific projects.
Undoubtedly,
all this is only possible if the money is available. The Swiss Banking
Association has already said that it might hand over to the Indian
government a list of names of individuals who have accounts there if New
Delhi so requested. However, unlike the German government, the
Congress-led UPA seems to be dragging its feet.
Even
Wikileaks founder Julian Assange has criticised New Delhi for giving
all the wrong excuses for not acting. Political observers feel that the
government is worried that names of account holders coming into the
public domain might haunt the various parties that make up UPA. The
grapevine has it that several prominent political leaders and their
family members, apart from prominent businessmen and public figures,
have money parked there.
So till
the government actually swings into action, which is highly unlikely,
all this is entirely in the realm of speculative fantasy. But just
because our government fails to fulfil our wishes, we should not stop
having them.
(Latest: India has to repay $172 billion debt by March 2014)
BY NEW DELHI, June 29, 2013
External commercial borrowings are now 31 per cent of the country’s total external debt of $390 billion as of 31 March 2013. Short-term debt with one year maturity is 25 per cent of total external debt. However, total short term debt to be paid back by the end of this fiscal, which includes a lot of corporate borrowings payable by end March 2014, is 44 per cent of the country’s external debt or $172 billion.
How will bringing black money back help India?
by bhasker-siddharth.blogspot.in. (OLD REPORT)
The
good thing about the black money stashed abroad is that it's in USD or EURO
and not INR. It can simply become part of our
foreign reserves. This takes the
pressure off INR and domestic
inflation.
Now forex can be used to fund costly oil imports
there is an even safer way of using forex
(from the
point of view of INR devaluation and domestic inflation).
Excess Forex
can be used as soverign fund to invest in foreign assets thus avoiding
any
conversion to INR and no direct issue of inflation.
Forex
can otherwise be used to fund imports which still shouldn't have a
direct impact on
INR and domestic inflation. Our oil and gas PSUs, the
biggest importers, will be
cushioned from the foreign exchange
fluctuations as the Gov.
would be able to fund them from gov. treasury.
Bigger forex will also give RBI greater muscle to
flex in the money
market.
However, under normal circumstances if the black money is
coverted to INR without
much thought behind it then it will surely cause
INR devaluation and domestic inflation.
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