Background

The idea that vast amounts of India’s wealth lie in secretive bank accounts in Switzerland and elsewhere, and that if successfully repatriated and distributed through a hitherto undecided mechanism, it can solve nearly all of India’s problems with significant change left over, is one of the enduring notions of recent Indian political discourse.

The Aam Aadmi Party, led by Arvind Kejriwal, won the Delhi state elections making black money and anti-corruption two of its central agendas. In the national elections, BJP did something similar. In its election manifesto, BJP said it “is committed to initiate the process of tracking down and bringing back black money stashed in foreign banks and offshore accounts.” Nobody really knows how much unaccounted money is really stashed away and how much of it is illegal. Estimates vary from $2.3 billion to $250 billion. According to a study by BJP in 2011, the amount of black money stashed away in foreign banks is around $250 billion.

Disclosure

The first movement of levers in this process was set into motion on Oct 27th when the government told India’s top court that it had initiated prosecution against three individuals for tax fraud and money laundering.

The following three people have been named by the government as guilty of tax fraud and money laundering:

• Pradip Burman is the promoter of Dabur, India’s fourth largest FMCG company that sells everything from food to health care products.
• Pankaj Chimanlal Lodhiya is a Rajkot-based bullion and jewelry trader.
• Radha Satish Timblo is a managing partner of Timblo Enterprises and a member of the Goa Mineral Ore Exporters’ Association. Her name previously came up a few times in reference to the illegal mining of iron ore in Goa.

The Center told the court that it had no intention to withhold names of persons who have stashed black money abroad and stated that information received from foreign countries will be disclosed in all cases where tax evasion is established. Every foreign account held by an Indian may not be illegal, the Centre said, adding that names cannot be disclosed unless there is prima facie evidence of wrongdoing. It also told the court that Switzerland has indicated willingness to provide information on black money in cases where probe has been done by IT department. Television reports also indicated that four members of the Congress party, including a former minister of the previous UPA regime, are under investigation, and added that their names may be revealed after the probe is completed. Among the four Congress party members are two belonging to powerful political families in the state of Maharashtra, the television reports further stated.

Impact

The disclosure to the Supreme Court of names of three holders of illegal accounts abroad has predictably led to a political uproar, but the whole issue could well prove advantageous for the BJP. The ruling party is claiming that the names of several Congress members figure in the list of those who have stashed away undeclared wealth overseas. Bharatiya Janata Party (BJP) spokesperson G.V.L. Narasimha Rao, in fact, stressed that the list of 800 names with the government includes many Congress members, but none from the BJP. “It is a worrying development if the BJP is trying to avoid delivering on the promise. It was a major pillar of the party’s campaign,” he commented. Congress leader Salman Khurshid slammed the government for cherry picking names. “The government can disclose all the names on the list to the court as per law,” said Khurshid. Rao set aside the Congress’ allegations, saying the party cannot complain as it never revealed any names while it was in power. “Congress should not be complaining. They had the list for three years and they did not reveal a single name. The former finance minister P. Chidambaram then claimed that he had not seen the list,” said Rao. Political analysts say the government will tighten the noose around the Congress’ neck.

The coming weeks will let the country know how far this cleanup will go and how much of a difference it will make to India’s economic outlook.