In the run up to the 2014 elections, Prime Minister Narendra Modi promised to bring back black money stashed abroad. He assured people that if the BJP came to power, he would set up a task force, amend laws and distribute the money brought in as “gift” among honest taxpayers.
But even after five years, India has absolutely no idea about the amount of black money that is circulating within India as well as abroad. Three reports by government agencies put the estimate in the range of 7 per cent to 120 per cent of India’s GDP, which is huge.
The studies, conducted by the Delhi-based National Institute of Public Finance and Policy (NIPFP), National Council of Applied Economic Research (NCAER) and National Institute of Financial Management (NIFM), Faridabad, were commissioned by the previous UPA regime.
In 2017, the Finance Ministry sent three reports on the quantum of black money within India and abroad to a Parliamentary panel. This was after around three years after they were submitted to the government, PTI reported.
Finally, the Standing Committee of Finance tabled these studies in the Parliament on Monday (June 24). Since estimates of the three institutions differ vastly, it has brought us back to square one.
Differences in estimates
For instance, the NIPFP concluded that between 1997 and 2009, the flow of illicit money out of the country was between 0.2 per cent to 7.4 per cent of India’s GDP. The NCAER estimated that the total amount of black money accumulated outside India between 1980 and 2010 was in the range of $384 billion to $490 billion. This is approximately ₹27 lakh crore to ₹34 lakh crore at today’s exchange rate and about 120 per cent of India’s current GDP.
The NIFM suggested that the total outflow of black money between 1990 and 2008 was ₹9.4 lakh crore ($216.48 billion). The NIFM’s estimation was based on current values. It estimated that the illicit money outflows from the country on an average accounts for 10 per cent of the unaccounted income.
The Chief Economic Adviser has opined that there is no scope for arriving at a common estimate of unaccounted income by combining estimates from the three reports. Thus, India does not have a reliable estimation of unaccounted income and wealth inside and outside the country.
Against the vastly differing figures given by the three institutes, a 2018 study by the International Monetary Fund (IMF) gives yet another figure based on a different methodology. The IMF put the estimate at 23.91 per cent of the GDP (approximately ₹44 lakh crore at today’s exchange rate).
A shadow economy refers to all illicit economic activities such as undeclared economic activity that should be taxed. This exists alongside the country’s official economy.
A recent report notes that estimating black money inside and outside the country is a difficult task. However, the vast range of figures fails to provide a clear picture of black money held by Indians.