Generations of Indians have grown up imagining a bank with high ceilings and chandeliers in Switzerland, where shadowy Indians go to leave a lot of illicit cash in the care of practical white men. In popular lore, the “Swiss bank account” is an essential part of Indian villainy, even though illicit money is a common household possession.
So, last week, when a news agency quoted a Swiss official as saying that Switzerland was willing to share with the Indian authorities information about Indians of dubious nature who hold bank accounts in that country, the Indian government appeared to give the news considerable importance. Considering the infamy of the Swiss bank account in the Indian imagination, data released last week by Switzerland’s central bank, the Swiss National Bank, contained a surprise.
Indians, not all of them shady, held about $2.3 billion in Swiss banks last year. That’s 40 percent more than in 2012, but just a third of what they had parked in 2006. Indian accounts represented just 0.15 percent of the total holdings by foreigners in Swiss banks in 2013.
When Indians talk about their country’s illicit money, which is chiefly tax-evaded funds and income by illegal means, there is, of course, righteous contempt. But there is also a swagger over the sheer size of this shadow economy, because, after all, it is Indian. So a mere $2.3 billion was not what most Indians would have expected their rich and corrupt to have stashed in their Swiss nests.
It is possible that Indian money has fled to safer havens over the years, or has returned to India disguised as respectable investments.
Nobody knows just how big India’s illicit economy is, but in recent years Indians have come to accept that it is very big. From the range of numbers that claim to measure the shadow economy, Indians tend to believe in the highest.
A popular notion is that $1.4 trillion of illicit Indian money has flown out of the country over the decades and is held in various parts of the world. The apparent source of this figure is an analysis in 2009 by the academic R. Vaidyanathan. He had extrapolated it from a report released by Global Financial Integrity, a think tank in Washington; $1.4 trillion swiftly became a widely accepted estimate of Indian illicit money held abroad.
Dev Kar, a co-author of that report, eventually dismissed the figure as an exaggeration. In a report he released in 2010, “The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008,” he arrived at a more conservative estimate of about $500 billion as the value of illicit Indian money in foreign accounts. It was sexy enough.
Mr. Kar’s report hit India at a time when the middle class was convinced that it was disgusted by corruption. The $500 billion figure was picked up by politicians, reformers and officials, who quoted each other to support their claim.
A study published in 2006 by Friedrich Schneider on the world’s shadow economies dealt briefly with the “tax morality” of Germans. According to the study, two-thirds of the Germans surveyed regarded tax evasion as a “trivial offence,” while only one-third judged stealing a newspaper this way. Indian tax morality is similar, but it makes a distinction between expatriate illicit money, which is viewed as a serious crime perpetrated by the very corrupt, and money held within India, which is perceived as a practical measure.
Black money, as illicit money is called in India, is a significant part of Indian life. Most Indians of means, including many who protested on the streets against political corruption, deal in illicit money when they buy or sell real estate, or when they need foreign exchange to import goods. Huge amounts of cash travel across India during election seasons to bribe voters. Rich ladies prowl Delhi’s malls with bricks of cash in their bags, or with attendants who carry the bricks for them. And, there is a network of quaint people much in demand for their ability to magically transmute rupees collected anywhere in India into dollars that can be made to appear almost anywhere else in the world.
Manu Joseph is author of the novel “The Illicit Happiness of Other People.”
The New York Times
