Indian treasures, at home and abroad
By AJ Philip
It is a misconception that India is a poor country. In fact, India was never a poor country. It was the wealth of India that attracted foreigners and invaders to this country. With one more strong room yet to be opened for stocktaking, assets worth Rs 1 lakh crore ($22 billion) have already been discovered in the Sri Padmanabhaswamy temple at Thiruvananthapuram in Kerala. It’s a different matter that the wealth in India was not equitably distributed or shared.
Foreign rule had its deleterious effect on the economy. While accepting a honorary degree from Oxford University in 2005, Prime Minister Manmohan Singh pointed out: “As the painstaking statistical work of the Cambridge historian Angus Maddison has shown, India’s share of world income collapsed from 22.6 per cent in 1700, almost equal to Europe’s share of 23.3 per cent at that time, to as low as 3.8 per cent in 1952. Indeed, at the beginning of the 20th Century, “the brightest jewel in the British Crown” was the poorest country in the world in terms of per capita income.”
However valid the argument is, we cannot blame foreigners alone for our economic troubles. Conditions in post-war Japan were similar to India’s. Similarly, in the early-sixties, South Korea had an economy worse than India’s. When China became Communist, the socio-economic conditions in the mainland were similar to that of India. But all the three have stolen a march over India, though the latter is ahead in many respects.
Take the case of gold. No other country has as much gold in its possession as India. The World Gold Council has estimated that Indian households together have 18,000 tonnes of gold, which is valued at Rs 45 lakh crore ($1 trillion). If the gold is sold at a price of Rs 25,000 per 10 gram, every Indian citizen will get about Rs 37,000. A family of four will get Rs 1.48 lakh, a substantial sum, given the late Arjun Sengupta’s estimate that 78 per cent of Indians had an income of less than Rs 20 a day.
Sengupta’s figures do not square with the fact that by the year 1912, India will have 56 crore people using mobile phones, against 80 crore in China. Already there are more mobile phones in India than toilets. According to a 2008 UN study, only 54 per cent of the Indian population had access to the toilet. In comparison, less than 4 per cent Chinese did not have toilet facilities. Even if Sengupta’s estimates were exaggerated, there can be no denying that a vast majority of Indians are indeed poor.
The Planning Commission has said in an affidavit submitted to the Supreme Court that anybody who spent Rs 32 per day and above in an urban area and Rs 26 and above in a rural area could not be considered poor. The Commission was pilloried for the submission and its members were even asked to show how they could subsist on such an amount.
It was definitely a valid question. In a city like New Delhi or a village like Thekkepuram in Ranni in Kerala, nobody can live on these amounts, except courting starvation. But then allowance has to be made for the fact that what the Commission pointed out was the absolute minimum required for a living. In India a family is believed to consist of five members. If everyone of a family spends Rs 32 per day on food and other necessities, the family should have a monthly income of Rs 4,800.
The fact is that the monthly salary many people employed in private and unorganised sectors in a city like New Delhi is even lower than this amount. For instance, how many maid servants are paid a higher salary than this? They too spend money to commute between their huts and their workplaces. So the actual amount they are left with to spend on their family is even less. Seen against this backdrop, the Planning Commission figures are not all that nonsensical.
But the question remains: Who is a poor? Anybody who spends most of his income on food is a poor. Internationally, anybody who spends less than $1 (about Rs 45) is considered very poor and anybody who spends between $1 and $2 is called poor. If this is the yardstick, an overwhelming majority of Indians are indeed poor. There are other methods of determining the poverty of a person like the calorie of food he/she intakes. Whatever be the yardstick, poverty is something that cannot be wished away.
While it is neither desirable nor possible to unearth all the gold in Indian households and distribute it equally, it is certainly desirable and possible to bring back black money deposited in foreign banks and in shady companies in tax havens. Of course, nobody has a clear idea of how much such money is. One estimate by R. Vaidyanathan, a professor of economics, is that it amounts to Rs 72 lakh crore (Source: Wikipedia).
If the figure is correct and all the money is brought back to India, every Indian will be richer by about Rs 50,000. A small family of four, including two children, will suddenly have additional assets worth Rs 2 lakh. Prof Vaidyanathan’s estimate is actually conservative. Cyberspace is thick with speculative figures. Another estimate is that the value of Indian money in foreign banks is Rs 300 lakh crore, which means that every Indian will be richer by over Rs 1 lakh if the money is recovered.
Whatever be the real amount, it is certainly large enough to make a significant impact on reducing poverty in the country. It would be pertinent to recall that just one person — Hasan Ali Khan who is now in jail — is accused of having Rs 36,000 crore in foreign banks!
This is all the more reason that every effort should be made to bring back the Indian wealth. Swiss banking officials have said that the largest depositors of illegal foreign money in Switzerland are Indian. But the government has not been serious about trying to recover the money. It has the names of some Indians who have accounts in the Liechtenstein Bank but it is cagey about giving out details forcing the Supreme Court to take some proactive steps.
Similarly, the single largest foreign direct investment in India is from Mauritius which is, comparatively speaking, a poor country. But Mauritius allows Indians to disguise investment in their own country as tax-advantaged foreign capital. In other words, money from Mauritius that is invested in India is actually Indian money. Swiss banks manage a third of the world’s cross-border invested wealth.
The Swiss authorities are secretive about the account holders and it is this secrecy clause that they refer to whenever any government asks for details of its citizens parking their ill-gotten money in Swiss banks. Though India has signed hundreds of double taxation avoidance agreements and tax information exchange agreements, it has not been able to get details of the Indian money. However, things seem to have brightened up in the recent past.
For instance, the finance ministers of G-20 nations, who met in Paris early this month, reached a consensus on sharing information about tax evasion. Hopefully, the G-20 Summit in Cannes next month will take some concrete step in this regard. However, it is futile to expect the rich nations to take the initiative, because the victims of tax havens are not the rich nations but developing countries like India. Global Financial Integrity, a campaigning group, says poor countries “lose” more than $1 trillion a year to tax havens, around ten times the aid they receive.
Two-thirds of this is tax evasion and avoidance, the group says, the rest transfers by criminals and the corrupt. The Tax Justice Network cites a research to calculate that global off-shore deposits amount to at least $9 trillion, some $2 trillion more than the total held at home by American banks. Against this bleak scenario, there are some hopeful trends.
Under intense international pressure to lift banking secrecy, Switzerland agreed on October 6 to tax money held in its banks by British residents. These customers face a levy of up to 34 per cent as well as, from 2013, a withholding tax. That could bring the British treasury 5 billion pounds ($7.8 billion). However welcome the money may be to Britain, it will not get details of the people who deposited the money. Nicholas Shaxson, author of Treasure Islands calls it a “Swiss tax swizz”; the country will in effect pay a fat fee to avoid revealing clients’ name (The Economist, Oct 15). Switzerland has entered into such deals with Germany too! All this is welcome.
Since India has to gain much more from the foreign banks and the “treasure islands” than any other country, it should relentlessly pursue the matter till every Indian rupee is brought back. The money will definitely help transform the Indian economy. But the question is: Does the government have the political commitment to have the secret codes of the foreign banks broken and to bring back the money where it should be – in Indian banks?
(The writer is a New Delhi based senior journalist).