Unaccounted wealth outside the country held by Indians was estimated in the range of USD 216.48 billion to USD 490 billion over various periods between 1980 and 2010, according to three separate studies conducted by National Institute of Public Finance and Policy (NIPFP), the National Council of Applied Economic Research (NCAER), and the National Institute of Finance Management (NIFM). They found that the sectors where unaccounted income is found to be the highest included real estate, mining, pharmaceuticals, pan masala, gutkha, tobacco, bullion, commodity, film, and education, said a report of the Standing Committee on Finance tabled in the Lok Sabha on Monday.
There are no reliable estimates of black money generation or accumulation, neither is there an accurate well-accepted methodology for making such estimation, according to the Committee’s report, titled ‘Status of Unaccounted Income/Wealth Both Inside and Outside the Country: A Critical Analysis’.
“All estimates depend upon the underlying assumptions made and the sophistication of adjustments incorporated. Among the estimates made so far, there is no uniformity, or consensus about the best methodology or approach to be used for this purpose,” it said.
Amount not specified
As per the report, the NCAER study said that unaccounted wealth accumulated outside India is estimated to exist between USD 384 billion and USD 490 billion during the 1980-2010 period. The NIFM said results of estimation suggest that total illicit outflow at the current value (including opportunity cost) from India in the reform period (1990-2008) stands at £94.18 billion (USD 216.48 billion). Illicit outflows from the country are estimated on an average at 10 per cent of the estimated unaccounted income.
The NIPFP said that during 1997-2009, illicit financial outflows have been in the range of 0.2 per cent to 7.4 per cent of Gross Domestic Product (GDP). In March 2011, NIPFP, NCAER and NIFM were asked by the Finance Ministry to conduct studies to assess and survey unaccounted income and wealth both inside and outside the country. “It appears that the reliable estimation of unaccounted income and wealth inside and outside the country is a difficult task, this inference is validated by the widely varying estimates of the unaccounted income arrived at by these three institutes. 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 (studies),” the parliamentary panel’s report said.
The panel, headed by M Veerappa Moily, had submitted its report to the Lok Sabha Speaker on March 28, well before the dissolution of the 16th Lok Sabha.
The recommendations
The committee noted that as only a “limited number of stakeholders” could be examined by it, owing to the paucity of time, “this report might be considered as a preliminary report”, pending examination of other witnesses, including non-official witnesses or experts on the subject, and after evidence replies of the finance ministry which are awaited.
“In the meantime, the Committee would expect the Ministry of Finance (Department of Revenue) to continue their efforts with greater vigour to unearth and bring to book unaccounted income/wealth both within and outside the country including follow-up action on the seven reports of the Special Investigation Team (SIT) constituted on black money as well as the three study reports on estimation of unaccounted money,” it said. The Committee, the report added, would thus expect more fruitful outcomes on this count, both in terms of much wider tax base as well as actual tax yield.
In the context, it also desires that the long-delayed direct tax code should also be finalised at the earliest and reintroduced in Parliament with a view to simplify and rationalise the direct tax laws in the country.
