The total illicit financial outflows from India between 2003 and 2012 were $439 billion —$94.8 billion of that in 2012 alone — shows a study by Global Financial Integrity (GFI), a Washington DC-based research and advisory organisation.
On the list of the world’s biggest exporters of illicit financial flows from 2003 to 2012, India currently ranks fourth — after China, Russia and Mexico, in that order. Compared with the previous rankings, India and Malaysia have switched positions in terms of cumulative illicit financial outflows, with India moving to the fourth spot and Malaysia to fifth. This was due to a continuation of India’s upward move, which began in 2009, and Malaysia’s downward move, which began the next year. To put the figures in perspective, the $439 billion of outflows come to about 23 per cent of India’s gross domestic product in 2013 ($1.87 trillion).
GFI President Raymond Baker said: “The most troubling... is the fact that these outflows are growing at an alarming rate of 9.4 per cent a year —twice as fast as global GDP,” adding “it is simply impossible to achieve sustainable global development, unless world leaders agree to address this issue head on”.
The study estimates illicit financial outflows from two sources: As a result of deliberate trade misinvoicing, and due to leakages in the balance of payments (known as illicit hot money narrow outflows). According to the study, while trade invoicing accounted for 77.8 per cent of illicit flows from all developing countries over the period, this number was 85.3 per cent for Asia.
The report says it is likely the repatriation and surrender requirements create strong incentives for exporters to under-invoice exports as a way to circumvent these requirements. While the report provides an estimate of illicit flows, it is difficult to say with certainty what is the exact quantum of funds currently stashed abroad. That is because many allege a substantial portion of these illicit outflows are routed back into the country, often via tax havens. But Aman Aggarwal, director, Indian Institute of Finance, disagrees.
India ranks fourth among the world's biggest exporters of illicit money, the study says
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