Sunday, March 29, 2009

Black Money and the Indian Economy

As per a 2006 report by Swiss Banking Association, India with $1456 billion or $1.4 trillion has more money in Swiss banks than rest of the world combined. This doesnt include amount stashed away in the other tax havens around the word or the ones in suitcases.

To put it in perspective how far does this money go?

- Twice the GDP of our country
- Is 13 times larger than India's foreign debt. Which will mean India can be debt free and still have 12 times more money to invest in infrastructure which can increase GDP.
- 75 crore poor people can get 1 lakh each, which can earn them a decent 1K per month in FD interest alone and put capital in the white market to fund projects.

There is culture of hoarding among Indians. I cant put my finger on why that is. Is it our lack of a social security system that makes us hoard? There is a PF system that is more reliable than any other in the world, but we still hoard.

The bottom line is we are hoarding for a future that may not exist. On the other hand if that money were utilized for creating a better infrastructure today it would be far more effective than hoarding for a world that may not be worth living in.

BJP today took this up as a major poll plank in a news conference. LK Advani (prime ministerial candidate in this elections) promised to make efforts to bring back this black money if they came to power. The move by BJP to announce this is in response to comments by people in the media that there arent any substantive issues being discussed and that the agenda has largely been negative. There was also a deliberate avoidance of mention of the poster boy Varun Gandhi who the media have whipped up to keep ratings up. I am waiting to see how the media takes up this topic.
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