India has lost some 213 billion dollars to corruption, bribery and tax evasion over the past six decades a report said Thursday as parliament was stalled once again over a telecommunications scam. The Washington-based non-profit organisation Global Financial Integrity said in a report on illicit financial flows from India that with interest added the total loss to the economy could be as much as 462 billion dollars between 1948 and 2008.
India's underground economy was estimated to be worth about 640 billion dollars at the end of 2008 and 72 per cent of that money was held abroad, the report prepared by former International Monetary Fund (IMF) economist Dev Kar said. The underground economy has been estimated to account for 50 per cent of India's gross domestic product, the report added.
"A country that is still struggling to eradicate poverty with a shortage of capital relative to its development needs can ill-afford to lose funds of such magnitude," the report said, recommending improved tax collection and redistributive policy measures.
The outflow of illicit money from the Indian economy accelerated in the period of economic liberalisation that began in 1991, the report added. "Opportunities for trade grew and expansion of the global shadow financial system - particularly island tax havens - accommodated the increased outflow of India's illicit capital flight," the report said.
High net-worth individuals and private companies were found to be the main drivers of the illicit flows out of India's private sector. To reach his estimates, Kar used World Bank and IMF models that track illicit flows by measuring a country's recorded source of funds against its recorded use of funds and compare its recorded imports with what the world says it has exported to that country.
Indian analysts say corrupt politicians and bureaucrats also play a role in the illicit fund outflow. Andimuthu Raja resigned Sunday as telecommunications minister, days before a government auditor's report was tabled in parliament accusing him of gross misdealing in awarding telecom licences to selected firms at give-away prices. The report said Raja caused an estimated loss of 39 billion dollars to the economy.
India's Supreme Court, meanwhile, asked the Congress Party-led federal coalition government to submit an affidavit on behalf of Prime Minister Manmohan Singh stating why he delayed answering a letter by an opposition politician requesting permission to go to court against Raja over the scam.
Singh's Congress Party, in power since 2004, has been embarrassed by a series of corruption scandals over the past few months. Last week, Ashok Chavan, the chief minister of the western state of Maharashtra, resigned over his alleged role in a scam involving homes for war widows. Indian Commonwealth Games organiser Suresh Kalmadi also quit his party post over corruption allegations from the October event.