A white paper on black money was tabled in the Lok Sabha by the former finance minister, Pranab Mukherjee, on May 21, 2012. As he noted in the foreword to the white paper, it was presented in response to the issue of corruption coming to the forefront of public discourse. He noted two issues that had been raised in the debate, namely, the magnitude of black money, including the unaccounted for wealth stashed abroad, and the inadequacy of the government’s response in addressing these issues. He added frankly: “This document seeks to dispel some of the views around these two issues and place the various concerns in a perspective.”
The paper highlights the complexity of the problem and tries to define black money. It notes that “money that is not fully legitimate in the hands of the owner” may be so owing to two reasons: “The first is that the money may have been generated through illegitimate activities not permissible under the law, like crime, drug trade, terrorism, and corruption, all of which are punishable under the legal framework of the state. The second and perhaps more likely reason is that the wealth may have been generated and accumulated by failing to pay the dues to the public exchequer in one form or other.” While accepting that the problem is complex and the distinction drawn is valid, I am left dissatisfied with the wide variation in the estimate of black money drawn from different studies. It is for economists to assess whether the white paper could have given a more definite estimate. The paper then goes into details about the institutions in place to deal with black money. I am also left wondering, when so much is being done to curb black money, why the problem persists at all.
The paper, when looked at closely, appears to recognize that black money comes from crime or corruption. “The ‘criminal’ component of black money,” it goes on to elaborate, “may include proceeds from a range of activities including racketeering, trafficking in counterfeit and contraband goods, smuggling, production and trade of narcotics, forgery, illegal mining, illegal felling of forests, illicit liquor trade, robbery, kidnapping, human trafficking, sexual exploitation and prostitution, cheating and financial fraud, embezzlement, drug money, bank frauds, and illegal trade in arms. Some of these offences are included in the schedule of the Prevention of Money Laundering Act 2002. The ‘corrupt’ component of such money could stem from bribery and theft by those holding public office — as by grant of business, leakages from government social spending programmes, speed money to circumvent or fast-track procedures, black marketing of price-controlled services, and altering land use regularizing unauthorized construction. All these activities are illegal per se and a result of human greed combined with declining societal values and inability of the state to prevent them.” The paper disappoints in not considering the nexus between crime and corruption and thus failing to go to the root of the problem.
Most of the measures that appear promising in addressing the problem of black money are not yet in place: the lok pal and lokayukta bills, the citizens’ grievance redressal bill, or the public procurement bill. It is widely known that poverty reduction programmes have become areas of corruption. The welfare scheme started under the Mahatma Gandhi National Rural Employment Gurantee Act of 2005, for example, has come under criticism for not addressing adequately those for whom the scheme is meant. As to the lok pal bill, we all know the kind of drama that was enacted in the name of upholding the primacy of Parliament.
Thus, the paper ends without a clearer picture of the magnitude of black money. Indeed, it seems ironical in the midst of what is happening around us that the paper suggests, with a hint of smugness, that India compares favourably with the world average in terms of the weighted average size of the shadow economy (as a percentage of ‘official’ gross domestic product). It fails, moreover, to convince the reader of the adequacy of the government’s response to the issue of black money. Indeed, as noted earlier, it fails to go to the root of the problem.
It is reported that the prime minister, Manmohan Singh, has admitted recently that faster economic growth and new areas of economic activity have led to newer opportunities for corruption. In referring to this comment, T.N. Ninan has written in Business Standard (October 13, 2012) that “every (alleged) scandal has involved politicians and/or people linked to politicians — in the spectrum scam, the Commonwealth Games, Adarsh, coal allocations, Maharashtra’s irrigation projects, and now Gurgaon real estate. While some of these individuals have been investigated and/or charged, no senior politician has addressed the rampant spoils system that has manifestly been institutionalised. Many years ago, Dr Singh headed a Congress committee to clean up political funding; nothing seems to have come of it. Instead, ‘coalition dharma’ is now the thinly disguised code-word for sharing of loot.” Yet another way of considering the problem is to view black money as a governance issue that has existed under the so-called licence raj and now under the post-licence raj because both these regimes have operated under the mafia raj of money, musclemen, and manipulators of democratic institutions, notably politicians.
Corruption in India is not just an economic problem. That is why it cannot be left just to economists to analyse. They are likely to come up with a suggestion such as protecting bribe-givers. We need to realize that corruption in India located in a big way in the nexus between crime and corruption. To address this problem seriously, a pressing task is to reconsider democracy with respect to the manner in which it functions in the country. Corruption in India runs across the entire political order, and politics functions to ensure not the common good but the good of the persons engaged in it. It tends to throw up many politicians who make a trade of politics. This is happening in a country which still calls Mahatma Gandhi the father of the nation. If politicians are moved by narrow egoism, where is the space for concern with bigger issues? A joke illustrates this point well. It is believed that when Lalu Prasad was asked once why he had taken care of his family, not the state of Bihar, he retorted in his inimitable manner: “If I don’t take care of my family, will you?” It was obvious to him that whether as a father or as a chief minister of a poor state, if the joke is to be believed, his responsibility was to himself and his family. This raises the important question concerning who takes care of the poor who have paid the heaviest price for the rampant corruption that prevails in this country.
In his foreword Mukherjee also notes that “the success of an inclusive development strategy critically depends on the capacity of our society to root out the evil of corruption and black money from its very foundations. Our endeavour in this regard requires a speedy transition towards a more transparent and result oriented economic management system in India.” This is obviously needed and so is a fundamental change in different spheres, including in social consciousness, that will make it possible to bring about such an economic system in India and ensure its effective implementation.