Washington, DC: Between six and seven trillion dollars worth of black wealth lies hidden in tax havens across the world, according to a fresh estimate by a trio of senior economists from the Bank of Italy. Indians’ share in this is estimated at $152-181 billion, by one calculation. This is only wealth invested in shares and debt securities or held in bank deposits. It is impossible to get a handle on other wealth invested in physical assets like real estate, gold or art.
Released this week, these estimates follow the train of several such estimates in recent years with Gabriel Zucman, of London School of Economics, estimating it at $7.6 trillion, Boston Consulting Group at $8.9 trillion and Tax Justice Network at $21 trillion.
All of this wealth is held in tax havens, which are jurisdictions with weak regulations and strong secrecy laws, using shell companies to conceal original identities. The Italian economists analysed data from IMF and the Bank of International Settlements (BIS) to arrive at the figure. When asked by TOI to estimate the Indian share in this gigantic treasure trove, the researchers were cautious.
There can be two ways of doing this, they told TOI via email. One is to assume that the Indian share in this global hidden wealth was simply the same as India’s share in global GDP, that is, about 2.5% in 2013, the year for which this data pertains. By this measure, the Indian share of hidden wealth is $152-181 billion. That’s about Rs 8.9 to 10.5 lakh crore. Another way of finding out the Indian share of undeclared assets is to look at the Indian share in actual declared portfolio assets—about 0.07% of the total—and assume that the same is valid for hidden assets. By this way, India’s share in black assets works out to $4-5 billion or about Rs 25,000-30,000 crore.
These figures for India are just indicative and the three economists — Pellegrini, Sanelli and Tosti — were insistent that they “have to be considered with great care and in no way can represent firm data”. But, having said that, there is no other way of getting even a glimpse of the secret stockpile of wealth stashed away abroad by Indians. So, as a ballpark figure, it does give a hint of what lies buried.
Why is there a big discrepancy between the two methods of calculating India’s hidden wealth in tax havens? As the Italian researchers explained, Indians seem to have a much lower propensity for investing in foreign financial assets — that’s why their share in global offshore financial assets, as calculated from IMF data, is a puny 0.07%. But will this reluctance extend to secret investments too? Nobody knows.
In all probability, Indian share in foreign black money is somewhere between the two estimates computed above. This is supported by estimates of offshore wealth growth by various agencies. In the Global Wealth 2015 Report, the Boston Consulting Group says that shares of offshore wealth from Middle East and Africa region, Latin America and Asia Pacific were higher than Western Europe and North America, although it also points out that Asia-Pacific contribution is not so high.