In the recent revelations of HSBC whistle blower Herve Falciani, we look into who he is and how Black Money which leaves India comes back in as white money through various means.
Who is he ?
HSBC whistle blower Herve Falciani is the one leaked information & details of bank account holders in Geneva branch of HSBC – a list which later reached French government that later shared with India the information relating to Indian clients of the bank.
Why is he in the headline now?
Herve has alleged yesterday that huge amount of Black money is flowing out of India and he has offered to co-operate with the Indian Investigative agencies on the questions pertaining to Black Money. However he has sought protection for the same. Potential reason being are for the charges he faces back in Switzerland.
If it is flowing out, why and how it is flowing back into India?
Black Money goes out of India for the reason of evasion of tax, however the money which flows out get’s negligible earnings on interest rates hence it flown back into India by various means to make even bigger earning. One of the important ways in which Black Money flows back in is the FDI route.
Why would a country like Mauritius, which is primarily dependent on tourism and sugarcane able to contribute to about 40 percent of our FDI inflows. Black money which flows out, goes into a Mauritian subsidiary of a Indian (any national) company and comes back into the stock market and through FDI and the whole conversion of Black Money into capital investments and returns. Round-tripping is complete.
Are there other means than FDI?
Participatory Notes (instruments for foreign investors invest in Indian stock markets) and Gold are other means by which Black Money makes its way back into the Indian economy.
In the light of recent revelations and the means by which Black Money makes its way back to India, it is worthwhile asking, if there is any Black Money to be bought back to India or is it already in India as investments in stocks and firms reaping valuable tax benefits meant for foreign investments? The eventuality of the latter is increasing by every revelation of whistle blowers