India lost $123 billion in illegal money transfers between 2001 and 2010: GFI

Illicit money flows from India touched $123 billion in the 10 years between 2001 and 2010, making it the world's eighth largest source of unaccounted money, according to a report released by a US-based research and advocacy organisation.

Such illicit money transfers from India seems to have tapered off to around $1.6 billion in 2010 amidst a hue and cry among civil activists over the stashing away of funds by politicians and industrialists into banks in safe havens like Switzerland.

India comes eighth in line among the world's top black money generating nations, with China, which lost around $2.74 trillion in illegal fund flows during the 10 years, topping the list, according to the report Illicit Financial Flows from Developing Countries: 2001-2010, released byUS-based research and advocacy group Global Financial Integrity (GFI).

''Crime, corruption, and tax evasion cost the developing world $858.8 billion in 2010, just below the all-time high of $871.3 billion set in 2008 - the year preceding the global financial crisis,'' GFI said in it's a new study released today.

Mexico is in the second spot with $476 billion in illegal money outflows, followed by Malaysia ($285 billion), Saudi Arabia ($201 billion), Russia ($152 billion), the Philippines ($138 billion) and Nigeria ($129 billion).

India is also the only South Asian nation to figure among top 20 in the list the eight largest black money generating nations, said the report.

"$123 billion is a massive amount of money for the Indian economy to lose," said Dev Kar, former senior IMF economist and GFI lead economist and co-author of the report.

"It has very real consequences for Indian citizens. This is more than $100 billion, which could have been used to invest in education, healthcare, and upgrade the nation's infrastructure. Perhaps last summer's electrical blackout would have been avoided if some of this money had remained in India and been used to invest in the nation's power grid," he said.

"While progress has been made in recent years, India continues to lose a large amount of wealth in illicit financial outflows," said GFI director Raymond Baker.

"Much focus has been paid in the media on recovering the Indian black money that has already been lost," he said, suggesting policymakers should instead curtail the ongoing outflow of money priority number one.

"Astronomical sums of dirty money continue to flow out of the developing world and into offshore tax havens and developed country banks," Baker said.

"Regardless of the methodology, it's clear: developing economies are hemorrhaging more and more money at a time when rich and poor nations alike are struggling to spur economic growth. This report should be a wake-up call to world leaders that more must be done to address these harmful outflows," he added.

Loss to developing economis
In the 10 years from 2001 to 2010, developing countries lost $5.86 trillion to illicit outflows. In 2010 alone  the developing world lost $859 billion to illicit outflows  crime, corruption, tax evasion, and other illicit activity  - an increase of 11 per cent over 2009.

The worst sufferer, China, suffered a loss of $2.74 trillion during the same 10 years, followed by Mexico ($476 billion), Malaysia ($285 billion), Saudi Arabia ($201 billion), Russia ($152 billion), the Philippines ($138 billion) and Nigeria ($129 billion).
 
Conservatively estimated, illicit financial flows have increased in every region of developing countries. Real growth of illicit flows by regions over study period is as follows:

• Africa 23.8 per cent,
  
• Middle East and North Africa (MENA) 26.3 per cent,
  
• Developing Europe 3.6 per cent,
  
• Asia 7.8 per cent, and
  
• Western Hemisphere 2.7 per cent.

Top 10 countries with the highest measured cumulative illicit financial outflows between 2001 and 2010 were:

• China: US$2.74 trillion
  
• Mexico: US$476 billion
  
• Malaysia: US$285 billon
  
• Saudi Arabia: US$210 billion
  
• Russia: US$152 billion
  
• Philippines: US$138 billion
  
• Nigeria: US$129 billion
  
• India: US$123 billion
  
• Indonesia: US$109 billion
  
• United Arab Emirates: US$107 billion