Black money outflow from India rises ninefold in 2012 over 2003

The outflow of black money from India to foreign countries jumped more than nine times from $10 billion in 2003 to $94.7 billion (around Rs 6 lakh crore) in 2012, according to the latest report of Global Financial Integrity (GFI).

India has replaced Malaysia as the fourth-largest exporter of black money after China, Russia and Mexico from 2003 to 2012. Such has been the upward trajectory of outflow of Indian black money to foreign countries that in 2012 India replaced Mexico as the third-largest exporter of illicit money for that year.

The study is GFI's 2014 annual global update on illicit financial flow from developing economies and is the fifth annual update of the groundbreaking 2008 report Illicit Financial Flows from Developing Countries 2002-2006. This is the first report to include estimates of illicit financial flow from developing countries in 2012, which the study pegs at $991.2 billion.

According to the report, in 2003, only $10.17 billion of black money flowed out of India with the amount going up to $19.41 billion in 2004 and to more than $20 billion in 2005. In 2006, there was surge in the outflow of Indian black money to foreign countries going up from $28 billion to $34.6 billion in 2007 and then to $47.1 billion in 2008.

There was a sudden decline in the outflow of black money in 2009 with the figure coming down to $29 billion, the report adds. But in 2010, the outflow of black money from India more than doubled to $70 billion and then increased to $86 billion in 2011. In fact, the amount of black money going out to foreign countries is now larger than the amount of hard-earned money being remitted to the country by expatriate Indians.

According to the latest World Bank report, in 2014, India is expected to receive $71 billion in remittance. This marks a sea change from 2003, when remittance was $16.39 billion as against black money outflow of $10.177 billion.

Authored by GFI chief economist Dev Kar and GFI junior economist Joseph Spanjers, the study further states that "fraudulent misinvoicing of trade transactions was revealed to be the largest component of illicit financial flow from developing countries accounting for 77.8 per cent of all illicit flow-highlighting that any effort to significantly curtail illicit financial flows must address trade misinvoicing".

The $991.2 billion that flowed illicitly out of developing countries in 2012 was greater than the combined total of foreign direct investment and net official development assistance these economies received that year.