In a sensational News Global Financial Integrity reported that India stole 343.93 Billion US $ from the World during the period 2002 to 2011, by way of illicit financial outflows.
It is not clear to me whether this information is biased as it is from a source being funded by Ford Foundation , which is suspect.
Does India Steal from the World?
”
he developing world lost US$946.7 billion in illicit outflows in 2011, an increase of 13.7% over 2010. The capital outflows stem from crime, corruption, tax evasion, and other illicit activity.
The report finds that from 2002 to 2011, developing countries lost US$5.9 trillion to illicit outflows. The outflows increased at an average rate of 10.2% per year over the decade—significantly outpacing GDP growth. As a percentage of GDP, Sub-Saharan Africa suffered the biggest loss of illicit capital. Illicit outflows from the region averaged 5.7% of GDP annually. Globally, illicit financial outflows averaged 4% of GDP. China leads the world over the 10-year period with US$1.08 trillion in illicit outflows. However, 2011 marked the first time that Russia’s illicit outflows exceeded China’s, with a loss of US$191.14 billion against China’s US$151.35 billion. The previous methodology had significantly understated Russia’s illicit outflows, while it overstated China’s illicit outflows.’
Bon voyage, billions! The wealth of Chinese Premier Wen Jiabao’s family includes lucrative cross-border investment.AP Photo/Andy Wong
‘ The bulk of its estimate, 86.2%, comes from alleged trade mispricing, as Chinese exporters massage reported sales figures with help from their foreign partners to hide profits abroad. But there are many ways for funds to find their way overseas, from art to gambling. Over the last six years, GFI believes some $596 billion in Chinese funds have been moved to tax havens.
While GFI’s estimates are large, it’s clear this is a very real phenomenon: A more conservative figure for outflows from a Standard Chartered bank economist relying only on public data suggests that at least $71 billion left China just this past summer. Another recent estimate suggests some $225 billion left in the year leading up to September 2012(http://qz.com)
Global Financial Integrity (GFI), an American research group that campaigns against illicit financial flows, believes this mis-invoicing is rampant. In a new study Dev Kar and Sarah Freitas of GFI compared China’s reported exports to the world with the world’s stated imports from China. They also juxtaposed China’s purchases from the world, with the world’s exports to China. In principle the figures should match. But the two economists found huge discrepancies between them (see chart). If, as Mr Kar and Ms Freitas recommend, China’s trade with Hong Kong and Macau is excluded, the country appears to have understated its exports and overstated its imports by a combined $430 billion in 2011.
These estimates are hard to take at face value. They imply that China’s true current-account surplus (which includes its trade surplus plus one or two other things) was almost 20% of GDP at its peak in 2007 (officially it was about 10%). But even if the figures are illustrative, rather than definitive, they highlight the difficulty of curbing the cross-border flow of capital in a country with such a heavy cross-border flow of goods.”(economist.com).
S& P’s rating of India has come in handy for all and sundry to call for advanced reforms in Indian economy.
The Ups and Downs of your Credit Rating (Photo credit: GDS Infographics)
The report cites ‘political indecision,slow implementation and introduction of Economic Reform‘ as the cause for S&P’s decision to downgrade Indian Economy.
The general meaning of our credit rating opinions is summarized below.
‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating.
‘AA’—Very strong capacity to meet financial commitments.
‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
‘BBB-‘—Considered lowest investment grade by market participants.
‘BB+’—Considered highest speculative grade by market participants.
‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
‘CCC’—Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
‘CC’—Currently highly vulnerable.
‘C’—Currently highly vulnerable obligations and other defined circumstances.
‘D’—Payment default on financial commitments.
Note: Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
“Although finance ministerPranab Mukherjeehas put up a brave face on the economy, evidence that it is on the skids can`t be glossed over any more. The industrial growth rate was a mere 0.1% in April, after falling to -3.2% in March. The fall in overall GDP growth has begun showing up in shrinking employment numbers, with jobs in labour-intensive industries such as textiles being hit particularly badly. Like the threatened downgrade of India`s investment rating by global agency Standard & Poor`s, the finance minister`s reassurances too could acquire junk status unless backed by vigorous government action.
The outlook on India`s sovereign ratings had already been revised down to the last notch of the investment grade last April. A further fall to speculative grade will not only significantly impact foreign investment inflows but also push up cost of borrowings from abroad, denting income and employment growth. The slowdown in growth and higher government spending has already eroded the targets for improvements in government finances and dampened investment flows. To reverse this trend, the government must end the policy paralysis which prevents it from implementing decisions in a wide range of areas, including multi-brand retail, pension, insurance, land acquisition, project clearances, railway fares, oil pricing, fertiliser subsidies and the goods and services tax.”
Countries with Higher Debt % to GDP are given better Rating,USA,Germany UK and Canada and Japan.
Does it mean you increase your Debt to be rated as Stable?
The rumbles on rating usually starts when US/Europe faces Monetary crisis.
Is it to enable them to stabilize themselves at the cost of others?
How is it that limping economies can help improve a better performing Economy?
I know the reply will be in jargons, which does not make common sense.
How has the increase in FDI in Insurance benefitted India?
Policy Decisions to help multi-brand retail, pension, insurance, land acquisition, project clearances, railway fares, oil pricing, fertiliser subsidies and the goods and services tax are needed?
For?
To allow multi Brand Retail Chains,allow people.under the guise of Corporates to grab agricultural lands, increase Rail Fare, Goods and Service Tax?
How are these Companies performing in relation to improving Indian Economy?
Even to-day LIC is performing better.
Handing over infrastructural projects to foreign business may help them make more money.
Why not pump India money for these projects?
Yes policy indecisions are there.
They are to be corrected,not necessarily the one relating to FDI alone.
Look at Argentina,Brazil,Ireland, Greece and now Spain who followed IMF prescriptions till the other day!
However Figures from CIA are to be taken with a pinch of salt as it is notoriously inadequate and often incorrect.
You can check out CIA site.
This document explains the categories, metrics and methodology used in Newsweek’s ranking of the world’s best countries, and associated interactive infographic.
Size groups are based on population with large being greater than 50 million, medium being 20 to 50 million and small being less than 20 million.
Categories and Metrics
1. Education
Academic Achievement
Combined universal score on TIMSS and/ or PISA tests using Eric Hanushek‘s normalization methodology. For schools that do not administer these tests, an achievement score was imputed by doing a regression of literacy rate (CIA World Factbook) and average years of schooling against the universal score. [1],[2]
Quick Rationale: Captures overall efficacy of system and differentiates developing countries. Measures education achievement…..
Methodology for Creating Index
Seems to be a fair assessment.
Raw data for 100 countries were normalized on a 1-100 scale (except in Education, see note above) according to the following:
Sample min/max are lowest and highest country scores (with adjustment for outliers on GDP as indicated).
Each individual metric was given equal weighting within each of the five categories with some metrics being comprised of 2-3 submetrics that were also weighted equally.
Each category was weighted equally to arrive at overall index.
If high value indicates a worse outcome, index is calculated according to:
The truth is visible to everybody except the Government of India.
Instead of taking action it is hiding behind euphemisms like ‘secret, ‘bilateral arrangements,diplomatic relations’ etc.’
Story:
India’sunderground economy is closely tied to illicit financial outflows. The total present value of India’s illicit assets held abroad ($462 billion) accounts for approximately 72 percent of India’s underground economy. This means that almost three-quarters of the illicit assets comprising India’s underground economy—which has been estimated to account for 50 percent of India’s GDP (approximately $640 billion at the end of 2008)—ends up outside of the country. (vii, 19)
The finding that only 27.8 percent of India’s illicit assets are held domestically support arguments that the desire to amass wealth illegally without attracting government attention is one of the primary motivations behind the cross-border transfer of illicit capital. (vii, 19)
In the post-reform period of 1991-2008, deregulation and trade liberalization accelerated the outflow of illicit money from the Indian economy. Opportunities for trade mispricing grew and expansion of the global shadow financial system—particularly island tax havens—accommodated the increased outflow of India’s illicit capital flight. (Introduction)
There is a statistical correlation between larger volumes of illicit flows and deteriorating income distribution. (35)
Recommendations.
Tax evasion is a major component of the underground economy, which in turn is a primary driver of India’s illicit outflows. Expanding India’s tax base and improving tax collection has high potential to curtail illicit flows.
Illicit financial flows cannot be curtailed without the collaborative effort of both developing and developed countries. Economic reforms key to stemming the outflow of illicit money from India and the developing world in general include:
curtail trade mispricing (a widely utilized tax avoidance technique of international businesses);
New York —Nigeria might have lost $130 billion from 2000-2008 to illicit financial flows, a new report issued by US-based group, Global Financial Integrity, GFI, said.
The report entitled “Illicit Financial Flows from Developing Countries: 2000-2009,” said Nigeria had the 10th highest measured illicit outflows in the developing world, an average of $15 billion per year.
The North America Correspondent of the News Agency of Nigeria, NAN, reports that the GFI report ranks countries according to magnitude of illicit outflows.
According to the report, China is ranked the highest country of measured illicit outflows in the developing world with 2.18 trillion dollars, followed by Russia; 427 billion dollars and Mexico, 416 billon dollars.
The report also shows the annual outflows for each country and breaks outflows down into two categories of drivers: trade mispricing and “other,” which includes “kickbacks, bribes, embezzlement, and other forms of official corruption.”
Others in the top 10 are Saudi Arabia $302 billion; Malaysia $291 billion; United Arab Emirates $276 billion; Kuwait $242 billion; Venezuela $157 billion and Qatar $138 billion.
Primary findings from the report said illicit outflows increased from $1.06 trillion in 2006 to approximately $1.26 trillion in 2008.
You must be logged in to post a comment.