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India exported $94 billion of illegal capital in 2012

The total illicit financial outflows from India between 2003 and 2012 were $ 439 billion —$ 94.8 billion of that in 2012 alone — shows a study by Global Financial Integrity (GFI), a Washington DC-based research and advisory organization. 

On the list of the world’s biggest exporters of illicit financial flows from 2003 to 2012, India currently ranks fourth — after China, Russia and Mexico, in that order. Compared with the previous rankings, India and Malaysia have switched positions in terms of cumulative illicit financial outflows, with India moving to the fourth spot and Malaysia to fifth. This was mainly because of a sharp increase in outflows from India since 2008. To put the figures in perspective, the $ 439 billion of outflows come to about 23 per cent of India’s gross domestic product in 2013 ($ 1.87 trillion). 

GFI President Raymond Baker said: “The most troubling… is the fact that these outflows are growing at an alarming rate of 9.4% a year —twice as fast as global GDP,” adding “it is simply impossible to achieve sustainable global development, unless world leaders agree to address this issue head-on”. 

The study estimates illicit financial outflows from two sources: As a result of deliberate trade misinvoicing, and due to leakages in the balance of payments (known as illicit hot money narrow outflows). According to the study, while trade invoicing accounted for 77.8% of illicit flows from all developing countries over the period, this number was 85.3% for Asia. 

The report says it is likely the repatriation and surrender requirements create strong incentives for exporters to under-invoice exports as a way to circumvent these requirements.

GFI’s Joseph Spanjers said: “Illicit financial flows have major consequences for developing economies,” adding these funds “could have been invested in local businesses, health care, education, or infrastructure. Without concrete action to address illicit outflows, the drain on the developing world is only going to grow larger”.


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