Black money could be more than 10% of GDP: Study

February 24, 2013

As per a study conducted last year by the National Institute of Public Finance and Policy (NIPFP) on quantifying black money generated in the country, the illicit wealth is likely to exceed 10% of GDP or anywhere above Rs 10 lakh crore.

The study was headed by R Kavita Rao, head of NIPFP’s tax policy and research, and included former director general of income tax investigation SS Khan. The report has given sectoral break-up of the scope of black money such as the real estate sector, telecom, mining etc.

In 2012, the government had reacted to the furor over black money by selecting three institutions to estimate the quantum of black money. These were:

National Council for Applied Economic Research (NCEAR)
NIPFP
National Institute of Financial Management (NIFM).

The first report has been submitted by NIPFP while other two reports have not been disclosed.

Transfer Pricing Loopholes

Tax evasion through transfer pricing was highlighted in the white paper on black money tabled in Parliament in 2012.The white paper had quoted a private study report saying "developing countries may be losing over $160 billion of tax revenues a year, primarily through transfer pricing strategies".

As per the white paper, the illicit money transferred outside India may come back to India through various methods such as hawala, mispricing, foreign direct investment (FDI) through beneficial tax jurisdictions, raising of capital by Indian companies through global depository receipts (GDRs) and investment in Indian stock markets through participatory notes.

Past estimates by NIPFP:

Year Black Money (Rs crore) GDP %