Quiet flowed the moolah

“Any discovery by Americans about black money stashed in tax havens by Indian politicians, bureaucrats and businessmen can be damaging here. So before questions are being raised about sources of their funds, they are bringing their money back to India,” says a banker.

The US, in its fight against terrorism, has begun exerting pressure on countries with banking secrecy laws, to disclose details of account holders. No wonder, official data released by the RBI says that the country’s foreign exchange reserves have shot up to record levels of $ 75 billion as of last week.

But even before Sept 11, the money had started coming back. “Many businessmen want to settle their loans with Indian financial institutions after the recently promulgated Securitisation Act. Now, they are bringing back the same money they siphoned off abroad through the Hawala route,” says a banker.

Bankers estimate that Indians have over $ 150 billion (Rs 720,000 crore) —— almost double of country’s forex reserves —— stashed in secret accounts in Switzerland, Luxembourg, the Cayman Islands, and Gibraltar. To get back these funds to India is a mammoth almost impossible task for the government.

“You can imagine the kind of development work this country could have done with that kind of money…. Hawala has destroyed Indian economy drastically during the peak time of gold smuggling,” says a Mumbai-based former bureaucrat.

In the last 40 years, most of the black money has been taken out of the country through under-invoicing of exports and over-invoicing of imports. It is now slowly coming back to India, primarily through over-invoicing of exports and through remittances by Indians working abroad.

Former leather exporter Sudhir Patekar (named changed), now based in Pune, says their export firm used the hawala route largely because their clients in the Gulf preferred to pay in cash to save their import duty. ‘‘In those days, when leather exports enjoyed some benefits, we used to lose out on some government policy benefits if we did cash transactions. But, since the clients who imported our goods were interested in saving about 10 per cent import duty, we had no option but to use hawala.’’

Explaining the transaction, the exporter said for a transaction of Rs 1 lakh worth of goods, the Gulf importers had to pay a 10 per cent import duty (Rs 10,000). They preferred to pay 50 per cent in cash, and pay duty on half the original amount. The Indian export firm under-voiced the consignment of goods, and showed they had exported Rs 50,000 worth of goods, and not Rs 1 lakh.

Today, NRIs are the biggest remitters in the planet by sending $ 10 billion from abroad to India.

Andheri-based software engineer M Nilesh used the hawala route when he had to encash dollars after return from the US where he had gone on a project. He had travelled on a business visa, and after his return to Mumbai, he contacted a dealer who worked as a purser with an Indian airline to encash his dollars.

“Now transfer of money from overseas has become legal and easier. You can credit money to your Indian bank through money transfer companies without RBI permissions. Some companies offer you cash deliveries, while others credit the amount to your local bank account. So, hawala is on a decline,” he says.

It shows in a little neighbourhood near Manhattan. Wearing an overcoat over her salwar suit, Charanjit Kaur (45) sits with her friend Guddi (47) in a children’s park in Jackson Heights, New York. The gold she wears is enough for her to go for a wedding reception. But Charanjit is just keeping an eye on her 10-year-old son Taar who is playing among friends who teased him yesterday. They called him Bin Laden. Scared for her family, but there is no way they are folding up their dollar dreams and going back to Ludhiana.

She sent 2,000 USD her cabbie husband earned last October through the hawala route. Her sister was getting married in Old Sabzi Mandi, Delhi. She went to this travel agent who sits under the metro line in Elmhurst. In Delhi, the packet of money (at the rate of Rs 50/dollar instead of the official Rs 47/dollar) reached the house at 9 in the morning while breakfast was being served.

She has to send money again to her brother who is buying an acre of land in a village in Gurdaspur. Guddi dissuades her to use hawala. ‘‘The war (in Iraq) is on, they are not accepting money,’’ she reasons. On their way back home, they go to a Western Union counter. Charanjit finds the difference to be just Rs 800. In Dollars, that is a fraction of their daily budget. She decides to go Western Union.

Bankers say some part of money has also made the return journey as foreign currency gifts which can be maintained in foreign currency (domestic) accounts that were recently permitted by the RBI. With Indian banks still giving the highest interest rates in the world, NRIs prefer to keep their money in India rather than abroad.

(With Satish Nandgaonkar in Mumbai)