Our own drain

Congress pioneers in the 19th century made the drain of wealth from India abroad a major plank of their critique of the British rule.

Written by Meghnad Desai | Published: January 30, 2011 1:26:17 am

Congress pioneers in the 19th century made the drain of wealth from India abroad a major plank of their critique of the British rule. Dadabhai Naoroji wrote Poverty and Un-British Rule in India as a powerful indictment of foreign rule. The drain was estimated as being around 4-5 per cent of India’s national income. This went to London as an unrequited transfer. India,the nationalists argued,could be richer if only the drain stopped. The drain shrank during the Great Depression and almost vanished by 1939. Yet the memory of that looting stayed in national memory.

Of course,the maharajas and rajas were also looting the people but that was an internal drain spent at home on hiring retainers and abroad on Rolls Royces and foreign mistresses. No one has ever calculated how much those kings cost the poor people of India. The nationalist idea was that they may be robbers,but at least they were our own desi robbers.

Now we have globalised and grown. So the drain takes bigger forms. After all,the 26 people whose names we will never know because of the agreement with Germany,may have stashed away $1.8 lakh crore. Since the dollar is around Rs 45,this ‘drain’ is 45 times the 2G scam which was also 1.8 lakh crores but in rupees. Of course,the 26 accounts are just a tip of the iceberg. Who knows how many more accounts are stashed abroad,in Switzerland,Cayman islands,Liechtenstein,Dubai,Panama,Mauritius etc.

We can be proud of one thing at least. We no longer need foreigners to drain money abroad. We can do it on our own. In the old days of capital controls,much of this money was black and sloshed around the Indian economy,financing films and drugs,crime and prostitution. It also went into buying politicians. This money did not stay idle but circulated,earning high rates of return. It just escaped taxation. Even today,there is a vast black economy; ask any shop owner in a Delhi shopping mall. The money stashed in Switzerland earns a return but not by being invested in India. It must be financing crime,drugs etc somewhere else.

I do not expect any of this money will be brought back,or that anyone will be punished. Only a few days ago we were reminded of the unpaid tax liabilities of Win Chadha and Ottavio Quattrocchi. The Indian political system is not capable of nor interested in tackling corruption. It is well known that the entire financing of the democratic political process—most of the political parties with the exception of the Left parties are deeply complicit in it. We gather casually that the day before Yashwant Sonawane was burned to death by the kerosene mafia,Rs 25 crore was passed on to Maharashtra’s politicians. This may be denied,but is most likely to be true. Every government restriction on the prices of essential commodities is exploited as a chance to collect loot. Indeed,every time the government plugs a loophole blaming market failure,you can be sure that it is an income generator for the political system.

The politicians’ loot is rather like that of the maharajas and rajas. A lot of it recycles back into the economy,hiring crowds to come and greet the Leader giving a public speech,bribing voters,hiring the hard men to beat up the Opposition (this is done by the Left as well) etc. This is an internal drain but is helping the economy in many legal and illegal ways. After all,it makes Indian democracy possible.

If Dadabhai was worried about the poverty of India and the missed opportunities which the drain represented,today the political system is relaxed about such matters. After all,the economy is growing at 8 to 9 per cent and the government coffers are full with the legally paid taxes. Why then bother about such small matters as Swiss accounts or 2G scam or black money in politics? We know the economy is growing fast,thanks to all this black money. Maybe the true growth rate is 12 to 13 per cent,if only it was visible. It may be criminal,but who cares?

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