Dear Editor (Herald), In your editorial of 20th January, you said, "A recent Global Financial Integrity study has estimated that illicit cross-border transactions from India amount to $462 billion in offshore holdings, or 50 per cent or the country’s gross domestic product (GDP). For every rupee legally existing in this country, there is an illegal rupee stashed abroad!" You have taken this from the November 2010 report of GFI which states: India's underground 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) First, GFI has understated India's GDP as $640 bn. IMF, World Bank and others have esimated India GDP in the range of $1000 bn and $ 1200 bn. An editorial of a leading daily, is expected to place this inconsistency before the public and if necessary, challenge and argue which figure should be correct and then make conclusions taking this base. Secondly, another conclusion of yours, "For every rupee legally existing in this country, there is an illegal rupee stashed abroad!" is also not consistent. While Rupees existing in the country is a measure of wealth created over years, the GDP is a measure of annual output. Mere market capitalization of companies listed on Indian stock exchanges is more than India's GDP. Then there are other businesses not listed, land, real estate, gold holdings, savings, other public and government assets including roads, railways etc. So, India's wealth could be manifold India's GDP. Thirdly, GFI speaks only of outflow (over-invoicing of imports, havala etc). Whether it accounts for inflows not accrued due to under-invoicing of exports is not clear. This may be higher than outflows in the case of India. Interestingly, the latest, the January 18, 2011 report of GFI ranks countries according to magnitude of outflows (2000-08 ) with China ranking 1 ($2.18 trillion), Russia 2 ($427 billion), Mexico 3 ($416 billion), Saudi Arabia 4 ($302 billion), and Malaysia 5 ($291 billion). In this report, India is placed low at rank 15 with $105 bn for 2000-08 period! This in response to Herald Editorial: http://www.oheraldo.in/newscategory/Edit/15 Rajendra Kakodkar
