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Understanding Black Money: Why Jaitley needs to do more

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By Harshmeet Singh

The awakening of society towards the issue of black money can be credited as much to the media as to the innumerable agitations over the past 5 years.

After a long wait, tough talking Arun Jaitley has finally announced some stringent laws to deal with the offenders of the Foreign Exchange Management Act. According to the proposed law, a rigorous imprisonment of up to 10 years along with a 300% tax penalty will be awarded to those failing to disclose foreign assets.

Apart from proposing severe consequences for the offenders, the FM also stated that the Government was in the process of devising a plan to encourage voluntary disclosure by allowing people to repatriate their black money by paying the appropriate taxes.

Albeit experts and agencies differ in their estimation of the total Black money stashed in foreign banks by the Indian residents, all of them peg the amount to be a significant proportion of our GDP.

black money

How Black Money originates

Contrary to the common belief, Switzerland is fast losing its position as the ‘favourite’ destination for India’s Black money. With all eyes on the Swiss Banks, the depositors are now eyeing safer destinations. A number of individuals have resorted to round tripping to convert their unaccounted money. Round tripping essentially refers to Indian money going abroad by illegal routes, such as Hawala and then coming back to the country in the form of investments or remittances. Tax havens such as Mauritius have attracted huge funds over the past decade, owing to Round Tripping. While it may seem like an easier route to bring back the black money, the evasion of tax at the first instance causes huge losses to the exchequer.

GMR, Reliance Communication also round trip

Surprisingly, a number of listed companies have also come in the net of allegations of round tripping, with SEBI issuing notices to Reliance Communication, GMR and United Spirits.

Circulating money via Villages

Even though the phrases ‘black money’ and ‘stashed abroad’ are usually taken in a single breath, the amount of black money circulating within the borders of the country can’t be underestimated. One of the most common, yet unnoticed ways of circulating black money is through private money lenders in villages. With nationwide financial inclusion still a far off realization, the unbanked villages in India number more than 4 lakh. Lack of credit facilities forces the farmers to take loans from local moneylenders at exorbitant interest rates of 25% – 30%. Such mechanisms provide a fertile base for the black money holders to circulate their illegal or unaccounted cash without raising anyone’s eyebrows.

The Government, by its own admission, is trying its best to bring all the black money holders to the fore. One hopes that probes in matters such as HSBC leak list don’t take the ‘eternal’ path and are fast tracked to keep pace with the big promises made.

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Karnataka Polls: BJP On The Way to Win, Congress May Get Hard Defeat

Any party or grouping will need 113 of the total 224 seats to secure a majority in the Assembly. Polling did not take place in two constituencies on Saturday.

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A state of 60 million people, Karnataka is home to the Information Technology hub of Benguluru and was ruled by the BJP once before.
Congress may have to taste defeat in Karnataka, VOA

The BJP was on Tuesday set to return to power in its southern bastion Karnataka as its candidates crossed the half-way mark in vote count, stunning and ousting the ruling Congress and leaving the JD-S at the third spot.

Noisy celebrations broke out in party offices in Bengaluru, New Delhi and across Karnataka as Bharatiya Janata Party nominees were on the victory lap in 118 of the 222 constituencies which voted on Saturday.

This was a dramatic jump from the 40 seats the BJP won five years ago.

The Congress, desperate to retain power in the state amid shrinking appeal nationally, suffered major blows and was ahead only in 62 seats, with Chief Minister Siddaramaiah trailing in both the constituencies he contested: Badami and Chamundeshwari.

The Congress leader was way behind G.T Deve Gowda of the Janata Dal-Secular in Chamundeshwari, Election Commission officials said. And after leading initially, Siddaramaiah fell behind B.R. Sriramulu of the BJP in Badami.

In contrast, the BJP’s Chief Ministerial face B.S. Yeddyurappa was ahead of his Congress rival by more than 11,000 votes in Shikaripura.

Energy Minister and Congress leader D.K. Shivakumar said that the numbers indicated that his party was on the way out after five years in power.

Any party or grouping will need 113 of the total 224 seats to secure a majority in the Assembly. Polling did not take place in two constituencies on Saturday.

The BJP was overjoyed. “We are in a jubilant mood because we have crossed the half-way mark. We are confident of winning,” spokesman S. Shantharam told IANS.

BJP activists and leaders celebrated noisily in both Bengaluru and New Delhi, waving party flags and shouting slogans hailing Prime Minister Narendra Modi, their main vote-getter, and party President Amit Shah.

There were also celebrations outside the residence of Yeddyurappa, who has been Chief Minister earlier too.

Of the 2,654 candidates in the fray for the May 12 Karnataka Assembly elections, at least 883 are crorepatis and 645 have criminal cases against them, said two watchdogs after analysing their affidavits filed with the Election Commission (EC).
Karnataka Polls counting suggests big win for BJP, wikimedia commons

The Janata Dal-Secular of former Prime Minister H.D. Dewe Gowda, which has been expected to play the role of a kingmaker in the event of a hung Assembly, was leading in 40 seats — the same number it won five years ago.

As the vote count progressed, BJP leaders became assertive, saying they were confident of taking power again in Karnataka while Congress leaders began to speak about the possibility of an alliance with the JD-S.

BJP leader and Union Minister Sadanand Gowda said that there was no question of any alliance.
Union minister Prakash Javadekar, who is in charge of Karnataka, met BJP President Amit Shah in New Delhi.

Analysts said the BJP was leading in Lingayat dominated seats and the JD-S in Vokkaliga dominated areas.

Expectations of a BJP victory in Karnataka lifted the key Indian equity indices during the mid-morning trade session on Tuesday.

Modi’s Performance: Survey Reports That Significant Number of People Rate Performance of Modi Government as Below Expectations

According to market observers, broadly subdued Asian indices and disappointing macro-economic inflation data points released on Monday capped some gains.

Sector-wise, healthy buying was witnessed in banking, capital goods, metals, consumer durables and automobile stocks.

The Sensex has so far touched a high of 35,993.53 points and a low of 35,498.83 points during the intra-day trade. (IANS)