The corrupt have drained India of $462 billion (about Rs 20.8 trillion) between 1948 and now, says a report by Global Financial Integrity (GFI), a Washington-based think-tank.

The report mentioned that India’s aggregate illicit flows are more than twice its current external debt of US $230 billion. “The report finds that the poor state of governance is reflected in a growing underground economy which in turn has fueled more transfers of illicit capital from India.”

In terms of the total gross domestic product (GDP), the report finds that the ‘total capital flight out of India represents approximately 16.6 percent of India’s GDP as of year-end 2008.’ According to the study titled 'The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008', “India lost an equivalent of about 36 percent of its 2008 GDP which represents a staggering loss of capital.”

On an average, the GDP amounts to be 1.5 percent of India's economy annually.

The report says that the illicit money transfer has increased since the liberalisation of the country in 1991. “Some 68 percent of India’s aggregate illicit capital loss occurred after India’s economic reforms in 1991, indicating that deregulation and trade liberalisation actually contributed to/accelerated the transfer of illicit money abroad,” the report noted.

The private sector has to be equally blamed for this siphoning of money. “From 1948 through 2008 the Indian private sector shifted away deposits into developed country banks and moved more of its money into offshore financial centers (OFCs).  The share of OFC deposits increased from 36.4 percent in 1995 to 54.2 percent in 2009,” the report added.

“It also shows that these illicit outflows contribute to stagnating levels of poverty and an ever widening gap between India’s rich and poor,” said Global Financial Integrity director Raymond Baker.

Talking about the report, he said, “This report puts into stark terms the financial cost of tax evasion, corruption, and other illicit financial practices in India.”

India’s underground economy is also a significant driver of illicit financial flows, the report noted. “In this report we clearly demonstrate how India’s underground economy is closely tied to illicit financial outflows,” said GFI lead economist and report author, Dr. Dev Kar.

“The total present value of India’s illicit assets held abroad 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 US $640 billion at the end of 2008)—ends up outside of the country,” Kar added.

The report also suggested that India should initiate economic reforms and good governance measures to contain illicit financial flows, economic indices, and history of financial reforms.

Read the report