India has the fifteenth-highest flow of slush funds among developing nations, according to a report released by a Washington DC think tank, Global Financial Integrity (GFI). Neighbouring China earns the ignominy of being ranked first. GFI, a research and advocacy organisation, pins India's losses due to outflow of illicit liquidity at $104.1 billion during the period 2000-2008, a period when India's economic liberalisation was gaining pace.

The figure is a staggering ten times of the government of India's total allocation to the education sector in 2010-2011.

However, India is ranked fourth among developing Asian countries. “The top five Asian countries – China, Malaysia, Philippines, Indonesia, and India – on average account for 96.5 percent of total illicit flows from Asia,” said the report titled ‘Illicit Financial Flows from Developing Countries: 2000-09"

It also said, “While economic reform can be largely credited for driving faster economic growth, large sections of the population could not benefit from the growth, and income became more skewed.”

Authored by Dev Car and Karly Curcio and released on Tuesday, the report warned India, “The resulting profileration of high net worth individuals drove illicit flows in the absence of an improvement in public and corporate governance.”

While there may be some succour from the fact that the 2008 IFF report ranked India's volume of illicit outflow fifth amongst nations in the same year, the tumble in rankings is definitely not due to increased efforts to clean the system.

The report credits three factor for the falll. First, illicit money outflows from countries like UAE, Kuwait, Venezuela, Qatar, Nigeria, Kazakhstan and Indonesia outpaced India. Second, there were increased inflows of illegal money into India, taking down the net  outflow figure. Third, UAE and Qatar which were excluded in earlier report in December last year were included in this update. UAE and Qatar rank sixth and ninth respectively in the global list.

China, with an illicit outflow of $2.18 trillion during the period, is at the top of both the global and the Asian list. The Asian region has accounted for 44.4 percent of total illicit flows. But the report offers some redemption for China, saying that outflow has fallen from 46 percent in 2000 to 27 percent in 2008.

“Illicit flows increased from $1.06 trillion in 2006 to approximately $1.26 trillion in 2008, with average annual illicit outflows from developing nations averaging $725 billion to $810 billion, per year, over the 2000-2008 time period measured,” the report noted.

The report predicts a figure of $1.30 trillion of illicit capital from developing countries in 2009

Bribery, theft, kickbaks and tax evasion have been namd by the report as reasons of such massive figures. According to the report, “Russia, UAE, Kuwait and Nigeria are the new sources of illicit capital.” The report also suggested this could be due to the huge revenues generated in oil producing countries. 

“As the world trade recovers, it would not be surprising to see these two channels for for illicit flows reverse again, returing trade mispricing to the dominant means of moving unrecorded funds,” Raymond Baker, director, GFI wrote. 

The first ten countries named in the report are: China ($2.18 trillion), Russia ($427 billion), Mexico ($416 billion), Saudi Arabia ($302 billion), Malaysia ($291 billion), United Arab Emirates ($276 billion), Kuwait ($242 billion), Venezuela ($157 billion), Qatar ($138 billion), and Nigeria ($130 billion).

The report has only focused on the developing countries.