BLACK MONEY IN SWISS BANKS.

I think the quantum of black money in Swiss banks is unduly magnified by the media in India. Everyone has their own estimate but absolutely without any logical foundation. 

First of all why does a citizen need black money and how does he get it into Swiss banks? There are many ways of generating black money but the most important are:

1. Out of book transactions:

2. Manipulation of books of account:

3. Manipulation of sales/receipts/expenditure:

4. Corruption:

5. Manipulation by Way of International Transactions:

Out of the 5 major methods, only the 5th point generates foreign currency that could be stashed away in Swiss Banks.

Logically there is no reason for any Indian citizen to stash away money in Swiss banks when an area like the real estate in India gives them tremendous opportunity to invest the black money clandestinely avoiding all attention. Moreover the real estate sector delivers returns to them which no Swiss bank can match.

Therefore it appears that the money stashed away in Swiss banks is generated exclusively through international trade that cannot be channelized back to India easily. It may also include commissions on international contracts, specifically in areas like Defence.

Let us now examine as to what may be the quantum of black money in India. A.Schneider estimates, using economic variables arrived that the size of India's black money economy is between 23 to 26% of its GDP which is less than the average for Asian countries. The GDP of India is around 5,50,000 crores in 2012-13 at 2004-05 constant prices. If we take Schneiders estimates and consider the black money quantum to be 25%, then the black money in our economy is likely to be Rs 1,37,500 crores.

In early 2011, several reports in Indian media alleged Swiss Bankers Association officials to have said that the largest depositors of illegal foreign money in Switzerland are Indian. These allegations were later denied by Swiss Bankers Association as well as the central bank of Switzerland.

James Nason of Swiss Bankers Association alleged that the black money figures were rapidly picked up in the Indian media and in Indian opposition circles, and circulated as gospel truth. He stated that this story was a complete fabrication. The Swiss Bankers Association never said or published such a report. Anyone claiming to have such figures (for India) should be forced to identify their source and explain the methodology used to produce them.

Government has passed resolution for a Double Taxation Avoidance Agreement with Switzerland to provide means for investigations of black money in Swiss banks. This revision, will allow the government to make inquiries of Swiss banks in cases where they have specific information about possible black money being stored in Switzerland.

In 2011, the Indian government received the names of 782 Indians who had accounts with HSBC. As of December, 2011, the Finance Ministry has refused to reveal the names, for privacy reasons, though they did confirm that no current Members of Parliament are on the list. In response to demands from the BJP release of the information, the government announced on that it would publish a white paper about the HSBC information.

According to White Paper on Black Money in India report, published in May 2012, the Swiss National Bank estimates that the total amount of deposits in all Swiss banks, at the end of 2010, by citizens of India were INR 9,295 crore or US$ 2.1 billion. The Swiss Ministry of External Affairs has confirmed these figures upon request for information by the Indian Ministry of External Affairs. Therefore the statement that Swiss banks accounts contain lakhs of crores of black money cannot be substantiated.

P.S.A lot of matter from the above write up has been taken from Wikipedia. It also contains information from other sites. The information is mixed with my own input for arriving at this. .