The Swiss National Bank has provided the first official estimate of how much Indian money has been put away in Swiss bank accounts: $2.5 billion at the end of 2010. Since Switzerland has traditionally been considered a favourite banking destination for capital that has flown out of India, the recent estimate suggests that the amount of Indian money in foreign banks is far more modest than what most Indians believe.
Now compare this with what Global Financial Integrity, a US group that is considered an authority on these matters, has said in its recent reports: around $462 billion of Indian money is stashed away abroad. So where is the rest of the money?
There are two possibilities. First, Indian money is being held in Swiss banks through an intricate web of investment companies that have been registered in tax havens around the world, not surprising to anybody who remembers the money trail in the Bofors case. So the official Swiss numbers do not capture the full extent of the illegal hoard.
The second possibility is that Indians have moved money out of Switzerland ahead of a possible treaty between the two countries to share financial information. Wealth managers have hinted at this possibility in private. The money has either moved to other countries or been routed back to India. One theory doing the rounds is that the strong export figures in recent months despite a weak global economy can be explained by the return of black money back into India through over-invoicing of exports.
Black money stashed away in foreign banks has been a hot-button issue in recent years, with estimates of as high as $1.5 trillion being bandied about. The numbers put out by the Swiss authorities suggest that number is far lower. The truth almost definitely lies somewhere in between.