Since the time of Dadabhai Naoroji, Indians have always been captivated by the idea that our national wealth is slowly being drained abroad. That is why the Supreme Court's decision to set up a Special Investigation Team to ensure the return of money stashed abroad will be widely welcomed. What happens to the ill-gotten gains stashed at home, however, is anybody's guess. Black money is generated by the desire to evade taxes and hide assets disproportionate to known sources of income but populist political discourse on the subject has paid scant attention to this dynamic. Understandably, the focus is on the more emotional — but hard to quantify — problem of illegal bank deposits abroad. Upset by the slow progress made by the government's High Level Committee on the return of black money, the Supreme Court has now justly decided that its work must be supervised. To the extent political considerations are undermining the fight against black money, the SIT could act as a welcome antidote. But the court may also wish to frame the problem more comprehensively. Black money, after all, refers to the sum total of unaccounted income, and not just the funds spirited away to Switzerland, Lichtenstein, or some other foreign safe haven. The SIT must identify the legal and diplomatic tools the government can use to pierce this veil of secrecy. But unless it comes to grips with the overall pathology of black money, the political economy of India is likely to remain vulnerable to corruption.
In proceeding against unaccounted money, the judiciary — which scores high in public esteem — must push for urgent and far-reaching reforms in the way the Indian property market functions. Corruption in government contracts and licensing may generate large individual chunks of black money but for sheer overall volume, the top culprit is property. Every day, property transactions up and down the country add to the national stock of unaccounted money. Simply put, buyers and sellers collude in under-reporting the true value of the transaction. Usually, more than half the true sale price is paid in cash, depriving the state of capital gains tax and stamp duty. The cash received is often recycled back into the property market, where the returns are extremely high. What this means is that the focus of public activism, political outrage, and judicial concern on black money ought to be as much inward as it is westward. Seizing the moment, the SIT can and must devise a way to bring our wealth back from abroad. But if it can also push for simple reforms in the property market to clean up transactions, it could make a huge contribution towards ending the problem of black money.