International Economy - Current Affairs for May, 2017

Over $21 billion worth of black money was illegally taken out of India in 2014, according to the latest report by the international watchdog Global Financial Integrity (GFI).

This illicit outflow was nearly 19% more than that recorded the previous year.

GFI has, for the first time, given information on the equally damaging inflow of illegal funds in this report, with India being the destination of a staggering $101 billion in 2014, up nearly 11% over the previous year.

Globally, the report estimates that between $620 and $970 billion was drained out of the developing world, primarily through trade fraud.

Illicit inflows are estimated at a mind boggling $1.4-2.5 trillion.

Combined, illicit outflows and inflows accounted for 14-24% of total developing country trade over 2005-2014.

This year's GFI report stands out from its previous reports for adopting a much more rigorous method of collecting and analysing information on international trade and balance of payments.

Besides using IMF global data on direction of trade, the report has included information from other sources to plug gaps.

Inclusion of Swiss data on gold exports, that was earlier omitted, has led to a drastic revision of India's outflow and inflow figures.

Although both the lower and higher ends are described by the economists as “conservative” because it is difficult to trace all illicit transactions, the higher-end estimates are closer to previous years' estimates while the lower ones take into account only trade gaps with advanced economies.

About 87% of the global illicit financial flows are happening through trade misinvoicing

Recommending a slew of measures, the report primarily suggests a much better trained and equipped customs staff and stricter scrutiny of trade deals.

It also indicates global cooperation in exchanging information on bank accounts, especially in tax havens.