July 15, 2021 Sujeev Shakya

Black and white money

Two months ago, the Hawala took politicians by surprise in India and raised certain fundamental questions regarding the incestuous association between national-level politicians and the businessmen who have been holding the reins of the Indian economy. The Supreme Court´s directives to the Central Bureau of Investigation is the start, hopefully, of a much-needed drive against a rot that everyone knows exists but which has flourished unhindered thus far. The overall economic implications of such a drive is to make the Indian economy more transparent, efficient and productive. To that extent, the decision handed down by the justices is a positive economic step.

If the politics and economies of South Asia were more inter-linked, the repercussions of Hawala would have travelled swiftly to all other capitals. As things stand, however, commentators in each of India´s neighbours seem content to draw parallels and leave it at that. It is clear that none of these polities are ready, as India seems to be, to dip into the cesspool. In Karachi as in Kathmandu, they would rather pinch their noses and look away in a show of distaste.

Fingers have been raised at the prime minister of Pakistan relating to business connections of her husband, the former prime minister of Nepal, Girija Prasad Koirala, is in a tangle relating to the national flag carrier, and Gen Ershad is still fighting cases in Bangladesh for massive fraud. Nowhere, however, have things been as open and relatively transparent as in India, which speaks of a good prognosis. While India as a whole might be lagging on entrepreneurial fire, compared to China, the predictability and quality of its judiciary is one of the things that puts it in good stead versus that other Asian colossus. Hawala will benefit, not harm India in the long run.

The Hawala racket is essentially about the ill-gotten, tax-free, unreported “black money” that exists in abundance in all South Asian countries and practically runs a parallel economy in them. This black money is generated with the blessings of the politicians, who end up feeding in the same trough as partial beneficiaries. Politicians and political parties have always made money by protecting industries during the so-called socialist era, and by pushing MNCs and other bidders in the liberalised era.

Hawala was really a way to finance political expenditure. Something which is an open secret is being pushed behind a Gandhian veil that everyone sees through. It has become necessary to find a means to formalise these expenses. Though state-funded politics would be a dream, contributions to a certain extent should be openly allowed. The underlying understanding behind this idea should be that the cost of black money to the economy is higher than the cost of white money.