By Sam Nagarajan and Patricia Lui
May 13 (Bloomberg) -- India’s government needs to follow through on pledges to bring back cash stashed overseas to help fund an $85 billion economic stimulus plan and bolster markets, Credit Suisse Group AG and Credit Agricole SA say.
“India has to claw back every cent it can get,” Joseph Tan, chief economist for Asia in Singapore at Credit Suisse, the second-biggest Swiss bank, said in an interview. The prospect of “revenue is the impetus for this crackdown on tax evasion and tax havens,” he said.
The government led by the Indian National Congress already has taken action to try to bring illegal funds held abroad back to the country, Jayanthi Natarajan, the party’s spokeswoman in New Delhi, said in an interview on May 6. The Congress party-led coalition may have won the most seats without securing enough votes to form a government, initial exit polls showed after national elections ended today.
The Global Financial Integrity program, a Washington-based non-government organization campaigning for tighter controls on tax havens, estimates “illicit outflows” from India averaged as much as $27 billion annually in the five years through 2006, equivalent to about 35 percent of the nation’s budget deficit.
Cracking down on illegal outflows from India may help extend a rally in the nation’s stocks and currency, Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Calyon, the investment banking arm of Paris-based Credit Agricole, said in an interview.
Stocks Rise
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, climbed 47 percent since closing at a three-year low on March 9, while the rupee gained 4.4 percent in the same period to 49.69 per dollar.
“If they do get back even a part of the money, it would be positive for the rupee and Indian stocks,” Kotecha said.
Calyon forecasts the rupee will appreciate almost 3 percent to end the year at 48 a dollar, while Barclays predicts 47 in six months. The median estimate in a Bloomberg survey of 27 analysts is for the rupee to trade at 49.20 on Dec. 31.
The government said in a Supreme Court filing this month that it proposed a new tax agreement with Switzerland to improve the exchange of banking information. The affidavit followed an April petition from Ram Jethmalani, a law minister in the previousBharatiya Janata Party-led government, calling for the repatriation of 70 trillion rupees ($1.4 trillion) of funds he estimates are illicitly held overseas.
India has sent notices to at least 50 people having accounts with LGT Bank in Liechtenstein AG, the Economic Times reported today, citing S.S.N. Moorthy, chairman of the Central Board of Direct Taxes.
The government is seeking to track down individuals and entities holding money illegally in offshore deposits, the newspaper said, adding that the authorities want to know the sources of these funds and if taxes have been paid on them. Shishir Jha, spokesman of the tax board, wasn’t immediately available for comment.
‘Rhetoric’
The government said in a statement filed this month it has no “authentic” estimates of the amount lying in those bank accounts.
“This is election rhetoric,” said N. Bhaskara Rao, chairman of the Center for Media Studies, an independent policy research group in New Delhi. He said he expects the government won’t follow through with its pledge.
Both the Congress party and BJP made election promises to build roads, bridges and rural health centers in a country where the World Bank estimates 76 percent survive on less than $2 a day. They also pledged to reduce a budget shortfall that swelled to 6 percent of gross domestic product, the most since 2001.
Lal Krishna Advani, leader of the BJP, vowed last month to bring back the black money within the first 100 days of its administration, the Press Trust of India reported on April 17.
“It is time India joined the queue,” Sitaram Yechury, leader of the Communist Party of India (Marxist), said in an interview in New Delhi on April 30
May 13 (Bloomberg) -- India’s government needs to follow through on pledges to bring back cash stashed overseas to help fund an $85 billion economic stimulus plan and bolster markets, Credit Suisse Group AG and Credit Agricole SA say.
“India has to claw back every cent it can get,” Joseph Tan, chief economist for Asia in Singapore at Credit Suisse, the second-biggest Swiss bank, said in an interview. The prospect of “revenue is the impetus for this crackdown on tax evasion and tax havens,” he said.
The government led by the Indian National Congress already has taken action to try to bring illegal funds held abroad back to the country, Jayanthi Natarajan, the party’s spokeswoman in New Delhi, said in an interview on May 6. The Congress party-led coalition may have won the most seats without securing enough votes to form a government, initial exit polls showed after national elections ended today.
The Global Financial Integrity program, a Washington-based non-government organization campaigning for tighter controls on tax havens, estimates “illicit outflows” from India averaged as much as $27 billion annually in the five years through 2006, equivalent to about 35 percent of the nation’s budget deficit.
Cracking down on illegal outflows from India may help extend a rally in the nation’s stocks and currency, Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Calyon, the investment banking arm of Paris-based Credit Agricole, said in an interview.
Stocks Rise
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, climbed 47 percent since closing at a three-year low on March 9, while the rupee gained 4.4 percent in the same period to 49.69 per dollar.
“If they do get back even a part of the money, it would be positive for the rupee and Indian stocks,” Kotecha said.
Calyon forecasts the rupee will appreciate almost 3 percent to end the year at 48 a dollar, while Barclays predicts 47 in six months. The median estimate in a Bloomberg survey of 27 analysts is for the rupee to trade at 49.20 on Dec. 31.
The government said in a Supreme Court filing this month that it proposed a new tax agreement with Switzerland to improve the exchange of banking information. The affidavit followed an April petition from Ram Jethmalani, a law minister in the previousBharatiya Janata Party-led government, calling for the repatriation of 70 trillion rupees ($1.4 trillion) of funds he estimates are illicitly held overseas.
India has sent notices to at least 50 people having accounts with LGT Bank in Liechtenstein AG, the Economic Times reported today, citing S.S.N. Moorthy, chairman of the Central Board of Direct Taxes.
The government is seeking to track down individuals and entities holding money illegally in offshore deposits, the newspaper said, adding that the authorities want to know the sources of these funds and if taxes have been paid on them. Shishir Jha, spokesman of the tax board, wasn’t immediately available for comment.
‘Rhetoric’
The government said in a statement filed this month it has no “authentic” estimates of the amount lying in those bank accounts.
“This is election rhetoric,” said N. Bhaskara Rao, chairman of the Center for Media Studies, an independent policy research group in New Delhi. He said he expects the government won’t follow through with its pledge.
Both the Congress party and BJP made election promises to build roads, bridges and rural health centers in a country where the World Bank estimates 76 percent survive on less than $2 a day. They also pledged to reduce a budget shortfall that swelled to 6 percent of gross domestic product, the most since 2001.
Lal Krishna Advani, leader of the BJP, vowed last month to bring back the black money within the first 100 days of its administration, the Press Trust of India reported on April 17.
“It is time India joined the queue,” Sitaram Yechury, leader of the Communist Party of India (Marxist), said in an interview in New Delhi on April 30