News Wrap

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Much of the cash stored in tax  havens such as Switzerland, Liechtenstein, Mauritius and the British Virgin Islands is considered to be the proceeds of India’s thriving underground economy, after more than a decade of powerful economic growth. Huge amounts of undeclared and untaxed income are siphoned offshore or recycled into Indian property and other investments, a major portion of which is used to fund political parties. There is growing public anger over claims that hundreds of billions of pounds of ‘Black Money’ has been spirited out of India. Amid an intensifying crackdown on corruption and tax evasion, the Union Government of India has produced a list of 627 of its nationals who have money in Swiss bank accounts, before the Supreme Court at end October 2014. 800 million Indians live on little more than 1 pound a day. The 627 names are those of Indian account holders at HSBC in Geneva. The value of the list dates to 2006. During its own enquiries on tax evasion, the French government had given it to India in 2011. The previous Congress UPA government took no action. Only a handful of names of relatively unknown businessmen have emerged so far. Originally stolen by an employee of HSBC in Geneva, the list offers only fragmentary details of the true scale of Indian money slashed abroad. Bigger investors are not inclined to keep money at zero interest in Swiss banks, and prefer reinvesting their money in the Indian Stock Market via Mauritius, or put in real estate. Many of the accounts may be perfectly legitimate, while about half are thought to belong to non-resident Indians, who are not subject to Indian Income Tax Law. The Indian government maintains that it will establish whether the accounts are legal, before publishing the names. No serious attempt has been made to repatriate black money. The Swiss Bankers’ Association claims that Indian citizens hold no more than 1.2 billion Pound in accounts in Switzerland directly. Trusts and other arm’s-length arrangements are favoured conduits for channellizing much of the substantial off shore wealth.

The Special Investigation Team on black money has revealed that less than half of the HSBC bank list of over 600 accounts did not have any money, while more than 100 names were repeats. Tax authorities have exposed real estate assets and large amounts of cash routed illegally by Indian Nationals and companies to foreign countries, via tax havens located mostly in the British Virgin Islands and Singapore.

Stock Prices
The Bombay Stock Exchange (BSE) benchmark Sensex rose above the 28,000 mark on 05 November, 2014. Sustained capital flows from Foreign Institutional Investors (FII), favourable policy measures, and the hope of a sooner-than-expected interest rate cut by the Reserve Bank of India have seen the 30-share Sensex rallying from mid-October 2014. Even though the Indian economy stands on the brink of a recovery, it is still not in a position to sustain across the board earnings for listed companies, that would justify these heights. While the United States Federal Reserve has continued its fourth quantitative easing programme the Bank of Japan (BoJ) has expanded asset-buying, reducing fears of a tighter liquidity. The BoJ’s governor, Haruhiko Kuroda’s target is 80 trillion Yen a year ($700 billion at current rates), a substantial increase over previous targets of 60-70 trillion Yen. The BoJ will triple its buying of equity funds. Japan’s Government Pension Investment Fund (GPIF), the largest in the world, will invest in alternative assets, along with local and overseas equity. Financial markets worldwide have reacted favourably to the anticipated surge in liquidity, and pushing Indian trading circles. The Yen is losing value and carry trades as one way bets. The Yen is borrowed, converted and risky assets bought in other currencies. India is among the biggest beneficiaries of this largesse. Indian Stock Market indices have hit new highs on the BoJ stimulus and the ‘Kuroda Put’, as foreign institutional investors have stepped up their buying of Indian equities.

Tensions in Jerusalem
On 30 October 2014, Israel ordered the first full closure of the al-Aqsa mosque, after anti-terrorist police shot dead a 32-year-old Palestinian man, suspected of having tried to kill a far-right Jewish activist. The closure of the al-Aqsa mosque compound in Jerusalem’s old city in 14 years, was denounced by Palestinian President Mahmoud Abbas as ‘tantamount to a declaration of war’. In the aftermath of the shootings, Israeli security forces swamped the Old City, and Palestinian neighbourhoods of East Jerusalem, with extra reinforcements, some called in from the West Bank. Helicopters flew overhead, and observation balloons were deployed. In recent months, the al-Aqsa mosque compound, or Temple Mount, has become a central point in the escalating violence in the city. The compound is the most sacred spot for Jews, since it once housed two Jewish temples. There is also Islam’s third holiest site in the compound. Abbas has called for Jews to be banned from the site, and urged Palestinians to guard the compound from visiting Jews.

ISIS and Chemical Weapons
Fears of ISIS using chemical weapons have grown, since the group’s seizure in June of the al-Muthana chemical weapons complex near Baghdad. Even though chemical weapons could not be made from ageing stocks, ISIS could turn them into dangerous weapons. ISIS militants could be using crude chemical weapons to help their advance across Iraq and Syria. There have been six suspected toxic gas attacks in the region, since September 2014. A large number of Iraqi police officers have been injured by Chlorine gas, while fighting the terrorist group, also known as Islamic State, in the town of Dhuluiyah, 50 miles north of the capital, Baghdad. Symptoms included dizziness, vomiting and breathing difficulties, which were consistent with chlorine poisoning. Officials in the besieged northern Syrian town of Kobane, claim the ISIS had used unidentified chemical weapons against local Kurdish fighters and civilians. ISIS militants control 80% of the Sunni dominated Anbar province of Iraq, which borders Jordon, Saudi Arabia and the Baghdad province.

Frontier
Vol. 47, No. 27, Jan 11 - 17, 2015