The 97-page White Paper on black money tabled in Parliament on May 21 is no page turner. It does give details of various aspects of the parallel economy: how black money is generated by companies and individuals through fudged accounts and realty deals, how it is circulated through hawala or by the misuse of transfer pricing, financial derivatives like participatory notes, initial public offerings, global depositary receipts and so forth.

It also spells out the government's options and strategies to curb the problem, but makes no startling revelations or radical suggestions. "It reads more like an elaborate academic piece," says CPI leader D. Raja.

Some claim that even as an academic piece, it falls short. "The White Paper is just the perspective of the Central Board for Direct Taxes. There are not enough insights, more research is needed," says M. Govind Rao, Director, National Institute of Public Finance and Policy (NIPFP). There is also a great deal that it omits: for instance, how electioneering costs spawn black money.

The upper limits for poll expenditure set by the Election Commission - Rs 25 lakh for a Lok Sabha seat and Rs 10 lakh for an assembly seat - are violated with impunity, with the excess being provided by black money. This not only leads to the much-decried 'businessmanpolitician nexus', since only wealthy businessmen can spare so much cash, but also often spurs the winner to focus on earning back the money spent and hoarding for the next election - all of it in black money. "The White Paper does not go into political processes," adds Rao.

BJP leader Jaswant Singh goes a step further charging that the Paper ignores black money generated by governments. "The document does not say anything about the creation of an environment of criminality by corrupt politics or about the arms trade by the government," he says. Rao notes that it also ignores the black money generated in education, such as the huge capitation fees charged by some private institutions.

The most glaring example of the misuse of a financial instrument in pumping black money into the economy is that of participatory notes (PN). These have long been suspected to be a conduit for politicians and businessmen to bring black money stashed abroad back into the country through the stock markets. With these, the identity of the overseas investor can remain concealed as the Indian securities are legally held by foreign institutional investors (FIIs). The PNholder does not have to directly register with market regulator Securities and Exchange Board of India, and though FIIs are required to report the names and locations of the PNholders who have invested with them, the real identities of these individuals often remain hidden behind a maze of front companies, more so if they are registered in tax havens like the Cayman Islands or Luxembourg. "Banning PNs is the most important step needed to curb black money," says Subramanian Swamy, National President, Janata Party. But all that the White Paper says is that PN-holders could "be Indians and the source of their investment may be black money".

{quote}An NIPFP study puts the black money generated in the country at 30 per cent of the gross domestic product. A fresh report is expected by the year-end. A 2008 report estimated the illegal wealth stashed overseas at $1.4 trillion (a trillion is one lakh crore). For all its analysis, the White Paper offers no concrete plan on how to curb black money, a shortcoming even its supporters concede.

"It is a good document on how black money is generated, but provides no solutions," says T.V. Mohandas Pai, Chairman of Manipal Universal Learning, who has been on many government committees on tax-related matters. Opposition leaders are scathing. "If the US and Germany can get the names of its citizens holding unaccounted money in tax havens, why can't India," asks Raja.

What can be done? The Election Commission has made many suggestions for bringing transparency into election funding such as compulsory annual auditing of political parties' accounts: these could be implemented. Reforms in the realty sector, a major creator and preserver of black money are badly needed, such as bringing the circle rate of properties on par with market rates and reducing stamp duties. "Stamp duty levies, particularly on land transactions, are unreasonable," says BJP's Singh. Alongside, law enforcers must wield a big stick - punishment for those involved in black money transactions should be severe. The Special Courts Acts of Odisha and Bihar allow seizing of the properties of public servants charged with corruption, even while they are being tried. Other states could enact similar legislation.

No doubt there are bills intended to reduce corruption - such as the Lokpal Bill - being considered by Parliament. The White Paper too can be seen as another step to further action. "It is an attempt to understand the phenomenon of black money. It starts the discussion," says Salman Khurshid, Union Law Minister.