Indians are financial magicians.

A research organisation based in the US, Global Financial Integrity issued a report which claims that India has lost $123 billion between 2001 and 2010 ( equivalent to Rs 6.765 trillion which is one trillion higher than the government's yearly budget ) due to illicit outflow, which is another name for black money. India is eighth in the list of countries behind China, Mexico, Malaysia, Saudi Arabia, Russia, Philippines and Nigeria. GFI Director, Raymond Baker said," Much focus has been paid in the media on recovering Indian black money that has already been lost. The focus is for naught as long as the Indian economy continues to haemorrhage illicit money. Policymakers and commentators should make curtailing the ongoing outflow of money priority number one." ET, 18 December. Who is taking so much money out of the country and how? Between 3 June 2009 and 30 April 2012, that is in 35 months, one member of parliament traveled abroad 29 times which comes to once every 37 days. The country most visited was Switzerland. What is really worrying is what happens to the money if the account holder suddenly dies without revealing details to anyone. We may assume that the bank would quietly confiscate the entire amount after waiting for a suitable period for a claimant. After all, this is what they did with gold and art looted from Jews by Nazis, many of whom died in hiding or were executed after the Nuremberg trials. Swiss banks have admitted to only 4.18 million Swiss francs in dormant accounts when estimates run into tens of billion of dollars. No wonder they guard their banking secrecy laws so jealously. However, that is not the only black money in India. A similar around is floating around inside the country invested in properties. Today our most revered Finance Minister said that only 35 million out of 1200 million people file income tax returns of which only a paltry 1.46 million pay tax on income above Rs 1 million. Any 2 bedroom apartment of around 600 sq feet in a small city will cost in excess of Rs 3 million and prices are rising. So if no one is earning anything why are properties so expensive? Another sector doing really well is the share market. Partly this is due to easy monetary policies in western countries leading to excess of liquidity in the west. Some of that money is coming into our markets which is a similar situation that prevailed before 2009. In 8 months to October investment in Indian debts, derivatives and equity stood at $32 billion. This money has come through Participatory Notes which is the preferred route of hedge funds and a way of investing without declaring the source of money. The total investment stands at Rs 1.83 trillion. Worryingly this money could suddenly flow out if the fiscal cliff is resolved and the US economy surges. India is the only country where money multiplies when no one earns anything. Magic!