Black is black, we want our money back.

Our Finance Minister is keen to get rid of black money from the economy. " The government is making full efforts to bring back the black money stashed abroad, but the officers of the ( income tax ) department have to make equally serious efforts to unearth black money within the country," he said. Between 2002 and 2011 around $344 billion of illicit funds were transferred abroad. Depending on who you ask the estimate of the amount of money stashed abroad would vary from a few billion to trillions of dollars. The Finance Minister has plenty of help from western governments who, because of tottering economies, are taking increasingly tough action on banks that help with tax evasion. As the noose tightens wealthy people will seek to repatriate money in foreign banks. They can do that through Participatory Notes which is how foreign hedge funds invest in Indian stocks. How will the minister stop illicit money coming into the country through this means when a past attempt resulted in a crash in share prices and a quick surrender by the government? Our stock market indices hit record levels yesterday, who knows how much of the foreign money is black. The other way to bring back money from abroad is the hawala system which is used for money laundering by criminal gangs. You hand over a sum of money to an agent in any foreign country in any foreign currency and you get the equivalent in Indian rupees delivered to any address in India. No bank charges, no taxes and no delay. The trouble is that it is dangerous to keep vast sums of cash at home so this money has to be invested somewhere. That is where the property market comes in. Property prices have risen by 10-20 times in the last decade and show no sign of meaningful correction. This is the black hole in which trillions of rupees in black money have disappeared. But then house prices are shooting up all over the world which has the IMF worried enough to issue a warning. The difference is that these countries have virtually no inflation while CPI has been running at over 10% in India. The inflation rate was 2.1% in the US in June while the ECB is more worried about deflation. Rising prices mean that the rupee is able to buy less, so is the rise in real estate prices a reflection of the weak rupee? The rupee has fallen by around 50% but property prices have increased by 1000%. A precipitous fall in the rupee will send inflation skyrocketing so the only option for the Finance Minister is to engineer an 80% fall in property prices. But politicians will never allow that. States are collecting more taxes by increasing circle rates and politicians will see all their black money, which they have collected so strenuously all these years, suddenly disappear. Blackguards, black arts, black money. Great.