Economic Intelligence FDI - Foreign countries Dictating India Series

India’s Biggest Scam – Round-Tripping Black Money As FDI

We were told that demonetization would combat the black economy and also crack a whip on the funding sources of terrorist outfits by curbing the circulation of Fake Indian Currency Notes. Far from it we are again in the midst of mindless terror acts across the Red Corridor and the Kashmir region.

What we were not told about the black money however was that while Indian govt. was cracking a whip on the informal economy the actual black money was already being routed back into India legally via FDI.

While the government is busy waging war on black money, international watchdog Global Financial Integrity has estimated that black money worth as much as USD 21 billion was taken out of India illegally in 2014. In its latest report, GFI also threw some light upon illegal inflow of funds, with India being identified as the parking spot for around USD 101 billion, 11 percent more than in the corresponding period a year ago.

Titled ‘Illicit Financial Flows to and from Developing Countries: 2005-2014’, the report said that between USD 620 billion and USD 970 billion was drained out across all emerging market countries, primarily through the trade fraud route. In all, illegal inflows and outflows were estimated to constitute 14-24 percent of total developing country trade between 2005 and 2014.

Now Reserve Bank of India (RBI) has slapped notices to at least eight companies — including some software firms — amid concerns of round-tripping of fund and violation of rules on foreign borrowing reported the Economic Times.

The central bank suspects that some Indian groups and business families have misused overseas arms to raise cheap dollar loans and bring back the money as foreign direct investment (FDI) into local outfits owned by the same group.

The regulator has in similar cases directed companies to unwind such investments, accept contravention committed under the Foreign Exchange Management Act (FEMA), and cough up a settlement fee for compounding the offence.

The nature of the fund-flow could typically be like this: company A floats a subsidiary or acquires an offshore company (say B, in the US), with B subsequently raising external commercial borrowing to buy equity of company C in India.

Finally the Reserve Bank of India catches up with the phenomenon of Round-Tripping. As explained in our report on the global War on Cash the money that is generated through corruption by the politicians and private corporations through decades is the actual black money which is laundered to the safe heavens like Mauritius and Cayman Islands. While the Govt. was trying to curb the black money menace at home most of the Black Money was already being routed into India from the tax-havens and legally invested into the country through FDI.

This is called Round Tripping. One of the leading puzzles related to cross border flow of investment is the phenomenon of ‘Round Tripping FDI’. Here, money from a country (eg. India) flows to a foreign country (Mauritius) and comes back as foreign direct investment to India. Round tripping of FDI refers to the capital belonging to a country, which leaves the country and then is reinvested in the form of FDI. Why the biggest sources of FDI are tax-havens? While the western countries cracked down on the actual sources of black money – the foreign tax havens, in contrast the Indian govt. waged a war within on the informal economy that saved the country during the worst economic crisis of 2008. There is a big contrast in how the foreign countries are dealing with their black money problem compared to what the Indian govt. is doing. So what is actually happening and where is the FDI money coming from?

Bailout of Dubai & Indian FDI

After the collapse of the US real-estate bubble in 2008, the Dubai real estate market also collapsed as it was the popular investment destination for all those in the west looking for a safe way to invest hard earned ‘black money’. The total loss they suffered was close to $ 2 trillion. Most of the black money of US and Europe was invested in the Dubai Free Trade Zone. The sheikdoms were shaken, as their lavish life style and their way of life was under threat. Dubai’s glitz and glamour has been built by money sourced from every conceivable illicit means – black money, drug laundered money, profits from smuggling gold, diamonds, metals, arms etc. It was rumored in 2009 at the height of the crisis that they couldn’t afford to pay even the interest on the debt taken for the construction and maintenance of the Burj al Arab; Dubai’s iconic landmark. This is what is known as the Dubai Flu.

Most Arab nations too were struggling to make their ends meet. International financial institutions like the IMF and the World Bank were also helpless and no country could afford to bail UAE out. The real estate industry came to a standstill in UAE and foreclosures, layoffs and shrinkage of wages were on the anvil. Indian economists were forecasting that the Dubai Flu would rub off on India and would affect the Indian economy as millions of Indians would probably lose their jobs. The remittances sent back home by these workers, constitutes a large portion of the economy of some states in South India. Some thinkers suggested that the government take measures to reduce the impact of the Dubai Flu in India. Some suggested that it was the Government’s responsibility to provide financial assistance to those affected by the ripple effect of the Dubai Flu.

At this crucial juncture, the rulers of Dubai chose to walk down a unique path. With good connections in the financial world, they decided to hire the famed N.M Rothschild and Brothers (NMR) – one of the family bloodlines that controlled the East India Company – as knowledge partners and consultants to save UAE. NMR agreed to help for a whopping fee of $10 billion. Desperate for help, the rulers agreed on the condition that they would give the NMR group leeway to operate but they would have to make the money (fee) by themselves, whichever way they deemed fit. The solution proposed by the NMR group was to suck money out of India to bail the UAE economy out, without Indians knowing it – through FDI.

Why is it that everytime a major scam is unearthed, apart from the politicians, bureaucrats, lobbyists, corporates the links all end up in UAE? Is it not true that still massive infrastructure projects are awarded to Dubai based companies at more than 400% market rates? Is it also not true that these companies than subcontract these same projects to Indian companies at dirt cheap rates? Isn’t that what exactly happened in the CWG scam? Is it not true that even the FDI monies are routed into India through Dubai from the tax havens? Is it also not true that the major beneficiary of these scams is a company called Emmar owned by the House of Rothschild – one of the family bloodlines that controlled the East India Company? Why do we find this name everywhere be it the CWG Scam, 2G Scam, Kingfisher deal, Tata-Jaguar deal, Intel tax-evasion controversy and the more recent KIMS Hospital deal, ABG Shipyard deal, Mahindra-Bill Forge deal, and on and on? What is the reason that from Government of India to India Inc. companies all seek advice from our colonial oppressors for each and every deal? Don’t our Indian politicians know or even understand this? What about our intelligence agencies?

Read our exclusive research on FDI (Foreign countries Dictating India) to understand how the Rothschild tricked the Indian administration into bailing out UAE – a model that was further scaled-up to bailout the bankrupt US EU economies as well. Also read our exclusive research by Shelley Kasli on the global War on Cash with an impact study on India’s demonetization drive with a push towards a Cashless society published in the Apr-Jun 2017 Demonetization issue of GreatGameIndia – India’s only quarterly magazine on Geopolitics and International Affairs.

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