June 25, 2012
Clark Gascoigne, +1 202 293 0740 ext. 222
Disingenuous Reporting Distracts from Curtailing Illicit Financial Outflows from the World’s Largest Democracy
GFI ‘Disappointed’ in Indian Newspaper
WASHINGTON, DC – Global Financial Integrity (GFI) today denounced an article published by The Economic Times (ET) late Monday, explaining that the story represented sloppy journalism and was riddled with factual inaccuracies. Titled “GFI okay with govt’s black money fight despite white paper censure,” the article was authored by Binoy Prabhakar, the publication’s news editor.
“The report filed by The Economic Times is riddled with factual errors and takes quotes out-of-context,” said Clark Gascoigne, communications director of GFI. “It raises a number of questions about the integrity of this ET journalist.”
The story quotes sections out-of-context from the Indian Finance Ministry’s recently-published White Paper on Black Money as evidence to support the article’s thesis that “the white paper was damning on the GFI study.”
The ET article quotes the White Paper as saying of GFI’s November 2010 report on illicit financial outflows from India, “The back-of-the-envelope method used to derive the figure was flawed – the figure was based on GFI’s estimated average illicit outflows of $22.7 billion per annum (over the period 2002-06) multiplied by the 61 years since independence and it is erroneous to apply annual averages to a long time series when illicit flows are fluctuating sharply from one year to the next.”
However, this quote from the White Paper was not referring to GFI’s research as “the back-of-the-envelope method.” Indeed the White Paper was actually quoting GFI’s 2010 report as referring to other scurrilous reports circulated in the Indian media that illicit money from India could be as high as $1.4 trillion—nearly a trillion dollars higher than GFI’s estimates. The full quote from the White Paper actually reads:
“Another report which was circulated in the media stating that Indian nationals held around US$ 1.4 trillion abroad in illicit external assets was based on the 2008 report of Global Financial Integrity (GFI), ‘Illicit Financial Flows from Developing Countries: 2002-2006’. In its November 2010 report, ‘The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008’, however, it accepted on page 19 that the back-of-the-envelope method used to derive the figure was flawed – the figure was based on GFI’s estimated average illicit outflows of US$ 22.7 billion per annum (over the period 2002-06) multiplied by the 61 years since independence and it is erroneous to apply annual averages to a long time series when illicit flows are fluctuating sharply from one year to the next.”
The White Paper is clearly quoting from GFI’s 2010 report on India where Dr. Dev Kar, GFI’s lead economist, wrote on page 19 that:
“As it turns out, media reports circulating in India that Indian nationals held around US$1.4 trillion in illicit external assets are widely off the mark compared to the estimates found in this study. The back-of-the-envelope method used to derive the US$1.4 trillion was flawed—the figure was based on GFI’s estimated average illicit outflows of US$22.7 billion per annum (over the period 2002-2006) multiplied by 61 years since independence. It is erroneous to apply annual averages to a long time series when illicit flows are fluctuating sharply from one year to the next.”
“The Economic Times clearly quotes the White Paper out-of-context in order to tell a story that just doesn’t exist. It is impossible to read the text of the White Paper and draw the same conclusions as the ET,” added Gascoigne. “While GFI doesn’t agree with every aspect of the White Paper, the White Paper clearly affirms the research done by Global Financial Integrity highlighting the damaging effects that illicit financial flows have had on the Indian economy.”
Gascoigne noted, “The story we should be discussing is how to go about curtailing future outflows of black money from the Indian subcontinent instead of fabricating feuds and spreading gossip, which distracts from one of the most pressing issues facing our global financial system.”
“Illicit financial flows from crime, corruption, and tax evasion have cost India $462 billion since independence. Such outflows cost the entire developing world roughly $1 trillion per year, and they have even contributed to the European financial crisis. That is the problem on which we should focus,” continued Gascoigne. “I am very disappointed in The Economic Times.”
+1 202 293 0740 ext. 222
Notes to Editors:
- Click here to read the article in The Economic Times.
- Click here to read the Indian Finance Ministry’s “White Paper on Black Money.”
- Click here to read GFI’s November 2010 report, “The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008.”
- Click here to read a June 5, 2012 op-ed in The Financial Express by GFI lead Economist Dev Kar and GFI Economist Sarah Freitas on the Indian Government’s White Paper.
Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.
For additional information please visit www.gfintegrity.org.