Stocks and the Seeds of Scam
The book gives an insight not only about corruption but also links it with evils like black money, drug money, and flight of capital from India... A review by kalyani shankar
A recent survey claimed that corruption tops the list of the common man's concerns and even security comes next. With the recent spurt of scams involving lakhs of crores pertaining to the politicians, bureaucrats and the media surfacing, it is only reasonable that an ordinary citizen should worry.
Of late, checking the flight of capital has also surfaced as a serious issue. For instance, every party during the 2009 elections claimed to bring back the money, if elected. The Congress party manifesto also promised it but even after one and a half years later, there is no concrete action.
The year 2010 saw mind-boggling corruption in high places like the 2G scam and Commonwealth scam involving lakhs of crores. There is an atmosphere of public dismay, and disgust against corruption. Therefore the book written by Mr. Venkatesh, a chartered accountant from Chennai, is not only topical but also timely. The title – Sense, Sensex and Sensitivity – is self-explanatory about the theme. As the author claims it is a "story of how markets run the risk of being dynamited from within and becoming rigged casinos."
The book gives an insight not only about corruption but also links it with evils like black money, drug money, and flight of capital from India, stock market manipulations and tax havens abroad where the rich and powerful keep their illegal money. He explains how the tax havens (nearly 40 countries) that cause the " boom and doom" of the stock market. The book also gives the origin of hawala as a parallel economy as the watchdogs like the SEBI, RBI and ICAI fall asleep or play ball or even refuse to bark to check these illegal activities. Who will regulate the regulators or hold them responsible for such shoddy regulations and such serious lapses?
The book is informative because the author has done extensive research and has used the JPC reports, IMF reports, RBI and several other relevant documents to make his case. Quoting extensively from the JPC report (set up after the 2001 stocks scam) he asks why the government has not taken adequate action.
Who are the people who hide their money abroad? The author divides them into three categories. The first is money obtained by some bureaucrats, politicians, judiciary and media by way of bribe, the second is the Narco terror money, and the third is tax evasion and laundered commercial transactions. They use the same routes for parking their money.
The capital flight from India could be an alarming $ 20 to $25 billion per year and the author explains how this tainted money gets cleansed and returns from tax havens as legal money. Between 2000 and 2009, Mauritius accounted for 45 per cent of the total foreign investment in to India. He holds that the stock market scam of 2001 was in effect a PN (Participatory Note) scam. India ranks fifth in the world in terms of illicit capital outflows ranking below Mexico, Russia, Saudi Arabia and China. A vast majority of this capital disappears in offshore tax havens and returns as foreign investment.
The book would be useful for ignorant and greedy stock market investors. It gives an insight into how the market functions, who manipulates the market and how big deals are made. He claims that every rise of the stock market has the seeds of the scam. The recent case of Hasan Ali is "evidence of the rot that has set in high places in India. It is a confluence of crime, corruption, and capital market manipulation"
The author brings out a much bigger picture about how the globalization has affected the Rule of Law, stock markets and even democracy. He also refers to the 2009 resolution of the G-20 to crack down the tax havens as they are facing tremendous pressure from the global community, particularly after 9/11 to remove the veil of secrecy. Even the Swiss have agreed to compromise on their secrecy clause to stop protecting the tax dodgers.