What we are thus left with is a maze of figures, some concocted, others real, but sometimes quoted out of context. That doesn’t mean the issue is unimportant. Some reasons for capital flight (administered and unrealistic exchange rates, foreign exchange controls, unrealistic and non-transparent tax rates) have become unimportant in post-1991 India and BOP (balance of payments) data suggest there has been some reversal of capital flight. How else does one interpret a net capital inflow of $17.7 billion in the “other flows” category in 2007-08? This residual category primarily means delayed export receipts and errors and omissions. Stated simplistically, the reserves position shows this forex has come in. But we don’t know why it has come in. However, this reversal is restricted to situations where the push was unreasonable domestic economic policy. There are other unreasonable domestic policies too, including the political process and criminalisation of politics. These are issues we should talk about, not so much the pull of tax havens. But first, let us get the figures right.

The writer is a Delhi-based economist

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