Recently, the High Level Advisory Group on Trade Policy (HLAG), headed by Surjit S Bhalla, proposed a unique idea to the Indian government – the issuance of ‘Elephant Bonds’. This initiative could potentially allow India to recover up to $500 billion in black money presently held overseas. The measure is not just about recovering untaxed wealth, but also about financing infrastructure projects and boosting the country’s economic growth.
Understanding Elephant Bonds
An Elephant Bond refers to a 25-year sovereign bond issued by a national government. These bonds are specific in terms of their target demographic – individuals willing to disclose previously concealed income. Hence, those declaring such undisclosed income are obligated to invest 50% of that amount into these securities. The Elephant Bonds serve two main purposes: recovering the black money and creating a source of funding for various infrastructure projects.
The Role of Elephant Bonds in Infrastructure Financing and Growth Boosting
The fund amassed through the issuance of these Elephant Bonds is earmarked exclusively for financing infrastructure projects. The HLAG has recommended these bonds as an innovative way to drive India’s growth by allocating the recovered finances towards country’s infrastructure development. Utilizing black money to fund infrastructure projects can greatly enhance the country’s overall economic growth.
| Fact | Details |
|---|---|
| Elephant Bonds Tenure | 25 Years |
| Investment Requirement | 50% of Disclosed Income |
| Utilization of Funds | Infrastructure Projects |
| Potential Recovery Amount | $500 Billion |
Immunity from Local Laws as A Key Feature
One of the attractive aspects of this mechanism is the legal immunity provided to those who disclose their black money. Under this policy, individuals gain immunity from all local laws including foreign exchange, black money laws and taxation laws. This concession allows people to reintroduce their offshore undisclosed wealth into India without the fear of prosecution.
Tax Amnesty: A Strategy Already Adopted by Other Countries
Various countries such as Indonesia, Pakistan, Argentina, and the Philippines have already implemented their own tax amnesty schemes. These schemes provide opportunities for specified taxpayers to pay a certain amount, thereby receiving forgiveness of previous tax liability, including interests and penalties. The primary goal of such initiatives is to encourage the disclosure of undeclared income and prevent the risk of prosecution.
Expected Fiscal Benefits
The Elephant Bonds initiative is not just designed to recover black money but also has multiple fiscal benefits. It expected to lower the real interest rate and strengthen the national currency, the Indian Rupee.
The High-Level Advisory Group on Trade Policy was established under the Ministry of Commerce and Industry in 2018, committed to recommending strategies and ideas for comprehensive trade policy making. The Elephant Bonds suggestion is one of their most significant proposals to date.
