More than $ 125 billion worth of funds meant for the uplift of Indians were illegally siphoned out of the country by corrupt politicians and corporates between 2000 and 2008, hindering inclusive growth, says a leading think tank here.
"Much of the funds flowing out are generated at home within India and then sent illegally abroad," said an upcoming report from Global Financial Integrity (GFI).
"So the growth of corruption and India's underground economy contributes significantly to illicit financial flows from the country," said the research arm of the Centre for International Policy (CIP).
"Corruption is rampant in India as it is in almost all developing countries. Both corrupt political and corporate officers manage to siphon off funds - intended to aid the people of India - off to political and private sector elite," it said.
"Recent efforts in India to challenge this corrupt affront on humanity have been met with severe violence," junior GFI economist Karly Curcio said in a blog on the report on illicit financial flows from India and explaining its linkages with poverty, corruption, and crime.
"As India develops economically and builds better infrastructure, one would think all Indian citizens would see an increased standard of living and that the income inequality levels would fall," says the blog post following a news report about recent violent crimes in India against whistleblowers.
"However, the gini coefficient, which measures income inequality, has actually increased over the time period measured, 2000-2005, from 0.32 to 0.37 on a scale of 0 to 1, with 1 being the highest income inequality," Curcio wrote.
"In India, as in other currently developing countries, as the economy grows, so do illicit flows," she wrote. "This positive correlation exhibits the increased incentives to conduct illicit flows, mostly because more money is flowing within the system to steal away and constant greed is tapping into that pool."
India ranked 84 out of 180 countries in Transparency International's 2009 Corruptions Perceptions Index ranking.
"As corruption continues to plague both the country and its ability to develop free and fair institutions to monitor and charge corrupt officials, the majority of India's economic growth will never make it to the people of India who desperately need it the most," Curcio warned.
India's legislative efforts to protect whistleblowers and those who work to fight corruption is a step in the right direction, however more must be done, she says calling for global efforts to make it harder to move illicit funds around the world.
These efforts include increasing financial transparency, as well as stronger work by developed-country governments to crack down on their home banks accepting these laundered, illicit funds, Curcio said.