A report from the Global Financial Integrity Group in Washington says India has lost more than $US460 billion since Independence in 1947.
GFI says this is because of illegal flight of capital through tax evasion, crime and corruption.
According to the report, illicit outflows of money increased after economic reforms began in 1991.
Many also accuse governments and politicians of corruption in India.
GFI said that a "poor state of governance" had been reflected in a growing underground economy in India since Independence.
Director Raymond Baker said the report "puts into stark terms the financial cost of tax evasion, corruption, and other illicit financial practices in India".
Some the main findings of the report are:
India lost a total of $US462 billion in illegal capital flows between 1948, a year after Independence, and 2008.
The flows are more than twice India's external debt of $230bn.
Total capital flight out of India represents some 16.6% of its GDP.
Some 68% of India's capital loss has happened since the economy opened up in 1991.
"High net-worth individuals" and private companies were found to be primary drivers of illegal capital flows.
The share of money Indian companies moved from developed country banks to "offshore financial centres" increased from 36.4% in 1995 to 54.2% in 2009.
Underground economy
Author, Dev Kar, a former International Monetary Fund economist, said that almost three quarters of the illegal money that comprises India's underground economy ends up outside the country.
The BBC reports India's underground economy has been estimated to account for 50% of the country's GDP - $US640 billion at the end of 2008.
Mr Kar used a World Bank model to compare India's recorded sources of funds, such as foreign direct investment and borrowing, and its recorded use of funds, like foreign currency reserves and deficit financing.
Illegal outflows are considered to exist when funds recorded exceed those used. India's exports and imports over the past six decades were also taken into account.
Adjusted for inflation, that all added up to $US213 billion missing since 1948.
Taking estimated investment returns into account, Mr Kar calculated that was worth $US462 billion in today's money.
He warned the figure could be much more as it did not include smuggling and cash transfers outside the financial system.
