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Black Money : A Decade long story

India’s black economy is humungous and complex. It has been a major issue since independence and recently is on boil due to civil society activism and interventions by our existing government. It is hard to precisely define black money, let alone reliable estimation of its quantum. But time and again there have been attempt to quantify it with estimates ranging from 10 % to 100 % of GDP. Black money menace is though more in developing countries, but developed countries too have their shadow/black economies.

It should be noted that not all the unaccounted money is black. It is only that money which was legally required to be disclosed, but was not disclosed. Income tax provisions permits income below certain threshold without disclosure. Majority population of our country earns below this threshold and doesn’t report its income. For e.g. tea shops, small snacks bar, agricultural income etc. doesn’t need disclosure. It may be called shadow economy and its very near Impossible to distinguish it from black economy. Much of the shadow economy doesn’t even get calculated for calculation of GDP, national Income etc.

With all this, it appears that a lot of space has been made for black money ever since the Indian currency was even introduced. But, to no avail, black money problem has not yet got a solution. There is yet no landmark success that could convince Indian people that this problem will soon be arrested, not even after the GST implementation. Main reason behind this pessimism is political environment of India. It’s popular perception (and acceptance) that Elections are being fought on support of black money. Further, on this issue public opinion doesn’t seem to be as cautious as it should.

Some corners of the society believe that black money is not such a big menace as most of the jobs are in unorganized sector and it does helps the poor. They also believe that corruption is just speed money to get work done fast which might be good. But this belief is pure ignorance. Costs of black money are significant as we have seen. Administration, if corrupt, will deliberately attempt to create artificial bottlenecks which could be opened only by bribe and this is breeding ground for crony capitalism. Much talked about Inspector raj, License raj are results of this mentality. This results in favor and patronage, over distribution of public goods and services, which deprives poor. India’s huge social spending and subsidized products gets leaked into black market. For eg. It is estimated that for every 1 kg of food grains delivered by PDS in India, Food Corporation of India releases 2.5 kg. Kerosene, LPG, fertilizers, subsidized medicines are no exceptions.

The menace of parallel black money has grown to alarming promotions and is eating away the vital of our national economy. Unless it is ruthlessly combated and cut to size, it is likely to upset the whole economy planning. And to bring lasting change, public perception and acceptance of this system needs to be changed. This can be done by efficient administration, easy laws which facilitates life of people, this will increase faith of people in government and over the time, they will feel more responsibility to pay their taxes, at least now after NaMo’s initiative of Goods and Service Tax structure.



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