Eradication of black money from the society is very much required to build the realistic economy in India. It is extremely important to identify the factors responsible for the generation of black money and is required to be removed for the growth of nation. Politicians and bureaucrats are a significant factor in this; their fraudulent and irresponsible activities are accountable for compelling the 60% of the population to live below poverty line. This kind of imbalanced economy doesn’t provide enough white money to individual to fulfill their basic needs like food and shelter. This has ultimately resultant to the creation of black money as the parallel economy in the nation.
Following are the major factors responsible for the generation of Black Money in the economy;
Government of India has taken several prevention and penalizing steps to eradicate the issue of black money. These include;
Scrutiny of returns
Search and seizure action
Imposition of penalty
Launching of prosecution in appropriate cases
So many other efforts has also been taken to unearth black money,
Appropriate action under the provisions of Direct Tax Laws is taken in cases where unaccounted income/ wealth are detected.
See Also: What is an Economy?
The amount of total assets seized by the Income Tax Department during Search and Seizure operations conducted in the last three financial years is as under:
Total Seizure (Rs. In Crore)
There are several fundamental reasons for the generation and circulation of black money, including various socio-economic factors. However, generation and circulation of black money is found to be prevalent in Real Estate, Manufacturing, Mining, Education, Healthcare and various other sectors.
India’s 70% of rural population are illiterate more than that they are not aware of the rights and obligations conferred upon them by law. Even literate people are not aware of what are their rights and obligations under the law. Absence of this legal awareness is responsible for the exploitation, cheating and deprivation poor people in the country. The result is that poverty will keep on following them with a condition of total helplessness and unhappiness. This depressed condition in which the poor find themselves make them to think about alternative ways to make money.
Fake Note Circulation
In 2007- 08 Reserve Bank of India (RBI) has announced that the amount of fake notes found in banking system is four fakes per one million notes in circulation
Even though the intelligence agencies and officials trying their best to find out all the sources of fake notes, the uninterrupted circulation of fake notes is severely damaging the economic growth of the country by giving a boost to black economy. Foremost economists believe that the black economy could well touch 50% of the GDP if the situation is not handled on a war footing.
The actual volume of fake currency notes, which is in circulation in the country is less, but it is transacted at a very high velocity. Majority of such money is used for money laundering and to support illegal activities. Fake notes boost the black money circulation in the economy.
Unaccounted money circulation (Black money circulation) in the parallel economy is a big threat to the real economy. Elimination of black money will benefit the economy in many ways. As you all know it is causing big loss to the government in the form of tax-revenues and in many other ways. Eradication of black money from the economy will help us in generating more revenues for the government.
Black economy is variously termed as;
The money involved in black transactions or used in parallel economy is very large indeed. According to the report of National Institute of Public Finance Policy (2007) has estimated that the average amount involved in Indian Black economy is as much as about Rs 40,000 crores. This constitutes around 20% of the gross domestic product of the economy. The size of black money has grown fast over the last many years.
A recent estimate puts the size of black money at over 50% of Gross Domestic Product (GDP). The important thing to be considered is that the annual rate of growth of black money is higher than the annual growth-rate of GDP.
The impact of black money in the economy is huge. It has enormously worsened the income-distribution in the economy. When it comes to social life fixed income salary class is the biggest victim of this. In big cities like Delhi & Mumbai many well placed officials and honest employees earn much lesser than an average small shopkeeper. More over these people have to pay tax on their income also, all these things make even a good citizen to enter into the parallel economy.
Black money results in transfer of funds from India to foreign countries through secret channels. Such transfers are made possible by violating exchange regulations by under invoicing of exports and over-invoicing of imports thus finds itself in an inconsistent situation.
Can we get the information of all Indian accounts in Swiss banks? If it is possible, it will help us in getting back the black money dumped away by Indians in secret Swiss bank accounts. But unfortunately as far as Swiss laws are concerned they don't give any information of their banking transactions. Recently India has signed a “Double Taxation Avoidance Agreement” with Switzerland. But it allows only the exchange of information in accordance with the Organization for Economic Cooperation and Development (OECD) standards which were negotiated in line with the parameters decided by the Swiss Federal Council and Swiss Federal Department of Finance. According to our Honorable Finance Minister Pranab Mukherjee the agreement will help India access the information on unaccounted money for taxation purposes only.
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