JAM Topic - BLACK MONEY

World Bank report indicates shadow economy is at 1/5th of the economic output. Study on illicit financial flows by Global Financial Integrity has placed these at 3% of the economic output for India between the years 2002-2011. Black money is generated through complex criminal activities such as tax evasion and corruption.

             Certain studies have not included many sources of black money, for example, corporate tax evasion is responsible for 60% of total black income while criminal activities account for 35% and corruption only 5% as per the GIF study

             Black money has economic as well as political ramifications Remittances from abroad if not bonafide and illegal or parallel transactions to these also a source of black money

Aside from black money abroad, domestic black money is also a big problem. This includes: Election expenses, Real Estate, Gold, Hawala

 Impact of Black Money on the Indian Economy

• Government loses tax revenue on account of black money generation and tax evasion.
• RBI will not frame effective policies because estimates of black money in the system will be hard to arrive at and adjust for.
• Government policies will also suffer in formulation and implementation in the absence of correct estimates of black money in the system
• Black money will impact national security as terrorists and criminals will use these channels to fund their activities and ventures.
• Lack of research is another problem associated with black money. Econometricians and statisticians will not be able to assess the health of the economy if there is plenty of black money floating in the system

Steps Taken To Counter Black Money 

• Disclosing names of account holders in foreign banks a violation of confidentiality clauses in treaties with other nations; steps being taken to circumvent this.
• Delegation led by Revenue Secretary visited Switzerland to facilitate exchange of informationSwiss Federal Tax Administration indicates competent authority would help India to obtain information about black money in the nation
• Cases are in advanced stages of investigation and all names will be publicly revealed
• Government has also provided the SC with names of 627 persons who have committed mass tax evasion 

As we discussed Black money is an evil that has a far reaching impact on the economy. Government needs to work towards recovery of black money from international shores as well as take steps to curb the accumulation of domestic black money. On both scores, much has been accomplished yet perseverance is needed to facilitate a final resolution.