India and the Black Market
Sep 20, 2005
BLACK MARKET AND THE INDIAN ECONOMY
Statistics: It is said that black money in India accounts for 20 % of GDP. If this is true, then black money generated every year must be around Rs 400,000 crore or $ 80 billion. This is a huge amount, more than the entire budget of the government at the Centre. We have a government that spends about Rs 350,000 crore a year, most of it on itself, and asks for accounts of every paisa. On the other side, we have black money worth Rs 400,000 crore every year, which is just guesswork, and there are no accounts. This money goes into property, which is why real estate prices are so high, and of course five-star …show more content…
1. It is a plain fact that many high-earning persons evade income tax by ruthlessly exploiting the loopholes in the laws. Black money is the outcome of this practice. And neither the income tax department has mounted an effective campaign to hunt out these tax cheats, nor has the court, any court, felt provoked to order a comprehensive crackdown.
2. The widespread ruse of doling out big money to top executives and others by describing it as reimbursement.
Constituent activities of Black Economy:
1. Legal activities that are not reported to the tax authorities and the income which goes untaxed and unreported. For instance: it is not illegal to clean someone's house, to feed people or to drive them. It is, however, illegal to hide the income generated by these activities and not to pay tax on it. In most countries of the world, this is a criminal offence, punishable by years in prison.
2. Illegal activities, which needless to say, are also not reported to the state (and, therefore, not taxed). The money generated by these activities is largely held in foreign exchange outside the banking system or smuggled abroad (even through the local banking system).
How is it formed? A parallel or a black market is an illegal structure that is created in response to