Black-Money, INDIA…

Money that do not go through tax-net or on which taxes are not paid in a shadow or black-economy is black-money. It is generally the money, of which, sources are not known to the government or are hidden by it by the tax-payer or attributed to wrong sources. And, many times it goes through the money laundering. Tax-evasion has been a trend all over the world and there are countries which we proudly call tax-havens. Cyprus and Switzerland are among the examples of tax-havens of the world… Black-money is not always the money which leaves the country which is a privilege of the very-rich and there is also a huge amount of it within the country which is stashed under the carpet and unknown places. We can easily expect a similar amount of black-money in and out side the economy. Nevertheless, recently the estimates of black money has come-up around  $ 2 trillion ( 2 lakh crores) deposited in Swiss bank-accounts and as we have said there is a similar magnitude of black-money with-in the country which is lot money, if unearthed, could be spent on development of the Indian economy. However, the above figures are just estimates and the actual amount must be much higher. There is also a great amount of black-money invested in gold and realty within the economy. Moreover, a lot of black-money is deposited in banks with fake sources… According to a former RBI governor the responsibility to stop the generation of black-money is with the government and tax authorities…  

The quantum of black-money is so high that it equals the half of INDIA’s GDP in terms of purchasing- power-parity (around $ 4 trillion). The amount is so high that if it is brought to the economy back and is invested in the economy the growth-rate of the economy may easily touch 10 % with out government’s support (fiscal-policy). The high growth rate, above 9%, we experienced not long back was also the result of loose fiscal-policy and higher fiscal-deficit of the UPA government. At least the above plan will not increase fiscal-deficit and hurt the country’s rating in investors’ eye. Moreover, this is likely to improve the country’s fiscal position; if taxes are paid on the black-money government revenue will go up… Recently Assocham advised the government to tax the black money around 40% and allow it to bring back to the country with a six-month dead-line… But what is the difference? Money is deposited abroad because the subjects do not want to pay taxes and even at the cost of interest rates. The interest rate on swiss bank accounts are very much low than the Indian interest rates… The only benefit of the Swiss banks is that they often do not inquire about the sources… Many banks in INDIA also do not inquire about the sources or real sources which many time help making black-money white…  

It is important for the government to incentivize bringing the black-money back to INDIA. The owners of black money are not willing to pay taxes, but the amount is so huge that it would definitely undermine the country’s growth rate and development in the long-run and the government may be forced to come to terms of the black-money owners or the government should adopt stricter rules for having deposits abroad, under complete supervision. In year 2011, the founder of wiki-leaks Julian Assange gave the government of INDIA a list of 782 Indian people having-black money in Swiss accounts, but the government did not disclose the names for confidentiality. Therefore the above figures of black money in Swiss accounts are just estimates and the Swiss banks never issued any list or disclosed any amount of Indian money deposited in their banks. The figures we have are just informed guess work. The Assocham figure’s of $ 2 trllion black-money deposited in Swiss banks is a figure for black-money out-side the country and, again, as said above we must have a similar amount of black money in INDIA, too. Therefore, now, the figure we arrived at is $ 2 trillion inside the country and $ 2 trillion out-side the country, which together now equals INDIA’a GDP in PPP terms. Therefore, the conclusion we derive from the above discussion is that the Indian economy has an equal shadow or black or parallel economy running along with its white economy which can undoubtedly contribute to supply the needs of the economy… China has officially $ 4 trillion in its reserves and it is the fastest growing economy and if the Indian economy has to catch pace with the Chinese economy then the Government must try to unearth the black money, inside and out side the Indian economy and must purposefully invest that money for the welfare of Indians. Unknowingly the economy has created a big reserve…