By Anjana George
Edited by, Anandita Malhotra, Senior Editor, The Indian Economist
“Black money is so much a part of our white economy, a tumour in the centre of the brain-try to remove it and you kill the patient”- Rohinton Mistry
At a time when the Modi government is trying to say ‘come-to-India’ there seems to be one little thing that does not want to do so-black money. Interestingly, our political babus too aren’t really interested in inviting it back. In a clear message representing the people of the nation, the Supreme Court has rapped the present government for its delay in publishing the list of black money holders. What will this renewed tryst with the black economy bring, is a drama that we will have to wait and watch.
Government after government has presented the same slack in dealing with fraudulent money holders since 1955. Fast track to 2014 and you will see an agitated population who wants an end to this string of corruption and illegal money laundering. Active citizenship has lead to demand action from Parliament, judiciary, executive and civil society organizations-all of whom must activate quick action to resolve this problem forever.
But how much exactly does the average Indian know of the impact of this ‘parallel economy’ or the ‘unaccounted, subterranean, illegal and unsanctioned economy’? Because, as far as research shows, the rural population of India has absolutely no idea of the thriving black economy that could be indirectly affecting them. It is the middle class that is aware of the impact and hence the maximum outcry comes from this class. The multiple levels of society is probably one of the reasons why the nation as a whole is ignorant to the damages and the menace that the black economy is causing to the white economy, national debt and the exchequer.
The point to be noted is that if the ‘Parallel economy’ is posing such a serious threat to the stability and growth of the official economy, then surely it stems from the fact that the magnitude of black money is large and rigged deals are growing in volume and complexity at an alarming rate. Apart from the widespread ramifications of the parallel economy, one might also believe the fact that ‘black incomes’ are accentuating the inequalities in income and wealth and breeding a new class of ‘black rich’ in a society which is already harshly stratified.
The black economy has been causing underestimation of GDP in India as an enormous volume of income is diverted to this unaccounted sector. The direct effect of the black income is the loss of revenue to the state exchequer as a tax evasion. It has resulted in a diversion of resources for the purchase of real estate and luxury houses along with transfer of funds from India to foreign countries through clandestine channels. The availability of black incomes with businessmen and capitalists and the consequent inequalities of income, place a large amount of funds at their disposal.
When part of the black incomes is held in cash, there is an abundance of liquidity which becomes available through the addition of savings held in the form of cash, bullion, gold, silver, etc. Moreover money evaded through illegitimate means is spent in undesirable and crude manners that make virtues like hardwork and honesty underrated. This is what angers the average person in an Indian economy- that the rich get richer and the poor get poorer. The existence of such a parallel economy has totally distorted and disrupted the planning of the economy of the country.
Is the subsistence of such a parallel economy justified? India isn’t the only nation that faces this problem; even developed nations like Germany, Greece and Italy have parallel economies which constitute 20-30% of their GDP. Governments have taken many measures like demonetization, Voluntary Disclosure Schemes (VDS), Special Bearer Bond Scheme, tax evasion prevention laws, etc., but some scholars have maintained that all these measure have touched only the tip of the iceberg. In India all of such schemes have hardly fetched Rs. 5000 crore over a period of fifty years. The main drawback in these schemes is that they touch the problem of black money already created but they do not go into the root cause of the generation of black money. Unless this problem is tackled, the menace of black money will continue to increase.
At the end of this discussion, is the ‘parallel economy’ any good? Ofcourse not; but it’s high time someone took the reins and guided the economy to stability- be it the BJP or the Congress or the honorable Supreme Court. We can’t always keep speaking and writing about the menace and not do much about it, can we? Hope all parties in this fiasco will willingly help in eliminating this global predicament- nations and banks included.
Anjana George is a second year student pursuing Bachelor of Business Administration (BBA) from Christ University, Bangalore. She believes in the power of words and their magic to entwine people in thought and understanding. Her subjects of interest include politics, spirituality, architecture and movies among others. She is an avid reader and takes keen interest in writing, storytelling and photography. She aspires to be able to know people, places and lives and share her knowledge of experience with others. She can be contacted at the following email address- [email protected].