The Menace of Black Money in India – Essay on Black Money
Black money is the unaccounted money in the economy. Its accumulation is a result of the evasion of taxes like income tax, sales tax, custom duties, wealth tax etc. Black money can also be generated, through the sale of fixed assets and the sale of scrap as fixed assets can be under-priced and it is difficult to make a curate evaluation of scrap. Large scale smuggling of gold and various luxury items is yet another important source of black money. Then, sometimes, influential firms obtain manufacturing licenses, quotas or import licenses for in excess of their actual requirements and sell them at a cash premium to a second party. This also adds to the emergence of black money. Illegal remittances by the relatives staying abroad and various other malpractices have aggravated this problem.
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Today black money is functioning as a parallel economy in India. Although it is a very difficult to make an accurate estimate of the total amount of black money existing in the country, it needs no great imagination to realize the threat it passes to the stability of our real economy. Considering India’s GNP and total currency circulation, experts estimate that one rupee out of three of national income promptly goes underground every year and apparently takes the entire currency with it.
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The important fact which one should keep in mind here is that a black currency note does not remain black all the time nor is a white currency note perpetually as white as show. A part of black money may occasionally be converted into white money through small bank accounts or through cash payments of small official and private dues. Many business houses maintain benami or fake accounts for this purpose. In the same way, white money in small quantities becomes black money in small quantities becomes black when someone has no black money but payment in black money is insisted upon.
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If we look at the consequences of existing black money in India we will find that illegitimate money has widened the gap between the rich and the poor, between the haves and the have-notes. It has bred corruption and eroded the moral impulses of the human being. Much of the black money is being spent on conspicuous consumption and entertainment. Today the unscrupulous businessmen, smugglers and corrupt bureaucrats have forgotten their duty towards the people, particularly towards the backward sections of society, and are going on amassing unauthorized money.
Black money is also being changed into black wealth when the holders use their money to buy land, houses, gold, jewellery and other costly possessions. In official circles, corruption is rampant to such an extent that any file can be moved from one place to the other only by giving it ‘silver’ wheels. It has led to the cornering of industrial licenses, larger quotas of exports and imports and extraction of huge financial help by the big businessman with the support of politicians and bureaucrats.
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The worst part of the black money power is perhaps the climate of a moral illegality which it breeds. This ‘Chalta hai’ or indifferent attitude is apt to pervade not only the economy, but other social transactions and may ultimately end up by subserving the very values .which differentiate a healthy society from a sick one.
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It is no secret that certain classes of politicians and certain types of businessman have developed over the years a cozy relationship with one another, fostered mainly by common interest in the generation and distribution of black money. Politicians need black money to finance their election candidates and black money has to be generated by businessman to keep the industry going. It is a vicious circle. Evidence before the Sarkaria Commission and elsewhere has indicated how well-timed policy changes can provide opportunities for businessman to make money and how equally well-timed threats can secure funds for elections and other purposes.
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The fault also lies with the tax structure in the country. The high rate of taxation leaves hardly any scope for incentives to an honest businessman the returns filed by the wealthy are false and fabricated. The officials can be bribed to let off the tax offenders. Those possessing large properties try to apportion it in the name of their relatives, and thus evade wealth taxes. These evasions have certainly added to the problem, of black money.
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What steps have been taken to remedy the situation? In January 1976, the government imposed a statutory obligation on management to carry out physical verification of its assets to the satisfaction of the auditors to ensure that no black money is created through the sales of the fixed assets. Besides, measures like control on the issue of licenses, voluntary disclosure scheme, anti-smuggling laws, imposition of MISA, demonetizations of large currency notes, tightening of the tax laws, bearer bonds etc., were supposed to bring about good results.
However, it is nothing but populist rhetoric to say that controls operate effectively. The economic measures that have been taken so far are only aimed at unearthing black money and not at preventing the generation of black money. The emphasis has been in the wrong direction. Take our tax measures; they are largely self-defeating, as tightening of tax laws only leads to increased evasion, corruption and need for black money to meet these demands of corruption. The better solution would have to lower specific taxes, overhaul the entire system of licenses, have fewer controls and effective implementation of government programmes.
Ultimately black money is a social problem. The problem is part of the general moral degeneration affecting our society and needs to be dealt with on the social as well as the economic level.
