ASSIGNMENT MBA 1(C)

QUESTION NO. 40

How Black Money is affecting Indian Economy?

Introduction

Black money is the illegal child of every dishonest person in this world. White money is the omni-present child and glares well and call the attention of the public looking at it. Whereas black money which is huge and bulk in nature will not be visible to the public and they remain in dark or under the ground or inside the steel chests of banks. They live safe and sound.
Every individual earning, has a share to the government that governs him and his family for the well being of the public belonging to that government. Every time, when money is transferred from one hand to the other, in an authorised manner as laid down in the rules, the government has its share in that money in the form of tax. Any earning for which a government is not given its due share in the form of tax is called black money or a hidden money, thus creating great loss of revenue to the government. In simple words we can call black money as an unaccounted money.

The birth of black money

Black money takes birth through illegal business, organized crimes, gambling, bribery, black market dealings, smuggling, hoarders,burglary, drug trafficking , prostitution, sale of tickets in black for entertainments and many more which are considered as illegal. These days, share marketing and real estate businesses contribute maximum towards holding of black money. Greedy to gold is another source of black money.

Disscussion

Let us disscuss how black money affect the indian economy.

It has slowed the growth of Indian economy. The black money which is generated is not put to best of use and government loses revenue. Loss of Government revenue effects our development plans and social sector. ., Black money is usually stashed at homes or foriegn accounts.Instead of being put to productive use it is kept idle. This affects the economy.Due to Innefficency and corruption of the indian govenment black money is unlikely to be required.
Best option will be to come out with voluntary disclosure scheme ,so people can disclose and convert thier black money into proper legal money.This will alow the money to harnessed for productive purposes.

Black money results in transfer of funds from India to foreign countries through clandestine channels. Such transfers are made possible by violations exchange regulations through the device of under – invoicing of exports and over-invoicing of imports thus finds itself in a paradoxical situation.
Capital and more particularly foreign exchange resources are scarce, (the country) becomes a de facto lender of aid and capital to economically advanced and wealthier nations, with the concealed outflow of funds.
The situation has worsened further over the years The major effect of Black Money on Indian economy is non stop corruption. All we know that person are not corrupt if the system is accurate or you can say corrupt system resulted corrupt professionals only. Black Money leads to vicious circle of corruption. And if corruption & bureaucracy is presence in system of any country then economy of that country can't progress in true manner.

Due to Black Money, Distribution of Income is also affected. In India the major portion of population divided in only two parts; very poor and highly rich. Whereas progress of any country depends on high middle class group which is not enough as per Growing Indian Economy.

From financial express news paper

: India's parallel economy is so deeply entrenched that possession of black money is not even considered worthy of reproach in social reckoning. In fact, custodians of the administrative machinery themselves seem to have joined the race to accumulate such wealth.

Perhaps such attitudes were understandable to an extent during the high noon of repressive taxation and socialist subjugation in the 1960s and 1970s, when anything other than a frugal lifestyle was all but impossible for an honest taxpayer to maintain. Those were days of misery. But tax rates in India today are moderate by any yardstick in the world, and the persistence of the impunity with which black money is held suggests a much older provenance. Looking further back in history, the black sector emerged in India during World War II, when daily necessities were in acute scarcity and the government of the day adopted rationing as a welfare policy,...

Use of black money

Black money is mainly used as donation to trusts which have tax exemptions. No one questions the trust authorities as to, where do they get this money from. They get their donation in the form of cash or in kind. Mainly the black money is rotated for black businesses and is not useful to anyone as they cannot come out openly for distribution. It can be said that black money lives in dark room. Black money is mainly used for celebrations whose accounts are not audited normally.
The black money affects Indian economy severely as it reduces the purchasing power of the citizen of India. It causes abnormal increase in land and property values. The cost of living goes very high, due to abnormal price rise of essential commodities. The poor remain poor and rich become richer.

.Conclusion :

Conversion of black money to white money is a short term symtom based remedy, while the prevention mentions and treat the root cause of the money

Govt. will not do anything for Black money or Corruption issues, biggest scams and corruption happened right under the nose of Congress, what it did for that? Nothing!, Most of the poiliticians and MLA have black money piled up either in Swiss banks, or in some other National/International banks, then why these Politicians will let some law gatting passed which is against them? Its big time that junta, as such , take laws in their hands to bring down these pack of corrupt hooligans. Fully support Anna Hazare and Ramdev. They trying to enforce the govt. to bring the black money back to India since long back. If it happens then Baba Ramdev and Anna Hazare is going to get nothing as a benefit, but the people of India will get the actual benefit in many areas. The 2011 Indian anti-corruption movement is an ongoing demonstrations and protests occurring in India intended to establish a strong and independent legislation against endemic corruption The movement has gained momentum in particular since 5 April 2011, when Anna Hazare, a prominent activist, first went on a hunger strike which he called a "fast unto death". The main aim is to clean up corruption in many sdepartments of Indian government through a law called JAN LOKPAL BILL. Laokpal bill is a good thing if there no fight of being chairman or member of the drafting committee. So my support goes to both of them because they doesn't show greed for power.

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SHILPA CHANDNI