Essay about India and the Black Market

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Sep 20, 2005



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
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Similarly, payments for the sale and purchase of immovable property, various kinds of consumer goods and services beyond a certain stipulated amount should also be made mandatory through banking channels. While doing so, the Finance Minister will not only be plugging one of the biggest loopholes leading to tax evasion but would also reduce the need for ready cash and hence the printing of currency notes on a large scale. The biggest chunk of black money is invested in real estate and gold. The circulation of black money in the housing sector is beyond imagination. Since the house tax is based on the current purchase price only one fourth of the money is paid by cheque and the rest in unaccounted cash. Even an honest buyer of flats / houses is forced to pay in black money if he wants to acquire one.

History: The period 1946-61 was one of the intense creativity. A black or parallel economy emerged both in the wake of the Second World War and the expansion of the economic activity in the post-independence period. Incentives were provided through the taxation laws to promote savings and investment; this made the tax laws more complex. Then, there was the need for larger revenues to finance the plans of economic development. Thorough investigations were, therefore, conducted into the structure of taxation not only with a view to widen the base of
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