TIMES OF INDIA DATED 31 AUGUST 2009 SECTION:- TIMES NATION 15 PAGE NO.

BLACK, AT HOME
Five ways you and I help the black economy grow
Meenakshi Kumar and Insiya Amir | TNN

Black money thrives. Its not just stashed away in Swiss banks by crorepatis and billionaires, but in ordinary middle-class homes, away from the eyes of the income tax inspector and banking authorities. The black economy is currently estimated to be 50% of Indias gross domestic produce (GDP). Professor Arun Kumar of Jawaharlal Nehru Universitys Centre for Economic Studies and Planning says it could be more. Much more. Kumar should know. He wrote the book, The Black Economy in India. He says: In 1995-96, it was 40% of Indias GDP. Considering that the economy has grown by 8% and more in the last decade, it can be assumed that the black economy, too, has grown roughly by the same amount. Thats a conservative estimate, he adds. It could be much more, somewhere close to 70%. But experts say black money possession and use is only concentrated in a thin slab of 3% of the Indian public. They say it is largely generated in the services sector, which has grown enormously in the last decade. But it may not be as rarefied as that. Arent we all to blame? Arvind Kejriwal, Magsaysay awardee and Right to Information activist, says: Our system forces a person to be corrupt and, at every stage of our life, we end up paying extra for services that should have otherwise been free. That is extortionist corruption. In mutual corruption, greed forces a person to subvert the system for personal gains. Basically, its a combination of these which lead to the generation of black money. Anupama Jha, executive director of Transparency International, India, adds: There is lot of scope for improvement in the government. Also, India has not joined any international effort, like the United Nations Convention Against Corruption, in checking corruption. We need to strengthen our anti-corruption agencies. Last year, Transparency Internationals Corruption Perception Index (CPI) ranked India at 85 in a list of 180 countries. In South Asia, India continues to be at the top of this ugly league table. In effect, we are all guilty, even though none of us would openly admit to being partners in a gross national crime. Here are five ways each of us helps the black economy flourish. No bills | We buy things, say a mobile phone, a music system or even groceries, without asking for or getting bills. We may pay less by avoiding value added tax (VAT) or sales tax, but we are also helping the seller to under-invoice his bills and thus pay less tax. Bank executive Sumedha Kaul confesses to

TOI it never occurred to her that she was helping generate black money every time she bought a mobile phone in the grey market. When the whole world is doing it, then why should I be the only fool around to pay extra money for something which can be bought for less? she remembers thinking. The kirana shop or drug-store owner doesnt give bills unless asked, and the profit margin goes undeclared in income tax returns. The government introduced VAT to ensure businessmen pay the right amount of tax but the loopholes mean it can be bypassed. Even parking attendants in major city centres must be easily making Rs 2-2.5 lakh every month but they would declare perhaps only one-fifth of it. The receipts that they give you are torn up the moment you hand them back, says investment consultant Akash Bhatnagar. Professional herapheri | Many doctors reportedly prescribe unnecessary medical tests from specific laboratories in order to claim commission. Several government doctors run a lucrative and flourishing private practice on the side. And private doctors with their own clinics could be underreporting the number of patients they treat every month. The major bribe-earners are lawyers, doctors, bureaucrats, politicians and businessmen, says Professor Kumar. Government teachers assist the black economy too, he says, when they skip regular classes and devote their time to private, undeclared tuition instead. Consider the number of Indians who hide income from sources other than their salary. Puneet Sethi has rented out his flat in Kolkata but doesnt declare the rent when he files his tax returns. Only cash, no cheques | It may be as simple an act as taking your National Savings Certificate money or post office savings in cash. Surya Bhatia, principal consultant, Assets Managers, says: Its a lot easier not to declare it in income tax returns if you take it in cash. Similarly, most small shop-keepers prefer to pay for and sell wholesale goods in cash. When no receipts are involved, it means black money is generated. And this is happening at every level in the society, says Bhatnagar. Pocket money | The weekly or monthly hafta or bribe charged by policemen; the chai-paani you pay for to get your property file moving in a corporation office or to get your passport on time are just some examples of endemic extortionist corruption. Its the system that is forcing the commoner to become corrupt, says Kejirwal. Delhi resident Somnath Ghosh says: I have a faulty electricity meter. I have complained many times but no one has come to rectify it. So each time the electricity office official comes to take the meter reading, I pay him extra. In return, I get to pay a lower electricity bill every month. Property for sale, in black | At least 40% of a property transaction has to be paid in black. Rahul Sethi, who bought a house in Bangalore, remembers how hard it was for him, a salaried bank official, to arrange ready cash. But there was no other way, he grimaces.