BLACK MONEY AND THE INDIAN ECONOMY

By Group 1

What is Black Money?

The underground economy or black market The trade is conducted without regard to taxation, law or regulations of trade

Black money in India accounts for 20 % of GDP Black money generated every year Rs 400,000 crore

Government spends about Rs 350,000 crore a year

This money goes into property, five-star hotels, Swiss banks etc

If government gets a small fraction

There would be no need for revenue or fiscal deficits

How is it formed?

Manipulation of the economic forces of supply and demand for both currency and commodities
Profiteering activity generates unreported income and wealth, which escape detection by official statistics Donations to Political Parties

ISSUES OF HAWALA

Hawala means transferring black money from one state to another or from our country to other country through private individuals. Based on trust.

Black Money

Advantages V/S Disadvantages

Advantages

The black economy is a cash economy It is liquid and fast It increases the velocity of money It injects much needed foreign exchange into the economy It fosters economic activity and employs people

Black economy is especially important in times of economic hardships It enhances exports and competitiveness through imports It injects liquidity to a dehydrated market

Disadvantages

It is exploitative Visible parts of economy are penalized

Government collections are invested for welfare It increases the Rich-Poor Divide

MAIN PROBLEMS WITH BLACK MONEY

It has enormously worsened the income-distribution Example:

Many high placed official and honest employees earn much less than an average small shopkeeper in big cities like Bombay and Delhi

How to Park Your Black Money ?

 80,000 people from India travel every year to Switzerland out of which 25,000 people are regular
-Times Of India

Why Swiss Bank?

Complete Privacy Numbered Swiss Bank A/C Multi Currency A/C

No Minimum Balance Per Month

Complete Secrecy Stock Market Trading available Only under Criminal offense the personal details of the A/Cs can be revealed.

Swiss bank revealed India has more money than rest of the world

13 times larger than the countries foreign debt

Black Money in Swiss Bank

India - $ 1456 Bn Russia $ 470 Bn

U.K - $ 390 Bn
Ukraine - $ 100 Bn China - $ 96 Bn

POSSIBLE SOLUTIONS
Tax inspectors and customs officials should receive police powers and much higher salaries (including a percentage of tax revenues).
Bureaucracy should be pared down drastically. Less power to state officials means less corruption

Open for Discussion

Thank You