Fig-1, Cumulative Illicit Financial Flows as a percent of GDP(1948-2008)
Fig-2 , Composition of India’s Underground economy at 50% of GDP
According to his measure, the post-reform period is characterised by a much larger underground economy (averaging 42.8% of official GDP compared to just 27.4% in the pre-reform period).Thus,we can infer that globalization in Indian economy induced the increment in black money or loss of capital asset. Generally, one would expect a high correlation between the state of overall governance and the size of the underground
economy – countries with strong governance (such as Norway) typically have a small underground economy whereas those with poor governance (such as Nigeria) have a large underground economy.
Some of the spiraling effects of the black money are [i] emerging parallel economy,[ii] widening the income inequality,[iii] soaring inflation rate,[iv] speed up economic drain , [v] growth of terrorism since Paris-based Financial Action Task Force (FATF) has recently noted that anti-money laundering (AML)/combating the financing of terrorism (CFT) is necessary for national security.
We can split the principle causes of evolving black money in the following manners,[a] corruption in different ministerial levels and government officials , [b] hoarding of black money on the sides of political parties,[c] investment assets in gold , silver etc,[d] stock market scandals,under-world mafia’s activities,corruption in public distribution system,export incentives,rebates,gambling,lottery,real estates business etc,[e],evasion of excise duties,non payment of taxes,[f] bribing from major contracts,[g] capitation fees,donations,[h] no records of income from industries,business,tourism,travels etc,[i] complex tax structure,[j] corrupted political leaders and bureaucrates,etc.
The previous policies taken by the earlier governments were not encouraging and promising since in 1977,Wanchoo Committee just amended the taxation laws , in 1977, Direct Tax Committee introduced rules for direct taxes,in 1981,the “special bearer bond” (Rs 10,000/-) was induced by the order of the President and in 1985, Raja Chelliah Committee reformed the tax structure of the Indian Economy.Now,the Central Board of Direct Taxes began operation against black money. In brief, these are the above initiatives on the part of the government.
Some experts opined that government should ban the notes of Rs500,Rs 1000 and even Rs 100,and public are allowed to transact by cheque over 20,000/-.All earnings would be mark under the domain of tax and illegal income might be subject to FIR.Any bribe, donation, capitation fee should be supervised by the investigating authority who must verify the source of income , deposit accounts of the earner.Any non resident bank deposit is subject to the approval of Central Bank.
We know that the corruption charged against Rajib Gandhi and Narasimha Rao had been accused and the investigation were not completed which means the government is not transparent even on the part of the law. Thus why, the new amendment of law is necessary to fight against the illicit money. These can be arranged in the following manner.
Tax slabs have to be kept simple, easy and user friendly,[ii] Government expenditures need to be audited frequently, [iii] political parties and the chairpersons have to be closely watched and to ensure accountability, [iv]Transactions should be carried through electronic media only,[v] Invoice or a bill for all purchases and services is essential. Details of ID and pan card numbers to be entered in all transactions, [vi] Concessions and rebates to corporate companies are to be rigorously checked to avert privilege misusing,[vii] Transparent public distribution system, [viii] elected candidate is penalized for any corruption activity or any immoral practice should be added to the constitution, [ix] we should be honest, not providing any room for bribery, corruption and illegal activities before pointing out at others,[x] a verifying authority is needed for NRI and their transactions.
All the citizens of India expect equality, justice and right from an honest government who could not deny that the above problem is alerting our sovereignty, solidarity, stability and sustainability of inclusive growth process.