Project

1. Financing For Development
From Billions to Trillions: Black Money –An
Indian Financial Problem For Development
Mohammad Allam
Financing For Development World Bank
Group MOOC
December 2015

2. • Introduction: Black money is an important problem for
developing countries like India. It is assumed that a
large amount is transferred outside of the country
illegally. There are also cases of the large sum hiding
within the country without taxation. There is need to
control the black money for the better management of
financial resources and development of the country.
• The aim of this project is to study the problem of black
money in Indian context.

3. What is Black Money?
• Black Money is defined as an income which
has not been reported for tax or obtained
illegally by a person, an organization or an
authority.

4. Why Black Money is So Important?
• For Knowing the real national Income of the country
• For planning of the national development by accumulating all
sources of the nation
• Saving nation from going into hands of corrupted people
• To make possible the fruits of development to reach each and every
citizen
• To eliminate the security threat to the nation
• To make the financial position of the country strong
• To stop concentration of political and economic powers in few
hands
• To make the democracy function smoothly and meet the
inspiration of the people
• To stop forming an international group threatning to international
peace and security

5. Some Facts about Indian Taxation
• There are 1.2 billion people as per 2011 census of
India in which the tax payers are 35 million only.
• Out of 35 million tax payers about 89 % are those
who comes in tax slab of 0-5 lakhs rupess,1.3 %
having income about 20 lakhs and 0.1% having
taxable income exceeding 1 crore.
• Just 3% people in India pay taxes.
• Source:http://articles.economictimes.indiatimes.com/2013-05-
01/news/38958335_1_tax-compliance-tax-base-35-million-taxpayers

6. Black Money (illicit financial outflows) in International
Context-Some Facts
• As per the Global Financial Integrity study “developing countries lost an
estimated$858.6 billion (about Rs 43 lakh crore) to $1.06 trillion (about
Rs 51 lakh crore) in illicit financial outflows”.
• Of all the illicit financial flow from developing countries,50% is counted
from Asia alone
• Africa illicit financial outflows is about 50 billion USD which is double
the aid she receives under ODA(Official Development Assistance)

7. Black Money in Indian Context –Some Facts
• Estimation
• As per one report there 16.4 Trillion US Dollars of India is stashed in
Foreign Banks(http://election.rediff.com/interview/2009/mar/31/inter-
swiss-black-money-can-take-india-to-the-top.htm)
• Global Financial Integrity study reports that India lost 27.3 billion USD
during 2002-2006
• As per the reports Indian illicit financial flow might be reached to more
than 40 destination worldwide(Source: Internal Revenue Service USA on
Abusive Off-shore Tax Avoidance schemes –Talking Points Jan 2008)
• As per the “White Paper on Black Money in India report, published in
May 2012, Swiss National Bank estimates that the total amount of
deposits in all Swiss banks, at the end of 2010, by citizens of India were
CHF 1.95 billion (INR 92.95 billion, US$2.1
billion)”(. https://en.wikipedia.org/wiki/Indian_black_money#cite_note-
nanjappa-1)

8. Indian Government Initiatives against Black
Money
• Establishment of numerious institutions like Central Board of Direct Taxes, Enforcement
Directorate, Central Board of Excise and Customs and Directorate of Revenue Intelligence,
Central Economic Intelligence Bureau, Financial Intelligence Unit etc for control on
financial transaction
• Constitution of committee to tackle the problems of Black Money like M. C. Joshi
Committee
• Tax Information Exchange Agreements with the countries around the world to control black
money
• Encouragement for voluntarily disclosure of black money by giving relaxation in taxation
• Strict control on banking transaction
• Discouraging the non-banking transactions of money
• Reforms in many sectors of the economy which encourage the practices of black money
• The Government uses to issue the modified currency from time to time to make black
money hoarding difficult
• India Joined hands with international community by joining Task Force on Financial
Integrity and Economic Development
• India became 34th member of Financial Action Task Force(FATF)
• India joined Eurasian Group (EAG) in 2010 and Egmont Group-an international networking
of financial intelligence units

9. Result of the Policies of Indian Government against
Black Money
• The Government of India under Prime Minister ship of Honourable
Narendra Modi promised to bring black money from foreign countries
within hundred days.
• In recent time the government initiative known as black money
compliance window earned RS 3,770 crores from 638 declarations in
October 2015.(http://www.businesstoday.in/current/economy-politics/rs-
3770-crore-disclosed-under-black-money-window/story/224303.html)
• Rs 6,500 crores foreign assets have also been disclosed
• The government is working with the Judiciary, foreign countries and
financial establishments to sort out the black money problems.

10. What Should be Done?
• There should be strict control on illicit financial outflow from the country.
So, resources should be available for the development of the country.
• There should be provision of mandatory filing to each and every citizen of
the country. So, nobody could hide illegal income.
• There should be international obligation on each and every country to
stop the illicit financial outflow.
• The bank of each country should be penalized for promoting and helping
illicit financial outflow from one country to another country.
• United Nation(UN) should make the law against the financial institutions
which promotes illicit financial outflow world wide.
• Official Development Assistance should be given to the country which
discourage out flowing of the black money.
• Countries around the world should promote political instability by
discouraging the autocratic and dictatorial rulers.
• The taxation system of the country should be simplified and tax charges
should be low. So, the people could come themselves to pay taxes.