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Black economy 03


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Black economy 03

  1. 1. BLACK MONEY & PARALLEL ECONOMY <ul><li>By K . SHEKHAR </li></ul>
  2. 2. BLACK MONEY <ul><li>Black money may be defined as the money that is generated by activities that are kept secret in the sense that these are not reported to the authorities. As this money is also not accounted to the fiscal authorities i.e. the taxes are not paid on this money. </li></ul><ul><li>White money is that money which is shown in relevant accounts and tax paid ,if due </li></ul>
  3. 3. PARALLEL ECONOMY <ul><li>It connotes the functioning of an unsanctioned sector in the economy whose objectives run parallel , rather in contradiction with the aroused social objectives. This is variously termed as “ black economy ” , “ unaccounted economy ”, “ illegal economy ”, “ unsanctioned economy ” or “ subterranean economy” </li></ul>
  4. 4. SOURCES OF GENERATION OF BLACK MONEY <ul><li>Beginning of the evil </li></ul><ul><li>Control and licensing system </li></ul><ul><li>Tax structure </li></ul><ul><li>Donation to political parties </li></ul><ul><li>Ineffective enforcement of tax laws </li></ul><ul><li>Generation of black money in the public sector </li></ul>
  5. 5. IMPACT OF BLACK MONEY <ul><li>1. Leads to misdirection of precious national resources </li></ul><ul><li>2. Worsened income distribution </li></ul><ul><li>3. Big sized unreported segment of the economy </li></ul><ul><li>4. Transfer of funds from India to foreign countries </li></ul>
  7. 7. IMPACT OF BLACK MONEY (contd.) <ul><li>5. New black money culture in business world </li></ul><ul><li>6. Corruption in the society </li></ul><ul><li>Last but not the least……. </li></ul><ul><li>7. Corruption of the entire political scenario </li></ul>
  8. 8. IMPACT OF PARALLEL ECONOMY IN INDIAN CONDITIONS (facts) 2009 <ul><li>Indira Gandhi Institute of Development Research (IGIDR) </li></ul><ul><li>Indian economy grew by 5.8% </li></ul><ul><li>Finance , insurance & real estate expanded by 9.5% </li></ul><ul><li>Total amount of black money in India is Rs.3,54,000 crores </li></ul><ul><li>Food subsidy is supposed to rise by a mere 6.2% </li></ul>
  9. 9. Union Budget 2005-06:the Black Economy <ul><li>Introduction of two schemes in Union Budget 2005- 06 – </li></ul><ul><li>1. Banking Transaction Tax (BTT) </li></ul><ul><li>2. Fringe benefit Tax (FBT) </li></ul><ul><li>The value added tax (VAT) has also been billed as a scheme to tackle black income generation in indirect taxes. It is supposed to lead to better compliance. </li></ul><ul><li>Services tax collection has shown high buoyancy. Many more services are progressively being brought under the net of this tax. </li></ul>
  10. 10. Model of Black Income Generation in Legal Activities <ul><li>Profit (P) = Revenue (R) – Cost (C) …(1) </li></ul><ul><li>Profit may be white (what is declared) or black (what is not declared). The declared profit appears in the income statement of the business and is called the balance sheet profit. The undeclared profit or black profit is called off-balance sheet profit.It accrues directly to the management of the business. </li></ul><ul><li>P = White Profit (Pw) + Black Profit ( Pb) …(2) </li></ul><ul><li>Further, </li></ul><ul><li>P = Actual R – Actual C …(3) </li></ul><ul><li>Black Profit (Pb) is generated by declaring lower revenue and/ </li></ul><ul><li>or overstating costs. </li></ul>
  11. 11. Some questions to ponder upon?? <ul><li>Is black economy really an evil? </li></ul><ul><li>Is there a way to estimate and curb the black economy? </li></ul><ul><li>Are we as individuals also responsible in contributing in growth of parallel / black economy </li></ul><ul><li>How is the government going to tackle the twin and interrelated problem of black economy and unemployment? </li></ul>
  12. 13. EXAMPLES OF PARALLEL ECONOMY <ul><li>Hawala kanda </li></ul><ul><li>Film industry </li></ul><ul><li>Illegal export and import </li></ul><ul><li>Election polls </li></ul><ul><li>Sports </li></ul>
  13. 14. CAN WE CHECK IT ???..... <ul><li>1. Setting up invigilation & business department </li></ul><ul><li>2. Banning unorganized banking system </li></ul><ul><li>3. Outwitting of shrewd beaurocrat & businessmen by government agencies </li></ul><ul><li>4. Public sector’s participation must be encouraged in all sectors of economy </li></ul><ul><li>5. Effective measures to tackle inflation must be taken </li></ul>
  14. 15. SOME LINKS/ REFERENCES <ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>My friends and colleagues </li></ul>
  15. 16. Money…hai to honey hai….