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ISSN: 2278 7798

International Journal of Science, Engineering and Technology Research (IJSETR)


Volume 1, Issue 5, November 2012

BLACK MONEY IN INDIA: PRESENT STATUS


And
FUTURE CHALLENGES

RAJNI ARORA
Assistant Professor
Deptt. Of Management Studies
(Govt. Mohindra College)

ABSTRACT course of action. Hopefully, this would


contribute to an informed approach on this
In the present era, issue of BLACK issue as we move forward in this context.
MONEY has come into forefront of the
society with active participation of our KEYWORDS: Corruption, Demonstration
youth and parliament. The main aim of this Effect, Present Status, Future Challenges,
research paper is to know the present and their effects, SIT (Special Investigation
status of black money in INDIA & its future Team).
challenges. In the context of present status
it includes sources from where black money INTRODUCTION
is generated and its uses in the country at
different levels. This paper represents the As we know that in Ancient times
framework, policy options and strategies our country, INDIA, was popularly known
that Indian Govt. should adopt to tackle as Golden Bird because people of our
with this issue and also describes the future country were more civilised in terms of co-
challenges to be faced by Govt. in this ordination and co-operation, worked in a
context. It also studies the one of the main very enthusiastic & honest manner so as to
reason behind the generation of black provide fruits of their work to everyone
money i.e. corruption. It shows up to what without any selfishness and/or jealousy i.e.
extent, the corruption leads to its they were not concerned about their
generation which has considerable impact earnings as compared to others. They
on various sections of the society. At last focused on the welfare of the nation as a
but not least, conclusion of this paper is whole. So it could be predicted at that time
provided representing the ongoing issue of that our country will become one of the
black money in our country and its future greatest economies in the world and be at
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ISSN: 2278 7798
International Journal of Science, Engineering and Technology Research (IJSETR)
Volume 1, Issue 5, November 2012

the top as regards developed country very Vijay Kumar Singh presented a
soon, but sadly it didnt happen. paper on controlling money laundering in
India- problems & perspectives that to
There are many reasons behind it control black money in India is very
but the basic reason is the Use of BLACK difficult task only due to the existence of
MONEY to a large extent in our country. one reason i.e. poor implementations of
In Ancient times the ways to generate laws which leads to sophisticated crime in
money as well as its usage was very the economy and thus generates black
transparent i.e. everyone knew the sources money.
of money and its application, which may be
referred as WHITE MONEY. So, in the What is Black Money?
past, White Money was in use but now the
colour of Indian money has changed to As we know that in the present
Black. Before discussing the use of black times, black money is used in our country
money one must know what Black Money up to a large extent so it is not possible for
is. us to define it in a very clear terms
.Different people defines it in a different
Review of Literature way with different terms such as
unaccounted income, black income, black
Sukanta Sarkar (2010) conducted a wealth, underground wealth, or at economy
study on the parallel economy in India: level it is known as black economy, parallel
Causes, impacts & government initiatives economy, shadow economy, and unofficial
in which he focused on the existence of economy. Therefore, all in all these terms
causes and impacts of black money in usually refers to an income on which the
India. According to him, the main reason taxes are imposed by government but have
behind the generation of black money is the not been paid.
Indian Political System i.e Indian govt. just
focused on making committees rather than Black Money refers to that money
to implement it .So ,he concluded that laws which is not fully legitimate property of the
should be implemented properly to control owner. It is normally received in terms of
black money in our economy. cash from economic activities. i.e.
Individuals who received it must hide it,
CA lalit Mohan Aggarwal (2012) spend it on for the fulfilment of their needs.
edited the White Paper on Black Money
studied that violation of laws by central and According to National Institute of
state govt.leads to criminal activities which Public Finance and Policy (NIPFP) defines-
in turn leads to generation of black money
in Indian economy. Black Money is the aggregate of
incomes which are taxable but not
Arpit Guru and Shruti Kahanijow reported to authorities.
(2010) researched on is black money
income? Need for amendment in DTAA & Apart from this, the term black
ITEA analysed that black money is spread money would also include legal income
everywhere in India up to a large extent that is concealed or hide from public
which continuously stashed towards abroad authorities:
in a very large amount. They also studied To evade payment of taxes which
how black money had caused menaces in includes - income tax, excise duty, sales
our economy and in what ways it is used. tax, stamp duty, etc ;

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ISSN: 2278 7798
International Journal of Science, Engineering and Technology Research (IJSETR)
Volume 1, Issue 5, November 2012

To evade payment of other As we know, in the recent times the


governmental or statutory issue of black money and corruption has
contributions; come into being with participation of our
To evade compliance with the civil society and parliament institutions. In
provisions of various industrial laws this context two main issues have come
which exists such as the Industrial into being-
Dispute Act 1947, Minimum Wages Firstly, without any adequate factual
Act 1948, Payment of Bonus Act 1965, basis, a large magnitude /amount of
Factories Act 1948; black money and unaccounted wealth
To evade compliance with other laws stashed abroad every year.
and administrative procedures Secondly, Govt. Response to address
applicable in India. this issue has been inadequate or we say
considerably negligible.
From where is it generated?
Now let us look at the picture of
It is generated through main two Black Money in India
activities or means Illegal means and
Legal means Almost every sector in our country
It is earned through Illegal means such generates and uses black money for its
as drug trafficking, weapons trading, survival in the market, society....etc. It
terrorism, selling counterfeit or stolen includes Real estate, financial market,
goods etc. bullion & jewellery market, non-profit
By Corruption which includes bribe organisations, external trade and so on.
given to and by public officers.
Hiding income through Legal activities Apart from this, in India black
i.e. not reported to public authorities or money persists due to the existence of
we say to the govt.for the purpose to Demonstration Effect i.e. the way to live a
evade taxes. life in terms of others point of view or we
Even commercial classes generate black say live a life by looking at others
money through Trade. livelihood. People of India are very much
affected by the lifestyles of other people of
From where is it used ? the society who are maintaining
considerable high status, and in turn want
In INDIA it is mainly used by to be like them. For this, they want to
ministers in Elections to promote their own generate money by any means. Therefore to
interests. It is also used in air travel, land, fulfil these desires or to maintain their
jewellery etc. status in society they force themselves to
generate and use black money.
Who is involved in it ?
Another reason for the existence of
List is never ending but to name black money is the presence of Corruption
few are Ministers, Liquor Traders, Top in every field of the economy. For example,
Industrialists, Senior Officers, Chief
Ministers, etc. 1. if any common man wants to get a job
in any public institution like in a bank,
PRESENT STATUS OF BLACK or any transport or educational
institution etc., then he will have to pay
MONEY IN INDIA adequate consideration to the authority
of that respective institution i.e. Bribe
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ISSN: 2278 7798
International Journal of Science, Engineering and Technology Research (IJSETR)
Volume 1, Issue 5, November 2012

have to be paid. For this, common man makeup. Her jewellery and bridal dress are
is forced to generate money by illegal never repeatedly worn. This shows her
means. In this way, we can say that, earnings which are officially concealed i.e.
both, the public authority and a it is all Black Money.
common man generate and use black
money in a considerable manner.
2. Likewise, if a student wants to get
admission in any big and reputed
institution, he will have to pay some
extra money other than fees in the form
of Donations etc.
3. Also in some Educational institutions,
more fees are charged for examination
forms or for practicals which is
considerably higher than the quoted
fees. In this way, black money is
generated and used in big and reputed In India people are very emotional
educational institutions. towards spiritualty and many such
BABAs & MAAs make misuse of their
Another aspect of black money is emotions and sentiments and referring
very astonishing for society from which themselves as spiritual leaders generate a
significant amount of black money is significant amount of black money.
generated and used and that is the
spirituality. Another sector which generates
and uses significant proportion of black
Look at the cases of NIRMAL money is the Indian Political System.
BABA and RADHE MAA:

If anyone wants to meet Nirmal


Baba personally then he shall have to pay
such heavy amount which may be out of
ones pocket. Similarly, to listen to his
teachings in Nirmal Darbar, one has to
pay a minimum amount of around Rs.
2000/- per seat at the back rows, which
increases as we move towards the front
rows of the auditorium, with a validity of a
day only. Also his bank accounts are being
credited regularly by many hidden donors.
In this way, this one person is earning a lot The Leaders/Ministers of this
of money by fooling innocent people by system focus only on their personal growth
camouflaging himself as a spiritual leader, instead of the economic development of the
and uses such money for unofficial country. At the time of elections, they
purposes, hence, generating a lot of black spend a significant amount of money to win
money. or, as is said, to get a chair and after
winning they just focus on earning large
Radhe Maa, who calls herself as amounts of money by taking bribes, even
avatar of Maa Durga, wears heavy for small activities. Such Black Money is
jewellery and bridal dress and heavy either deposited in foreign banks like
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ISSN: 2278 7798
International Journal of Science, Engineering and Technology Research (IJSETR)
Volume 1, Issue 5, November 2012

SWISS BANK or invested in Real-Estate


in other countries like Dubai etc. According Maintenance of Two (Parallel)
to 3rd report published in May, 2012 Books of Accounts: This is one of the
SWISS NATIONAL BANK estimates total methods which are usually adopted by
deposits as below: those who are obliged under the law to
maintain books of accounts. In order to
evade taxes ,these people may resort to
maintaining two sets of books of account
Country Money Deposited one for their own consumption with the
INDIA $ 1,456 billion objective of managing their business and
RUSSIA $ 470 billion the other one for the regulatory and tax
UK $ 390 billion authorities such as the Income Tax
UKRAINE $ 100 billion Department, Excise Department etc.
CHINA $ 96 billion
Under-report of Production
From above analysis it is clear that figure: In this production figure is
India has a Top Position in case of black manipulated in order to evade taxes which
money deposits. in turn help to generate black money at
Even our Prime Minister Dr. industrial level in an economy.
Manmohan Singh lives in a house which
has 365 rooms whereas a common man All these aspects only affect the middle
with an average income lives in a simple income persons who earn their livelihood
house containing only 2 to 3 rooms. But by end means. But according to some
many are not even getting this and they are research, to some extent, common man is
the people living below poverty line and also responsible for generation of black
live in slums. money like for saving tax he may produce
This data shows that our ministers fake bills, or by producing fake travelling
only know about Generating and using bills for claiming TA, giving bribes to
Black Money and instead of Developing builders to reduce stamp duty etc.
they are Deteriorating India.
In this way, every citizen of our country is
Another aspect through which responsible for generation of black money.
significant amount of black money is
generated is by Manipulation of Accounts Effects Of Black Money
in which the accounts are manipulated to
misrepresent the authorities which help to It leads to increase in inequalities of
generates large amount to black money. income which widens the gap between
Accounts may be manipulated by following the rich and the poor people of our
ways: country.
It leads to wasteful consumption in our
Maintenance of Out of Books economy i.e. money which should be
Transactions: It is one of the most widely used for investment but wasted at
adopted methods for generation of black consumption.
money which is generally used by grocery It leads to decrease in working
shops. I.e. transactions that may result in efficiency of people as they get used to
taxation of receipts or income are recorded earn Black money by easy means and
out of the books of accounts .In mostly they start preferring leisure to work.
cases the taxpayer does not maintain books
of accounts.
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ISSN: 2278 7798
International Journal of Science, Engineering and Technology Research (IJSETR)
Volume 1, Issue 5, November 2012

FUTURE CHALLENGES OF
BLACK MONEY

Above we have studied a


comprehensive analysis of factors leading
to generation of black money in our
country. At the same time, it is not possible
to curb, control and finally prevent the
generation of black money in near future as
well as repatriation of black money. It is
possible only if a comprehensive mix of
well defined strategies and policies is
pursued with patience and perseverance by I think it is the one of the biggest
the central and state government and put challenge of our government of India to
into practice in a very co-ordinated manner. bring back money from abroad .However;
There are some challenges which might be it is a goal that cannot be achieved by
faced by the government as explained government action alone as it requires co-
below:- ordination and co-operation of other
countries as well as authorities to achieve
To control criminal activites this. So, government needs to evolve an
As we know, in country like India environment & create legal mechanism
there are many illegal activities and crimes through global consensus, co-ordination &
that lead to generation of significant by making specific bilateral treaties.
amount of black money incomes. It
includes counter fiet currency, drug Special Investigation Teams:-
trafficking etc. Each of them is a major In order to control and curb
source of unaccounted or black money. So prevalence of black money in India,
to control them is one of the greatest govt.has makes a team which is known as
challenges before the society as well as for Special Investigation Teams to investigate
the govt... Therefore, it requires all on the issue of black money. So, at present
agencies of both central and state in India, it works under the chairmanship of
government to actively make strategies to retired SC Judge B. P. Jeevan Reddy. But
bring them to a halt. its success depends upon the team members
of committee as it requires a significant
Repatriation of black money stashed effort to work on this issue. So, government
abroad:- must take quick action in setting SITs, then
potential black money holder will definitely
reduce. It is big challenge in front of
government to properly implement the
special SIT which helps to bring back
stashed black money in the country.

Less formation of Committees:


I think this is one of the biggest
challenges which are going to be faced by
Indian govt. to form fewer committees. i.e.
Ministers in Indian Political System are just
focus on setting up new committees even
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ISSN: 2278 7798
International Journal of Science, Engineering and Technology Research (IJSETR)
Volume 1, Issue 5, November 2012

for a very small issue in order to rot the ensure transparency, fair and equitable
issues i.e. our politicians only know how to treatment of bidders, promoting
delay the process of action and thereafter, competition, and enhancing efficiency and
making lame excuses rather than providing economy in the public procurement
solutions for a problem i.e. Corruption and process.
black money. So, we can say that the
Indian Government is just forming Therefore at last, I want to say that
committees to make fool of the people of if govt. really wants to control corruption,
India and not for the sake of the nation. So, then there should be proper implementation
its a very big challenge for our of Public Procurement Bill 2012.
Government to properly form committees
and run them in a very efficient & effective To Strengthen the Social Values:
manner. I think to control the generation of
black money in our economy requires a
Reduction in the Cost of Compliance and combined effort by all citizens of a country.
Administration: Or it needs to be fought by every citizen at
As we know that the transaction various levels which includes political,
cost associated with compliance and economical and administrative levels etc.
Administration is one of the major At ethical level, we have to reinforce our
disincentives for generation of black money moral education in the school curriculum
in a very large amount. It includes cost of particularly highlighting the ills of black
compliance, administration, maintance of money which in turns leads to tax evasion.
books of accounts etc. which is being borne At economic level, there must be a
by the citizens of our country, or we say tax reduction in wasteful consumption or
payers who are in turn compelled to evade expenditure, and to encourage savings,
taxes. In this way black money is being frugality and simplicity which in turn
generated in our country. Therefore it must reduces the gap between the rich and the
be reduced which again proves to be a poor. So, to strengthen the value system of
challenge for the Government of our our country at individual level is proving to
economy. be a challenge for an economy.

To control corruption: RECOMMENDATIONS &


As all know that there is only one SUGGESTIONS
major reason behind the generation of
black money is corruption. It is perceived After studying the concept of black
as one of the biggest challenges faced by money & its various sources of generation
our country which is almost impossible to in our country, its time for some
counter. As we study above all the factor Recommendations & Suggestions that may
that leads to generation of black money are help to control black money in India. These
directly related to corruption. So to control are as follows:
black money .it is essential to curb and Our Government should make its
control corruption which requires foremost objective to control black
multipronged strategies with assigned the money in our country.
responsibility to prevent it. E-Governance should be started by the
For this the government has Government i.e. the use of technology
introduced the Public Procurement Bill be made as far as possible like E-
2012 which intends to regulate public Registration with Revenue Authorities,
procurement by all Ministries and Central E-Filing of Returns, etc. because more
Government Departments. This bill aims to the involvement of human beings, more
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ISSN: 2278 7798
International Journal of Science, Engineering and Technology Research (IJSETR)
Volume 1, Issue 5, November 2012

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ISSN: 2278 7798
International Journal of Science, Engineering and Technology Research (IJSETR)
Volume 1, Issue 5, November 2012

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About The Author


Rajni Arora is a Masters in
Business Administration (M.B.A), having
done from ICFAI University, Dehradun
and has qualified UGC-NET with JRF in
2009. She graduated in B.Sc. Hons.
(Economics) with First position in Punjabi
University, Patiala, having done her
graduation from Govt. Mohindra College,
Patiala, where she is presently working as
an Assistant Professor. She is also the
author of a book on Business Laws
published recently in June 2012, by Thakur
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