Impact of black money on economy. Effect of the black market on the economy Essay 2022-10-26
Impact of black money on economy Rating:
Black money, also known as illicit or undeclared income, refers to funds that are earned through illegal or illegitimate means and are not reported to the government for tax purposes. The impact of black money on an economy can be significant and can have far-reaching consequences for individuals, businesses, and society as a whole.
One of the main impacts of black money on an economy is that it undermines the integrity of the financial system. Black money is often generated through activities such as corruption, tax evasion, money laundering, and illegal trade, which erode trust in the financial system and undermine its stability. This can lead to a lack of confidence in the economy, which can deter foreign investment and damage economic growth.
Another impact of black money is that it distorts the distribution of wealth and income in an economy. Black money often accrues to the wealthiest and most powerful individuals and businesses, who are able to take advantage of their connections and influence to engage in illegal activities. This can lead to greater income inequality and social unrest, as well as a decline in social mobility and opportunities for those who are unable to access the same illicit channels.
In addition, black money can have a negative impact on the government's ability to fund public services and investments. When individuals and businesses evade taxes by not reporting their income, the government loses out on revenue that could be used to fund education, healthcare, infrastructure, and other vital services. This can lead to a decline in the quality of public services and a decline in the standard of living for citizens.
Furthermore, black money can fuel corruption and undermine the rule of law. When individuals and businesses engage in illegal activities to generate income, they are often able to bribe officials and influence decisions in their favor. This can lead to a culture of corruption and a lack of trust in institutions, which can further damage the economy and society as a whole.
Overall, the impact of black money on an economy can be significant and wide-ranging. It undermines the integrity of the financial system, distorts the distribution of wealth and income, hinders the government's ability to fund public services and investments, and fuels corruption and undermines the rule of law. To address the issue of black money, it is important for governments to implement strong measures to combat illicit activities and enforce tax compliance, as well as to promote transparency and accountability in the financial system.
ESSAY ON IMPACT OF BLACK MONEY ON INDIAN ECONOMY
The flight of capital lowers the employment potential and the level of output in the economy. Various murders are the result of black money which are done for political revenge and are done by the contractors engaged by the various political leaders. Even the withdrawal limit was set up for withdrawing new currency from the ATMs and banks. Â After the country started developing i. The countries where people pay taxes religiously are far better off as compared to those where there is a huge amount of accumulation of black money.
Governmental policies will also suffer in formulation and implementation in the absence of correct estimates of black money in the system 4. It became apparent at the time that there was a hidden market for commodities where they could be purchased but at a higher cost than on the regulated market. The best way to leverage those is to invest in Black-led financial firms with a history and strategy to invest in high growth business led by Black people. Nowadays almost all the educational institutions have fixed seats for admission in quota management. Many people without basic education end up becoming jobless in the formal economy leading to an increased level of poverty.
. If it accounted for 40% of GDP in 1998-99, the loss of direct tax revenue at the prevailing rate would amount to at least Rs. Swiss Government recently passed an act to return the black money to the country of origin. Indian Securities Regulator, SEBI otherwise called Securities Exchange Board of India has forced exchanging confinements on 331 recorded substances which it recognized as shell organizations. We assume an expansion in the size of the economy such that no gains in Black business revenue or size come at the expense of non-Black businesses. The government must look for more effective measures to curb this problem. Many of the highly paid Government officials and honest employees are earning very much less amount than an average small shop keeper in cities like Mumbai or Delhi.
All the officials should be more focused and more efficient in their work. The country could have resources to feed almost 90-95% of the poor and hungry beings. The taxes on income and wealth are so high that an honest person will be left with little after he pays his due taxes. Average Effect on Production As a consequence, the consumption pattern is titled in favor of the rich and elite, at the cost of encouraging production of articles of mass consumption. This kind of money is earned setting aside all human and moral values. The moral of the people in the society must be raised.
Black markets are well defined informal sectors that deal with production, manufacture, processing, packaging, and distribution of products into the markets. There are three stages involved in money laundering: 1. If the government does not get enough revenue it would be unable to take up new projects for the development of the country and the uplift of the poor sections. Investments in industries should aim to develop Black entrepreneurs in those sectors as well as the ecosystem where those businesses are situated. This causes the shrinking of the formal economy. The menace of black money has also increased the rich poor divide. A particular limit was set up for exchanging of old notes.
Black Money: Key Points, Impact on the Economy and Steps Taken to Counter This
These categories make up a smaller percentage of Black businesses than of non-Black businesses. Even the political institutions and organizations lose their credibility as they also gradually become a part of the entire system of black income generation. Many black markets have been created in almost all economies of the world creating a stiff competition. In this scheme, everyone was allowed to disclose their illegal income either with the bank or the post office. Social values of honesty, hard work, thrift and simplicity get eroded. Insurance policies can be purchased and premiums paid in cash. Consequently, an analysis of Black business ownership can offer insight into the degree to which America is truly the land of opportunity.
The government of the day appears to be doing its best to unearth black money. These firms are able to make clever usage of the income tax rules and hence, they save taxes. Government has also provided the SC with names of 627 persons who have committed mass tax evasion Conclusion Black money is an evil that has a far reaching impact on the economy. Many people have been able to meet their needs by securing jobs in black markets. Let us see what is the impact of black money circulation on Indian economy. It is thus evidenced that black markets offers job opportunities to all regardless top their level of education. There are a number of economic and social reasons why Black businesses are concentrated in fields different than non-Black businesses—investment capital is one.
About Black Money 1. This has enhanced equitable distribution of resources across a nation. There is also interaction between the reported and unreported activities such that it is difficult to identify black money from the white money economy. Black income generation implies a deviation from the accepted norms in society and from the point of view of the society is unethical. It has been evidenced that a lot of guns possessed by people in the United States are purchased illegally in the black markets. Disclosing names of account holders in foreign banks a violation of confidentiality clauses in treaties with other nations; steps being taken to circumvent this 6.
A total of 1,195 Indian Swiss bank accountholders have been estimated to have stashed black money to the tune of INR 25,420 2. They are role models for the society so by paying proper taxes they can set an example to the society. One good news is that Switzerland Government has agree to reveal the names of account holders if the respective Governments formally asked for it. The central bank is unable to control the supply of money to the economy, which triggers higher inflation. Â Â According to the accounts, there is a particular amount circulating in the market but apparently, the market also includes black money which has not been included as a fact of being black money which leads to more money than the calculated amount. SIT considering old as well as new cases and making efforts to complete probe by 31st March 7.
Impact of Black Money on Indian Economy and Government Initiatives
With this, a cycle continues of passing this money from one person to another, giving rise to a parallel economy. The growth estimates needed to achieve business equity assume growth in high-revenue industries, which will require a much heavier lift than other sectors. Honest officials and staff must be rewarded to encourage honest staff in the department. Hopefully, this would contribute to an informed approach on this issue as we move forward in this context. Some of the step government has taken to curb black money and control money laundering are as follows: 1.