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Opinion

Transforming the Parallel Economy of Black Money into Growth Economy!

At a time when the common man is suffering from limited cash situation, the money hoarders seem to be unaffected by this major financial change. The Demonetization of Rs.500 & Rs. 1,000 has sent clear message across the Nation, and there is still much confusion & chaos, & suffering reported from across the Nation. Long queues outside the banks & ATMs has become a common sight & there are various reports floating around about the suffering of the poor, underprivileged and remotely located people in India. There are also multiple deaths sadly reported, in this Demonetization drive that is aimed at recovering black & counterfeit currency. Now the institution like co-operative banks are caught up in the nexus, and I am just Echoing the allegations raised by the Kerala unit of BJP MLA O. Rajagopal, the lone BJP member of Kerala Assembly, alleged that the co-operative banks in the state have become a haven for converting Black Money into White.

Mr. Rajagopal said at the special session of the Kerala assembly which was convened to discuss the co-operative sector crisis, told “It is true that the Co-operative sector flourished under public support. But unfortunately, the co-operative institutions have become unable to fulfill its goals.” He also noted that Demonetization move of the center is part of a ‘Minor treatment’ to curb the usage of Black Money. The use of fake notes & black Money has increased enormously in the country over the past years. This needs an ‘, effective treatment’, Rajagopal said. Co-operative banks are piling up in such banks.

Why Black Money has creeped into our economy so deeply?

The matter of Tax evasion or generation of Black Money is not exactly needed for Indian economy at all. As we all know & it’s a known fact that there is a dual economy which functions based on official monetary system and in the boundaries of rules & regulations set up by the Government. And we find that there is Parallel economy, informal or illegal one, which operates outside these boundaries too.It’s very difficult to assess the magnitude of this parallel economy and the money that flows through it. But this subject has been debated extensively over the years. Over the years all the successive Government have tried to deal with this serious issue such as voluntary disclosure, Demonetization &bearer bonds & so on. But the previous Governments hardly had any success with its attempt to curb such practices. On the other hand, the situation became more serious due to round tripping of such money to India through complex cross—border structures and devious utilisation. National Institute of Public Finance & Policy

(NIPFP) defines ‘Black Income’ as the aggregates of incomes which are taxable but not reported to the Tax authorities. It also further clarifies – Black incomes or unaccounted incomes are the extent to which the estimates of National Income and output are biased downwards because of deliberate, false reporting of incomes, output and transactions for reasons of Tax Evasion, flouting of other economic controls and relative motives

Black Money is generated by two sources – Illegal means & Legal means

Let’s first check what are Illegal means – Income generated from illegitimate activities such as smuggling, illicit trade in banned substances, counterfeit currency arms, arms trafficking, terrorism, corruption includes bribe given to and by public offers. Factors leading to this are social & Administrative.

Legal Means—Legally permissible activities, which are not accounted for and disclosed or reported to the authorities to evade taxes or avoid compliance which results in converting such incomes into black money.

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