The Amount Of Black Money In India Economics Essay

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Several efforts have been made for gauging the sum of black money in India but it is about following to impossible to account for the same in a just and crystalline mode. The chief trouble arises on history of the fact that the ‘black ‘ economic system exists in the shadows. There is, hence, broad fluctuation in the figures reported as estimations are required to be made in indirect ways. Assorted single methods like input/output method, monetisation attack, financial attack, study attack, etc. are used by the undermentioned commissions for quantifying the black income.
I. Kaldor ‘s Estimate: Although the Taxation Enquiry Commission had examined the construction of Indian Taxation, a reappraisal by Prof. Nicholas Kaldor was desired by the Government in late 1955 in position of the larger dimensions assumed by the jobs of resources for the program since the committee reported ( Important Events 1946aˆ?61 ) . ” Prof. N. Kaldor in his study on Indian Tax Reform estimated the nonaˆ?national income ( I ) rewards and wages ( two ) income of selfaˆ?employed and ( three ) net income, involvement and rent. After doing the unsmooth accommodations, harmonizing to Wanchoo Committee, the estimated income on which revenue enhancement has been ( black income ) would likely be Rs.700 crores and Rs. 1000 crores for the old ages 1961aˆ?62 and 1965aˆ?66 severally. Projecting this estimation farther to 1968aˆ?69 on the footing of per centum addition in national income from 1961aˆ?62 to 1968aˆ?69, the income on which revenue enhancement was evaded for 1968aˆ?69, the income on which revenue enhancement was evaded for 1968aˆ?69 can be estimated at a figure of Rs. 1800 crores ” .
II. Wanchoo Committee ‘s Estimate: Shri K.N.Wanchoo, retired Chief Justice of the Supreme Court of India, as president explained what the term black money meant in its concluding study submitted in December, 1971. This commission estimated nonaˆ?salary income for 1961aˆ?62 of amounting Rs. 2686 crores and nonaˆ?salary income really assessed to revenue enhancement as Rs. 1875 crores, therefore, revenue enhancement escaped for Rs. 811 crores. Therefore, in 1961aˆ?62, black money was of amounting Rs.700 crores which rose to Rs. 1000 crores in 1965aˆ?66 and farther Rs. 1400 crores in 1969aˆ?70. Very recently it was accounted to be 4.4 per centum of GNP.
III. Rangnekar ‘s Estimate: D.K. Rangnekar as a member of the Wanchoo Committee submitted his study in 1982 ( India Today, 2005 ) . Harmonizing to Rangnekar, revenue enhancement evaded income for 1961aˆ?62 was the order of Rs. 1,150 crores, as compared to the DTEC estimation of Rs. 850 crores. For 1965aˆ?66, it was Rs.2,300 crores, as against Rs. 1,216 crores estimated by DTEC. The projections of black money for 1968aˆ?69 and 1969aˆ?70 were Rs. 2,833 crores and Rs. 3,080 crores severally.
IV. Chopra ‘s Estimate: A Committee under O.P. Chopra was formed in 1982 for mensurating black money in India ( India Today, 2005 ) . O.P.Chopra prepared a series of estimations of black income where it increased from Rs. 916 crores ( 6.1 per centum of GDP ) in 1961aˆ?62 to Rs.8098 crores ( 10.5 per centum of GDP ) in 1976aˆ?77 ( Dhar, 2003 ) . The survey showed that a floaty economic system offers more chances for unaccounted income. During periods of recession, it may be hard for manufacturers to demand unaccounted money. Chopra besides corroborates the hypothesis that revenue enhancement equivocation is more likely the higher the rate of revenue enhancement. His findings besides support the hypothesis that addition in monetary values leads to an addition in unaccounted income. Further, he found that financess are diverted to agriculture to change over unaccounted ( black ) income into legal ( white ) income.
V. Gupta ‘s Estimate: Government of India formed a commission under Poonam Gupta and Sanjeev Gupta in 1981 for ciphering black money in India. They used Feige ‘s method of dealing income ratio to gauge black money in a state. They used norm of three old ages viz. 1949aˆ?50, 1950aˆ?51 and 1951aˆ?52 as the bench grade for gauging black money for the twelvemonth of 1967aˆ?68 to 1978aˆ?79. They estimated that it was 19.8 % of GDP at market monetary value. The black money increased for Rs. 3034 crores in 1967aˆ?68 to Rs. 46867 crores in 1978aˆ?79. The chief findings of surveies on black money were: ( a ) A floaty economic system offers more chances for unaccounted income ; ( B ) The ratio of unaccounted income to assessable nonaˆ?salary income has gone up after 1973aˆ?74 ; ( degree Celsius ) Addition in monetary values leads to an addition in black money ; ( vitamin D ) Fundss are diverted to agriculture to change over black money into white money ; and ( vitamin E ) One per cent addition in overall revenue enhancements leads to more than 3 percent addition in the black economic system relation to the official economic system.
VI. NIPFP Study on Black Economy in India
National Institute of Public Finance and Policy ( NIPFP ) conducted a survey under the counsel of Dr. S. Acharya. The survey defines ‘black ‘ money as sum of incomes which is nonexempt but which is non reported to revenue enhancement governments. The survey, nevertheless, gives a broader definition of ‘black ‘ income and calls it as unaccounted income ” for intents of lucidity. As there is deficiency of sufficient informations, the NIPFP survey follows the minimal estimation attack ” that is to state, non being able to determine the most likely grade of under-declaration or escape, the survey uses a grade of under-declaration which could safely be regarded as the lower limit in the relevant sector. In several instances the survey has besides made usage of a scope instead than a individual figure of under-estimation.
While fixing the estimation of ‘black ‘ income, the survey excludes incomes generated through illegal activities like smuggling, black market minutess, credence of payoffs, kickbacks, etc. To fix a planetary estimation of black income, the survey confines itself briefly into six countries: –
( I ) factor incomes received either openly or covertly while take parting in the production of goods
and services ;
( two ) ‘black ‘ income generated in relation to capital grosss on sale of plus ;
( three ) ‘black ‘ income generated in fixed capital formation in the public sector ;
( four ) ‘black ‘ income generated in relation to private corporate sector ;
( V ) ‘black ‘ income generated in relation to export ; and
( six ) ‘black ‘ income generated through over-invoicing of imports by the Private sector and sale of import
After aggregating the different constituents of ‘black ‘ income the survey quantified the extent of ‘black ‘ money for different old ages as under: –
Year Estimate for black money ( Rs in Crore ) % age of GDP
75-76 9,958 to 11,870 15 to 18 %
80-81 20,362 to 23,678 18 to 21 %
83-84 31,584 to 36,784 19 to 21 %
NIPFP survey concludes that entire black income coevals of Rs. 36,784 crore or in circular Numberss Rs. 37,000 crore out of a entire GDP at factor cost of Rs. 1,73,420 crore seems to be on the high side, although it turns out to be less than 30 per cent of GDP as against some excessive estimations puting it at 50 or even 100 per cent of GDP. Taking out lower estimation, what we would state with some grade of assurance is that black income coevals in the Indian economic system in 1983-84 can non be placed below 18 per cent of GDP at factor cost or 16 per cent of GDP at market monetary values. ”
While the NIPFP Report estimates the extent of ‘black ‘ economic system ( non numbering smuggling and illegal activities ) at approximately 20 % of the GDP for the twelvemonth 1980-81, Shri Suraj B Gupta, a celebrated economic expert, has pointed out some erroneous premises in NIPFP survey. He estimated ‘black ‘ income as 42 % of GDP for the twelvemonth 1980-81 and 51 % for the twelvemonth 1987-88. Shri Arun Kumar in his book has pointed out certain defects in NIPFP survey and Gupta ‘s method. He estimated the extent of ‘black ‘ income to be approximately 35 % for the twelvemonth 1990-91 & A ; 40 % for the twelvemonth 1995-96.
Therefore, it can be said that though ‘black ‘ money exists to a significant extent in our economic system, its quantum can non be determined precisely.

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