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Parallel economy in India
Parallel economy 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’, ‘subterranean economy’, ‘unsanctioned economy’ or 'hidden economy'.
A hidden economy in its broadest sense may consist of - a) illegal economy, such as money laundering, smuggling,
etc; b) unreported economy including tax evasion; c) unregulated economy, ie economic activities outside regulations.
The money laundering is a lack of transparency standards in bilateral and multilateral trade with
flourishing offshore banking in tax havens has allowed it to grow unabated in past couple of decades.
Experts estimate that around 50 per cent of GDP—or about Rs 33 lakh
crore of black money—is generated every year through corruption at
various levels. While black money which operates within the country can
be productive, what goes overseas is seen as non-productive.
Impact of Black Money
The circulation of black money has adversely affected the Indian economy in several ways.
1. It leads to the misdirection of precious national resources.
2. It has enormously worsened the income-distribution. The fixed income salary class finds itself ever
be the lower rung of the income-ladder as they pay taxes. They are not able to catch up with the
people in business, or in professions, or many of those employed
who make money by black activities. Many high placed official and honest employees earn much less than an average small shopkeeper in big
cities like Bombay and Delhi.
3. The existence of a big-sized unreported segment of the econom is
a- big handicap in making a correct analysis and formulation of right policies for it.
4. Black money results in transfer of funds from India to foreign
countries through clandestine channels. Such transfers are made possible
by violations exchange regulations through the device of under –
invoicing of exports and over-invoicing of imports etc.
5. Black money requires for its protection, proliferation and expansion
of a service organisation composed of musclemen, touts and brokers to
combat the forces of law and order on the one hand and on the other
hand, there are income tax advisers, or chartered accountants in the
pay of black money operators. There are contact men, liaison officers,
dalals who negotiate favors from top bureaucracy and political bosses through bribes of black money.
6. Black money has corrupted our political system in a most vicious manner. At various levels, MLAs, MPs,
Ministers, party functionaries openly go on collecting funds for
party or elections. Ministers dole out favours of crores by accepting black money
donations of a few lakhs from businessmen National policies are, therefore,
being bent in favour of the big business under the pressure of black money.
7. Causes inflations
The politics of black money thus has corroded the moral fibre of Indian
polity. Ministers dole out favours of crores by accepting black money
donations of a few lakhs from businessmen. National policies are, therefore,
being bent in favour of the big business under the pressure of black money.
Due to the pernicious impact of black money on the Indian economy and polity that the
Wanchoo Committee concluded: “It is, therefore, no exaggeration to say that black money is like a cancerous growth in the
country’s economy which, if not checked in time, is sure to lead to its ruination”. |
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Survey on Bribery and Corruption
India lost a staggering $462 billion in illicit financial flows due to
tax evasion, crime and corruption post-Independence, according to a
report released by Washington-based Global Financial Integrity.
The document on the "Survey on Bribery and Corruption" was released at
the first annual fraud conference organized by the Association of Certified Fraud Examiners here on June 21, 2011. The report stated that 68% of
India's aggregate illicit capital loss occurred after India's economic
reforms in 1991, indicating that deregulation and trade liberalization
actually contributed to or accelerated the transfer of illicit money
abroad. Reports that wealth is stashed in offshore destinations and tax
havens also goes to indicate the extent of the problem, the report said.
The KPMG India Fraud Survey 2010 suggested that today India is faced
with a different kind of challenge. It is not about petty bribes, popularly known as 'bakshish' anymore, but scams to the tune of
thousands of crores that highlight political and industry nexus which if
not checked could have far reaching impact on the economy. India has been facing governance challenges from within at various
levels for a long time. "Rigid bureaucracy, complex laws and long-drawn
judicial process deter people from considering legal recourse in corruption cases. India has around 35 million court cases pending.
Besides lack of manpower and poor infrastructure facilities, other
factors hindering the anti-corruption drive include lack of teeth in the legal framework," the study said.
"A large number of respondents stated that organizations pay bribes to
win and retain businesses. This is a typical scenario where organizations tend to overlook the implications of encouraging these
practices and often look only at short term benefits achieved. They fail
to realize that what has worked in their favour could also land into
trouble later and lead to adverse consenquances for them," the report said.
The study noted that another key area where business is impacted is in
the area of mergers and acquisitions. "Nearly 37% respondents opined
that the corruption could impact the valuation of a company thereby
denying shareholders of a fair price. Moreover, it could also make it
difficult for them to find a suitable business partner, thereby seriously impacting the growth prospects of the business," the study said.
Ugly
faces of black money and corruption
The appropriation of public and national wealth through bribes and black money is the third facet of corruption.
2010 was the year of scams — 2G Spectrum, Commonwealth Games, Adarsh Housing Society etc.
2011 has emerged as the year of the fight against corruption — with
social activist Anna Hazare’s fast for a Lokpal Bill and Baba Ramdev’s
fast to bring back black money stashed away in foreign banks.
Forceful capture of land - 20 police battalions were being used to crush the anti-Posco movement in
Odisha and destroy the betel-vine gardens that are the basis of people’s
prosperous living economy, earning small farmers Rs 400,000 per acre.
The ecology movements and tribal and farmers’ movements are fighting against the corruption involved in themassive resource grab and land grab taking place across the country for
the mining of bauxite, coal and iron ore, for mega steel plants and
power plants, for super highways and luxury townships.
Farmers fighting the land grab along the Yamuna Expressway were killed
on May 7. While they received a mere Rs 300 per sq. m. for their land
the developers who grab the land in partnership with government using
the 1894 colonial land acquisition law sell it for Rs 600,000 per sq. m. This is corporate corruption.
Farmhouses of farmers are burnt and destroyed to create “farmhouses” for
the rich. Farms are destroyed to create Formula 1 race tracks and swimming pools for the elite. This obscene, violent, unjust land grab is
the cruellest face of corruption in today’s India. |
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Parallel economy booms
The black money issue has angered the masses as various
groups have put out staggering numbers to highlight the extent of the
problem. Despite several studies since the early Fifties, the exact
estimate of the black economy and black money has remained elusive.
Against this backdrop, the government has been forced to commission a
study by three top economic thinks tanks to get an estimate on the size
of the black economy. The study is expected to be over by September 2012
and provide fresh insights.
What Civil Society
Wants about black money
1: Ordinance to declare black money a national asset with powers to seize as well as confiscate, be it at home or overseas
2: Disclose the identity of those with loot stashed abroad
3: Life sentence or capital punishment for those found guilty
4: Join global efforts to combat drug and terror funding
5: Enact legislation so as to make property transactions transparent
6: State funding of elections, right from national to state, municipal and panchayat |
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