What are the important reasons behind the circulation of Black Money in the Indian Economy?

Civil Services Main Examination

General Studies (Paper - 3) : Model Question & Answers


Black MoneyQuestion: What are the important reasons behind the circulation of Black Money in the Indian Economy? What steps can immediately be taken to check its further circulation?

Answer: A Triad exists between the corrupt businessmen, corrupt politicians and the corrupt executive.

The Triad is mutually convenient to all. The businessmen are able to influence policy and protect their ill gotten profits. The other two in the Triad need the businessman to invest their funds and launder them. Most politicians have at least one businessman close to them who provides such services. The media is increasingly a party to some of these illegalities. The reduction in tax rates and removal of controls like MRTP, FERA, licensing and easing of reservations for small scale after 1991 has not led to a reduction of the size of the black economy. It is because the Triad has grown stronger and forms of making black incomes have changed.

To tackle the black economy, the Triad has to be dismantled. It functions in secrecy. Hence the most important step is the `Right to Information’. This would make the politician and the executive accountable and their functioning transparent so that unlike at present, they cannot subvert the law deliberately. The present dispensation on Right to Information is entirely inadequate since it is far too complex for the common man to use. The mindset of the politicians and the bureaucracy needs to change. Unfortunately, those heading the Right to Information bureaucracy have mostly been bureaucrats.

A major reform required is that political parties function democratically. Electoral reform is required so that genuine representatives of the people enter the legislature. Reform of Judiciary is required. Cases have to be speeded up and procedures simplified. Direct taxes need to be simplified by elimination of concessions and deductions.

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