Monday, March 22, 2010

Black Money in India

Now this is something quite interesting. Do you know that a very big source of money exists in India? It is so big that it could fund the doubling of India's power capacity without breaking into too much sweat! Alternatively, it could create India's current cement capacity six times over and still have some money left with it! We are referring to the Rs 7.5 trillion windfall that could accrue to the Government by way of tax income. Income that the Government would generate if all the 'black money' in India is declared as legitimate earnings by individuals and companies.

As per a leading daily, the size of the black economy, comprising fake and counterfeit products, smuggled and pirated goods and things like bribery could easily run into 40% of India's official GDP estimates of around Rs 62 trillion.

Thus, if all of it is taxed at around 30%, it could generate tax revenues of Rs 7.5 trillion as mentioned earlier. This could then be used by the Government to build infrastructure in the country or to expand its welfare schemes. However, what has already gone looks like gone forever as it will be very difficult to retrieve the same. But the Government could indeed try and contain the spread of black money in the future. It is believed that the implementation of goods and services tax, which will soon become a reality, will go some distance in addressing the problem. If it does indeed succeed in its objective, the long term case for India would receive further boost.
Ranjan Varma

Posted via email from Ranjan's posterous

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