Black Money Circulation

A money which is earned through illegal ways and we can say that the income which is generated by the unfair means and dishonesty and kept in secret to evade taxes, is called black money. And it is black because no taxes paid on it, and it is a tax free earning, because it is earned and hoarded by illegal way of earning, unfair means, dishonesty etc. if taxes are evaded on the earned income, then that income turned to be black. There is a huge amount of black money in country, or I can say that there is larger ratio of black money than legal earnings. And that massive amount has created a parallel economy. Black money is one of the main reason for flourishing state of the parallel economy of the black money. Black money has created a massive market in economy, which is the main reason of the corruption.

"Black money is the combination of power and money." this statement is so true because it defines the ways of earing through black market. the main reason is "greediness of human beings." and with the help of black money, anything can be done, anyone can be bought or bribed, honest men and public servants those who are against this system, those who don’t use this method of earning to increase their income, can be blackmailed.

One of the main source of black money generation in developing countries like India is through commission which are mainly obtained for arranging government deals, which are impossible through legal way, which takes a lot of time to be done, through illegal ways it can be done in couple of minutes. Foreign multinationals make a huge amount of payment to supply their weapons, technology etc., and for that agents, middlemen pocket considerable a particular part of money as their commission, to influence the political decisions.

dishonestly and corruption has become a normal and simple way of life to set things done, and the black money generation's growth is so fast in our country that it has created a massive negative market, And just because of that there is so much difficulties to establish a single sector of economy or administration that can be move without the use of black money. Black money generation has become a major factor for inflations, it is responsible for the misallocation of the available resources. Black money not only created ways to misallocate the available resources, it has not only gallops the inflation but also shifts them from investment to consumption.

Beside, tax evasion has created a great inequalities between the tax payers, who are honest or who can’t use the illegal way of earnings, or who can’t evade taxes and who are dishonest, earns from unfair means and illegal ways, who are in the position to evade taxes.

And to generate a massive amount of black money, there are many "TAX HEAVEN COUNTRIES", who are equally participated in the crime. TAX HEAVEN COUNTRIES is a state, country or territory where, on National level, many types of taxes are charged at a very low rate and sometimes not at all charged. Countries like Singapore, Hong Kong, and UAE etc. it also refers to those countries who have a system of financial secrecy. Financial secrecy can be used by foreigners to consume certain taxes (such as inheritance of money and income tax of the interest on the money you have on your bank account) because there is no requirement of paying these type of taxes on these funds cannot be transmitted, as these type of funds themselves invisible to the country the individual is from, these types of taxes can be avoided.

Politicians, corrupt parties take bribes from foreign companies to invest their, as on that particular they don’t have to show the returns, as they kept secret with them only. And because of financial secrecy, the investment would be tax free. They invest money in tax havens for transferring India when needed.

The Vodafone tax case is the clear example where the foreign multinational companies evade tax payment, by showing the transactions in shell companies’ account of tax haven countries.

Foreign Direct Investment is one of the legal channel through which investment can be made in Indian stock and financial markets. As per the data Released by Department of Industrial Policy Promotion (DIPP), the topmost two sources of inflows from April 2000 to March 2011 are Mauritius (41.80% and US$54.227 billions) and Singapore with (9.17% and US$11.895 billions).

As we all know that these countries have small economies and have limited and lesser sources in comparison to other countries, so with that lesser sources they can’t make such a huge investment so it is a clear face that investment is transferred through illegal ways to avoid taxes and for hiding the identities from the revenue authorities of the ultimate investors, many of them could actually be Indian residents, who have invested in their own companies.

According to National Institute of Public Finance and Policy (NIPFP) –

“Black Money is the aggregate amount of incomes which are taxable but not reported to authorities”

Apart from this, there are many other terms of black money which also has include legal income which is kept secret by the public and individuals from the public authorities:

  • To evade the amount of taxes which are compulsion for individuals such as income tax, excise duty, sales tax, stamp duty etc.

  • To evade compliances with the provisions of various industrial laws and administrative procedures which are applicable India such as the Industrial Dispute Act, 1947, Minimum Wages Act 1948, Payment of Bonus Act 1965, Factories Act 1948.

Now let us look on a point that from where Black Money is generated:

Mainly there are two ways which are responsible for the Black money generation and Day by Day growth of it: Illegal or Legal

  • Illegal ways such as Drugs Trafficking, Weapons Trading, Terrorism etc.

  • One more factor which is responsible for the Black money generation is “CORRUPTION” which include bribes given to and by the public officers.

  • Public who earns income through legal activities, are also equally involved in the crime of black money generation, as they are hiding their income from the public authorities or we can say from govt. for the purpose of evade taxes. And that amount which are hidden from the public authorities is nothing, just a Black money.

  • Now a days, even the commercial classes is also generating Black money through “Trading.”

From where is it used?

In India, the main source, which is used by the ministers in elections to promote their own interests. Other way which is used is in air travel, real estate, jewellery etc. Ministers of our Indian Political system mainly focus on their personal growth instead of economic growth of their country, that’s why at the time of elections they spend a massive amount of money to win, or I can say to get chair and after winning, they just focus on doubled the amount which is spend by them in elections by taking bribes, even for the small activities. They shows a large amount of bills to government for any project, and if we compare that amount with the project, we can see that how they are making fool of us. Such black money is either deposited in SWISS BANKS or invested in Real Estate in other countries like Dubai, Singapore, Hong Kong etc. as these are the TAX HAVEN COUNTRIES.

These are the ways which no one noticed, but are the main reason which is affecting the growth of our Indian economy and maximizing the ratio of black money.

Some pictures which shows the Black money in India:

Black Money Circulation in India

Black Money Circulation in India

Black Money Circulation in India

As from the above pictures you can see the way of corruption in India.

  • There are many other aspects of Black money which is affecting the society and a large amount of Black money is being generated and used, that is “Spirituality”.

Now let’s have a look at the cases of “NIRMAL BABA” and “RADHE MAA”.

They both are generating a large amount of Black money in the name of spirituality. If anyone wants to meet Nirmal baba personally then he shall have to pay a heavy amount which a normal man cannot afford, I can say that which is out of one’s pocket. Similarly to listen his teachings in “Nirmal darbar” one has to pay a minimum amount of Rs.2000 per seat at the Back rows, and for the front seat the charges would be different and more than back rows. And as per the reports, it is also found that many times his bank account is credited by the unknown donors with a huge amount. In this way there generate black money by fooling innocent people by calling himself as a spiritual leader, those who blindly believe in spiritualty.

RADHE MAA who calls herself as an “Avatar of Maa Durga”, wears heavy jewellery, and bridal dresses, and her jewellery and dresses never repeated. See, how much they have as a black money, and spending that money either for their personal growth or in unofficial purposes.

In India, people are more emotional towards spirituality as compared to other countries, and many such “BABAs” and “MAAs” make misuse of their feelings and sentiments and referring themselves as a spiritual leaders and generate a massive amount of Black money.

Another reason which is responsible for maximizing the ratio of Black money or for the generation of Black money is “corruption” in the every field of Indian economy. For example-

  1. If a person wants to get a job in any private institution, bank etc. he will have to pay a particular part of money as in consideration to the authority of that respective institution i.e. bribe to be paid. And for this, common man is forced to generate black money through illegal ways. In this both the public institutes and the public are responsible in generation of Black money.

  2. Likewise, if a student wants to take admission in reputed universities or institutes for quality education, he will have to pay a huge amount for admission, as in terms of Donation.

  3. In many reputed organizations, institutes they charge a large amount of fees as in terms of examination fees, tuition fees, co-curricular activities fees etc. which is excluded from the actual course fees. These all type of charges are charged not for the benefits of students, they all are just for the growth of their personal institutes, and used for unofficial purposes to remain stable in competitive market. “Institutes are now a days becomes a source of business.”

According to 3rd report published in May, 2012 SWISS NATIONAL BANK estimates total deposits as follows:

Swiss Bank Estimates

Swiss Bank Estimates

Swiss Bank Estimates

From the above analysis we can clearly see that India which was popularly known as “Golden Bird” because of the people of the country, as they are more civilized in terms of co-ordination and co-operation, as they worked with a very enthusiastic and honest manner, as they were happy with their available sources, as they knew about their lifestyles and society cultures. That India is on the Top position in case of BLACK MONEY.

I know it is unacceptable and unexpectable thing, but it is TRUE. Because the recent condition of India, Indian economy, and Indians Is worse than other countries. There is no honesty, and enthusiasm in their works, there is no proper co-ordination and co-operation between the individuals. Everyone is getting jealous of others as in terms of lifestyles, standards etc. no one is happy with their available sources. A middle class man desires to be Rich, Rich man wants be a millionaire, and so on. That is the main reason for the absence of co-ordination and co-operation between them. Everyone thinks about their personal growth, to increase their standards or lifestyles whether sources are available with them or not. And for maximization of income sources, they use illegal ways of earnings, evade taxes and generate Black money. Even the politicians, officers, ministers of our Indian economy thinks about their personal growth rather than economic growth of the country.

Another aspect of Black money in India is “Manipulation of Accounts”. Accounts can be manipulated by following ways:

  1. Maintenance of out of books transactions.

  2. Maintenance of two parallel books of accounts.

  3. Under report of production figure.

Effects of Black money

  1. It leads to increase in inequalities of income which creates a wide gap between the Rich and Poor people of our country, which the main issue of our country nowadays.

  2. It leader to wasteful consumption of available resources, which directly affects the Indian economy.

  3. It leads decrease in the work efficiency of people as they get used to earn Black money.

How to control issue of Black Money

We cannot completely control the issue of black money instantly, we can overcome the problem of Black money by decreasing its utilization. It is only possible if Central and State government applies some strategies and policies. Which are as follows-

  1. To control Criminal Activities

  2. Special Investigation Teams

  3. Less formation of Committees

  4. Control over Corruption

  5. To strengthen the Social Values


From the above discussion, we cannot say that India is a poor country, as we can see from the table that we have the highest deposits in SWISS BANK. If all that Black money brought back and converted to White money, Our India will again be called as a “Golden Bird”.