Question-1: Tackling black money menace should be the utmost priority for developing economies. How Black money hampers growth and development in the world?
Answer: Black money is the income which is not declared by a person or a group of persons. The sources of black money could be through income earned from legal sources but not declared and also through illegal sources.
Black money hampering growth and development
- Loss of revenue for government
Black money is primarily the money hidden from government authorities, which has to be paid in form of income tax.
The liquidity in the economy increases due to illegal movement of black money. This causes artificial inflation in the country.
- Increase inequality
People owning black money have more resources, which gives them more opportunity to prosper. This further increases inequality in the country.
- Funding antisocial elements
Black money is used to fund antisocial activities such as terrorism and smuggling. They act as a tool to create divisions in society.
Measures to tackle black money
Periodic withdrawal of high value currency can act as a deterrent against black money. People will be discouraged to store huge cash.
- Amnesty scheme
The government can run amnesty schemes that will withdraw cases from accused if they declare black money. It will be a win-win situation for both.Thus, the issue of black money is deep rooted and there has to be stringent laws such as Prevention of Money Laundering Act to stop accumulation of black money.Tags: GS 3 (Economy)