Sanjeev Sharma
Tribune News Service
New Delhi, June 26
The black economy in India is growing faster than the white economy and its growth in recent years has been around 20%.According to a paper presented by Arun Kumar and Saumen Chattopadhyay of Jawarharlal Nehru University (JNU), while it is difficult to estimate the size of the black economy, the relative size of the black economy in 2012 turns out to be 54.6% of the country’s GDP.
This would mean it is almost more than half the size of the official economy. The paper says this number was 4.5% of the GDP in 1956, 7% in 1970, 18-20% in 1980, 35% in 1990 and 40% in 1995.
Kumar is the Sukhamoy Chakravarty Chair Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University.
The paper was presented at a seminar on “Black Economy, its Global Dimensions and Impact on Policies” organised in JNU here today. Kumar said the black economy impacts macroeconomic variables like rate of growth, savings, education and health.
However, he said, the government has not been interested in estimating the size of the black economy since acknowledging a large black economy would force it to answer how it has become large and why steps have not been taken to check its growth.
Kumar said the government has been happy to sweep the issue under the carpet even though policies fail due to the existence of the black economy.
Even the RBI, he said, has not acknowledged the existence even though it affects all the monetary variables. The paper also argued that black income generation is concentrated in the services sector and is absent in the agricultural sector.
India’s foreign trade has been a part of the process of black income generation and its flight abroad via capital flight.
Through mis-invoicing of trade, black money is generated and transferred out of the country. As trade restrictions have declined, black income has increased.
In addition, globally a large number of tax havens have come up which aid this process of capital flight and its return back in the form of round tripping to the country.
The paper argued that with expansion of trade it has become easier to make black incomes since they can be easily hidden or laundered into white.
Pointing out to the difficulties in capturing the black economy, the paper argues that the official data on services sector, operating surplus and crime rate are underestimated because of the presence of the black economy.
