parallel economy.ppt

effects and measures of parallel economy

1. Submitted by: Sumit Sharma Submitted to: Shivani Dutt Mam BBA 6 th Semester SILB Solan Parallel Economy

2. Index Introduction Effects of parallel economy Measures of parallel economy Conclusions Reference

3. What is Parallel economy? Parallel economy includes those activities that go unreported or are unmeasured by society’s current techniques for monitoring economic activities. ‘Scneider & Enste’- parallel economy includes all unregistered activities which contribute to the officially calculated GNP (gross national product) Continue………………………………..

4. Parallel economy poses a serious threat to stability and growth of the official economy, surely it stems from the fact that the magnitude of ‘black money’ is large and rigged deals are growing in volume and complexity at an alarming rate Parallel economy is tax-evaded economy. It is possible to convert illegal economy or black money into white money OR VICE-VERSA.

5. Effects of parallel economy Loss of revenue to government: black money is not recorded or reported, so no tax is paid through income. Business class indulge in under-reporting of output, sales, under registration of property. So, both direct and indirect taxes are evaded which lead to huge loss to revenue of government. Wrong estimation of gross domestic product : To evade taxes manufacturers under-report their output , sales, while service sector like doctors, charted accountants, etc. under report their income this lead to under-estimation of gross domestic product.

6. Difficulty in framing policies: due to lack payment of taxes, budgets of government decrease through which proper plans and policies are difficult to frame. Policies framed on the basis of wrong data prove ineffective. Unequal distribution of income : with distribution of income taxes are set on the basis of per capita income of an individual. This point indicates that the rich sector who is earning 12 or 14 lakh rs. Annually does not pay tax. But the person taking 3 to 4 lakh rs. Annually pays tax. Therefore it results in is unequal distribution of income. Unequal distribution of wealth: due to non payment of taxes rich sector is becoming richer and poor ones are becoming poorer. Which results in unequal distribution of wealth.

7. Corruption in political system: black money has corrupted our politics in bad manner. At various levels, MLA’s, MP’s, ministers and party workers collects the money from small-small businessmen. Corrupt ministers tap big business houses. Ministers give favor and support to large MNC’s and receive high amount of donations from them. Investment in unproductive assets: if anyone had black money they invest their money in foreign liquor factories, luxury housing, wasteful expenditure on non essential luxuries cars, parties, etc.

8. Measures of Parallel Economy Special schemes: the government at various times adopt special schemes to control parallel economy. some of them are: Voluntary disclosure scheme : this scheme was adopted in year 1951-1975. under this scheme, those declaring their income were not to be punished. Budget envisaged scheme: in this scheme people with uncounted money, if deposits the same with the national housing bank, will be given complete immunity from enquiry and investigation. The government would deduct 40% of such deposits with the rest belonging to depositors.

9. Voluntary disclosure of income: this scheme was introduced in 1997. such people were to pay the tax and keep the declared income with them. The government realize over 1,00,000 crores as taxes. Raids: this is the most common means to catch the guilty and the tax evaders and put them behind bars on the spot Gold bond scheme: this scheme estimated that the total amount of gold and silver legalized was about 100 to 200 tons. That gold and silver which is purchased by black money.

10. Policy of LPG models of growth: Liberalization: under the liberalization policy of the government, the licensing system, permits, quotas and other restrictions imposed on private sector. Thus this reduces the amount of donations to be given to civil servants by the business class to get the license easily. Privatization: in this policy , the new sector that were previously exclusively reserved for public sector were opened for private sector. Only three industries were reserved for public (railway, atomic power, defense requirement) . This made the establishment of private industries more profitable that the private sector need not to indulge in corrupt and malicious act.

11. Policy against the black money stored in Swiss bank: Swiss Bank have a policy to not to disclose the bank account information of their customer to any authority for any purpose whatsoever. Recently I ndia has urged the other nations to put pressure on Swiss bank to disclose the accounting details of I ndian account holders. As per their reports there is a total of 1.4 trillion$ of black money related to Indians accounts.

12. Top 5 SCAMS in India 2G spectrum Scam (Mr. A Raja)-------------------------1.76 lakhs crores Commonwealth Games Scam(Mr. Suresh Kalmadi)------35000 crores Telgi Scam(Mr. Abdul Karim Telgi)----------------------20000 crores Satyam Scam (Mr. Ramalingam Raju)--------------------14000 crores IPL Scam (Mr.Lalit Modi & Mr.Shashi Tharoor)

13. Top five country generating black money India - 1456 billion $ (76,00,000 crores) Russia - 470 billion $ U.K. - 390 billion $ Ukraine - 100 billion $ China - 96 billion $

14. Conclusion Black money and corruptions are two sides of the same coin. Dishonest industrialist, scandalous politicians and corrupt officials have deposits in foreign banks in their personal illegal accounts a sum of about 1500 billion $. 1500 billions $ = 76,00,000 crores .

15. Reference All material included in this power point presentation is taken from the book Indian Economy and Business Environment (T.R. Jain, Ranju Trehan ) and from site www.slideshare.com