Image uploaded on SXC by SilentFury

As some economist put it, “Black money is nothing but any transaction which is conducted without regard to taxation, regulation or law of trade.” Here are some breath-taking facts about the Indian black market:

1. India’s black money economy is ranked fifth highest at $22bn-$27bn a year, coming in behind Russia ($32bn- $38bn), Mexico ($41bn-$46bn), Saudi Arabia ($54bn-$55bn) and China ($233bn-$289bn).
2. The black economy is currently estimated to be 50% of India’s gross domestic produce (GDP).
3. Personal account deposits in the bank, which have been misappropriated, are to the tune of $1,500 billion in foreign reserve, an amount 13 times larger than the country’s foreign debt.
4. Black money possession and use is only concentrated in a thin slab of 3% of the Indian public.

So, how does this black money affect you and me?

This so called black money affects the inflation in the country. It defies all the theories of economics. Thus whatever action the Reserve bank of India takes to curb the inflation, it is never effective as it has no effect on the amount of black money floating in the market, and as a result the prices of the commodities keep increasing in spite of the steps taken by the central bank to curb them. And no one is  immune to price rise, regardless of the amount one may be earning.

However, despite its side effects we Indians are involved in this black money market in one way or another. Some of the ways in which we contribute to this black market are:

1) Bills: Many people don’t ask for bills whenever they buy small items like groceries, routine medicines or even relatively bigger ones like a music system or a television set. By not asking for bills we pay less by avoiding Value Added Tax (VAT). Avoiding the VAT, in turn, helps the seller to under invoice his sales and there by he succeeds in paying less income tax. The government introduced the value added tax to ensure that the businessmen pay the right amount of tax, but no bills means government cannot keep a check on the sales of the businessmen, and hence on their incomes. And these bill-less transactions lead to black money accumulation in the system.

2) Chai Paani : We are in a system where one cannot imagine of leading a life without paying bribe (or chai paani) to the government officials. This includes the bribe you paid to the policeman – a small price to pay to avoid the challan. It also includes the amount you paid in the passport office to get your passport on time. This also includes the extra amount you paid to the ticket checker in a train to get a berth for the night… and the list goes on. It is wrong to blame the government alone for all ills, as it can never stop these transactions unless we agree to stop paying these amount to make our life just a little bit easier.

3) Property for Sale: With rise in income of the Indians and opening of the Indian economy, more and more Indians can now dream of owning a house. This simple dream has resulted into a mad rush for the real estate. In general 40% of the total amount is asked in cash by the property dealer. This paperless transaction is one of the biggest culprits behind the accumulation of black money in the market.

So, the ultimate question is: can we put am end to this black money market, which is affecting us badly. The unfortunate answer seems to be “no” as it would require an Herculean effort from all of us, and we are used to getting everything the “simple” way. Corruption is so deep in our system that every Indian – from a politician to a rickshaw puller- is a part of it in some way or the other. However, it is always our choice to not be a part of it. This simple step, however, will require a lot of determination and courage on our part. The onus now solely rests on us.  Are we up to it?