Group Discussion on Black money in India

Black money in India is a hotly debated topic and likely to come for GDs across private sector job selection processes, government selections and at various entrance exams. So, we have compiled this handy guide to help you understand black money in India from all angles, the impact of demonetization and the Hawala scam as well as the Mauritius route to black money.

Also provided is a list of all potential GD topics on Black Money in India.

Funds earned on the black market, on which taxes and other income have not been paid is black money. Currently, the total amount of black money deposited by Indians in international banks is not known. One estimate pegs the wealth at an astounding USD 1.06 trillion in Swiss Bank accounts. Other reports by Swiss Banker's Association and the Swiss government hold that the total amount held by Indians in these banks is only around USD 2 billion.

In February 2012, CBI indicated that Indians have USD 500 billion of illegal funds in foreign tax havens. This is more than any other country. In March 2012, the clarification was issued that the CBI statement was an estimate made to India's apex court, SC in July 2011.  On November 8th, 2016, PM Narendra Modi announced INR 500 and 1000 notes would cease to be legal tender henceforth, starting the fight against black money in India. Process of cash circulation is directly related to corruption.

The Demonetization Effect

  • Number of IT returns filed for 2016-2017 grew by 25 percent to INR 2.82 crores
  • Advance tax collections rose by 41.8 percent in the same period. Many filed returns after demonetization.
  • By December 2016, IT department detected USD 650 million of non disclosed income and seized USD 16 million illegal notes as part of India operations.
  • IT department also carried out 983 searches and issued 5027 notices to various entities besides seizing cash and jewellery worth USD 86 million.
  • A total of 477 cases were also reported of money laundering, corruption and disproportionate assets to CBI and ED.

History of the Term Black Money

  • It is a form of advance fee fraud; the first time black money was used as a term was in 2000.
  • This type of scam is also called Wash Wash scam.
  • In modern times, this refers to money which is not accounted and no statutory tax is paid for the same.
  • Hoarding of wealth leads to a shadow or parallel economy
  • Black money also includes production of goods and services not done legally and not taken into GDP estimation account.
  • India is currently 10th in the world when it comes to the richest people; if black money were also considered, the numbers would be higher.
  • Nearly half of India's population is below the poverty line. Black money contributes to income inequalities.

Causes For Black Money's Emergence

  • High incidence of corruption through bribes taken by bureaucrats and politicians
  • Corrupt tax officials shielding income from disclosure, and a complex tax structure with loopholes that allows evasion
  • Foreign banks as havens for black money hoarders
  • Black money transactions using elections as a cover- CMIE in 2006 found each election poll generates between USD 10-11 billion dollars (approximately) of black money!
  • Black money laundering and chit fund scams
  • Charities and societies creating black money
  • Hawala business as a source of money transactions
  • Black money purchases such as jewellery, property, rare art and luxury cars.
  • Donations to educational institutions in black money cash.
  • Issues of licenses and contracts to Indian and foreign companies
  • Mauritius route to use black money where money is stashed in illegal accounts abroad

GD Topics on Black Money

1. Treaties or willpower which can get Black Money?
2. India's fight against 'Black Money'- Can It Prove Successful?
3. Can Digital Payments in India Solve the Black Money Issue?
4. Should Tax Havens Be Ousted?
5. Is Privatization the Way to Eliminate Black Money and Corruption?
6. Will Income Declaration Schemes Curb Black Money?
7. Cash Transfer or Subsidy: Which can Curb Corruption?
8. Should Higher Taxes be imposed on Richer People to Curb Black Money?
9. Can Linking Aadhaar to PAN Curb Black Money?
10. Can Information Sharing Between Nations Bring Back Black Money?
11. Black Money: Can India gain from Swiss bank black money information?
12. Why Demonetization Will Not Eliminate Black Money or Corruption?
13. Has common man been misled by the NDA Government on Black Money?
14. Demonetization is Affecting Common People More than Black Money Holders.
15. Black Money in Tax Havens should be declared the National Property.
16. Would it be Digital Black Economy Post Demonetization?
17. Methods for Curbing Black Money Menace– Are They Effective?
18. Will the SIT be Successful in Bringing the Black Money Back from the Foreign Banks?
19. Curbing Black Money-Steps by Government a Success?
20. Ban 500, 1000 notes-Corruption Uprooted or Just Changing Clothes!
21. Operation Clean Money II launched- Post Demo Initiative Successful?
22. Is it Fair to Spare Political Parties from Income Tax Investigation?
23. Black Money Bill 2015: Pros and Cons
24. Is India Ready to Go Cashless?
25. Should Online Gambling be Banned to Curb Black Money?
26. Benefits and Drawbacks of e-Payments
27. Project Insight: Big Data Analytics Useful for Catching Tax Evaders?
28. Benami Property Raid: Will it Help the Fight Against Black Money?
29. Should Election Expenses be Limited to Curb Black Money?
30. Indelible Ink Marking at Banks: Necessary or Useless?
31. Are Huge Expenses in Election Campaigns Justified?
32. Do Initiatives Like Panama Papers End Black Money?
33. Can Paradise Paper Point the Way to Ending Black Money?
34. Banks to Check IDs for Transactions Above INR 50000- Useful Initiative?

Some Quotes on Black Money in India You Can Use

If any money that was looted in India and has left Indian shores, it is our duty to find out about it.
- India's PM Narendra Modi

"Black money is so much a part of our white economy, a tumour in the centre of the brain-try to remove it and you kill the patient."
- Author Rohinton Mistry, Family Matters

Demonetisation was a major step to fight black money and corruption; People had asked me to fight graft.
- India's PM Narendra Modi

Impact of Black Money

  • Loss of government revenue
  • A shadow or parallel economy in India- some estimates say black money constitutes 40 percent of GDP!
  • Black money transactions add to high levels of corruption and create a vicious cycle, impacting income per capital and national income of the country in adverse ways
  • Black money also leads to inferior quality of goods and services, besides boosting inflation and resulting in higher taxation.
  • Black money also leads to issues in monetary and fiscal policy, besides exacerbating criminal activities.

How to Control Black Money

  • Existing black money can be turned into white money. Additionally preventative measures can also be in place to prevent black money creation.
  • Government should plug loopholes in Double Taxation Avoidance Convention to prevent inflow of black money into India by Mauritius companies to lead to the Mauritius route of black money.
  • Voluntary Disclosure of Income scheme, where tax defaulters get the chance to disclose hidden income prevents black money hoarding too.
  • Bringing black money from Swiss banks through severe punishment for those found with black money.
  • Bilateral agreements with foreign governments to disclose account holders and black money stashed in foreign banks.
  • Court causes and severe punishments for economic offence should also be in place.
  • Demonetisation, issuance of fresh currency notes, issue of special bonds can also work.
  • Tax system should be restructured to make it easy to pay taxes and avoid loopholes in the system to do away with evasions.
  • Severe punishment should be handed out to IT officers found guilty of corruption
  • Electronic media and banks should be used for money transfers.
  • People should be made aware of black money and related evils

Black money in India assumes many forms including Hawala, Benami properties and much more. It is time to catch the evaders and hoarders one step at a time. The NDA government has initiated demonetization to bring about a change, and GST restructuring to yield a complete and comprehensive tax system. Twin measures of demonetization and income disclosure schemes have also encouraged people to stop hoarding black money. As India takes steps forward, and benami properties could be tackled next, the system is headed for a change.

We hope this GD guide on Black Money in India has served to create a better understanding of what drives this economic evil and how to curb it.