The very concept of black money has undergone a great change. In 1950s and early 60s evasion of income tax by big industrialists and businessmen was considered the source of black money. This evasion has been renamed as tax planning. It has resulted in saving a good amount as white money.

Still huge chunks of black money are saved through more unfair means by corporate sector and businessmen of the highest level. But it accounts for not more than 20 per cent of the total black money that is generated in the country.

There is a very large group of people which does not worry about tax planning. It comprises of millions of people whose income remains a little above the lowest tax limits. A cycle rickshaw puller in corporation towns earns Rs. 300 per day which is taxable. He does not pay any income tax. A large number of green grocers, petty businessmen, medical practitioners, advocates, chartered accountants, private engineers, small contractors, income tax and sales tax practitioners, mechanics, carpenters and artisans fall in this category.

Some of them like medical practitioners and advocates declare only a small fraction of their income and pay nominal tax. This generates a sizeable amount of black money. These include teachers who dc tuitions, government servants who are in a position to earn through under the table dealings and those who do part time work besides the whole time jobs.


Besides these are the so-called ‘netas’ who work as intermediaries and earn through many sources including partnership in business houses and industrial units. All this accounts for the remaining 80 per cent of the black money. It may well be named the household sector as most of the gains are shown in the names of women.

Gone are the days when this Black money was kept in boxes or consumed on articles of luxury or on precious metals and stones. Apart of it is still consumed on these. But the rest is deposited in saving bank account, fixed deposits or invested directly. It has made many a man private finance- who never worries about maintaining accounts.

From 1950s to 1970s the growth rate of India remained stagnant M 3.5. It was due, mainly to the dearth of capital investment as the taxes sucked the savings. It was only in 1972-73 that the saving rate rose to 16.2%. Since then it has been increasing. In 1978-79 it was 24.3% while according to Planning Commission it rose to 26% in February, 1985.

The estimates depend upon the savings deposited in banks, post offices or 9 other agencies. At least 20% of the savings have always been turned inn capital directly. The result has been a steep rise in growth rate to 4.25% according to Dr. K. N. Raj. If direct investments or loans are accounted for and small industrialists are also taken into consideration the growth nm would come to about 5.5%. This boost in industrial and trade activities are with the help of black money. It is now known as parallel economy. It is the biggest source of capital investments.


Thus black money has increased and the gross national product (G.N.P.) too. The 1987 estimates of 9 to 10% growth most probably depended upon capital generated through black money. The goals of 1987 having been achieved it was expected that in 1992-93 growth rate would be more than 12% while the official projection was a mere 6.5%. The 2001-2002 estimates were much higher.

With the advent of multinationals and the proliferation of kick backs there would be a quick rise in the investments and role of black money in Indian economy. By the end of the century only rise in the role of inflation gave the idea of saturation of black money in the parallel economy.

Black money has benefited the business community and industries. Many new projects have been started in the corporate sector. Newspapers are full of advertisements for equity shares and debentures. They are all subscribed by the small savings which are a part of the black money owned by the people. As the government does not charge tax on the debenture interest at source there is a big demand for them. The market is stormed. The industry is no more starved.

There is no tax on dividends up to Rs. 1000. A householder would take shares of different companies to evade taxes and help the industries.


The number of saving bank accounts in post offices and banks more than doubled during the period from the middle of 70s to the middle of 80s.

In the nineties they again increased by 80%. Most of this is black money. Banks give loans to agriculturists, small and cottage industries, business houses, big industries and the industries in the public sector.

Thus all these run gainfully with the help of black money Investment planning would save him even from the withdrawal of tax redemption declared in the budget every year.

Besides these the governments, specially state governments, enjoy the facility of overdraft from the banks. The government borrowings from the banks in 1984-85 were Rs. 4,951 crore. Besides these direct borrowings the banks also help antipoverty programmes started by the government. Two-third of the assets provided to poor people under Integrated Rural Development Programme (IRDP) was provided by nationalized banks from their black money deposits.


During 1986-87 the Finance Minister lured black money owners to declare their black money through many schemes. A fraction was declared the rest was invested with impunity. Since then Indira Vikas Patra and Unit Trust schemes are good sources of evading taxes. The government financial establishments too secure a lot of black money. Indirectly the government too has a free access to more money.

One of the greatest benefits of the black money is that it has provided jobs to more people in all the sectors as all the sectors have expanded. By capital formation black money has become job oriented specially in the small scale and cottage industries. It has also helped self-employed people through banks.

If whole of this black money is netted by the government it would be spent mostly on administration i.e. on non-productive and non-planning schemes. It will add to the already surplus staffs in government establishments and public sector that are responsible for zero growth or minus growth. The other factor is that if it is withdrawn from the capital market the whole economy of the country would be shattered to pieces as it is the most important source of capital generation. So it is allowed to proliferate.

According to the Minister of State for Finance, as told in the Lok Sabha the black money in circulation in 1983-84 was about 36,786 crore. It was an unofficial estimate. It can even be double or treble of this amount as the government has no way to find the real amount. According to academicians and economists it may be simply a tip of the iceberg.


One has just to guess what it could be in 1993. The amount invariably doubles every three years. Thus in 1993 it was roughly 3,00,000 crore and more than 6,00,000 crore in 1995. But if the 1983-84 amount was the tip of the iceberg what would it have been in nineties is one’s guess. It may escalate to a mind boggling 48,00,000 crore or more by the end of the first decade of the century.