'Causes of Parallel Economy in India Essay\r'

' in that respect argon several factors responsible for the emergence †of parallel economy. It would be relevant to discuss those factors so that a straighten out understanding about the genesis, growth and expansion of ghastly currency can be made. The principal factors argon: 1.Rigid and Complicated revenue enhancement & high appraise rates implemented by the government- High assess rates and defective tax structure do also been responsible for the existence of pitch wispyness capital to a large extent. Take for instance shoot for taxation.\r\nTill recently the tax on income and on wealth was very(prenominal) high to invite evasion. The peripheral rate of income tax was as high as 75 per cent. And when it was combined with the tax on wealth, it was still higher. The corporate tax rate too was very high. In these circumstances the temptation / gain from tax evasion was substantial. 2.Quantitative and qualitative Controls and licensing system of rules- The sys tem of controls, permits, quotas and clears which argon associated with misdistributions of the commodities in short supply results in the generation of sorry coin. Since considerable discretionary powers lay in the reach of those who administered controls.\r\nThis provided them with a scope for degeneracy †‘speed coin’ for turning a blind eye to the assault of controls. All this gave rise to trading in permits, quotas and licenses, malpractices in distribution and in the carry through; it generated coatable sums of desolate property. 3.Price and distribution controls- Price and distribution controls pass water in the past led to the generation of corrosive money on a significant scale. Any value control without any adequate machinery of distribution and speedy arrangement for increase supplies is potentially a bug of minatory money generation.\r\n4.Hawala market as the briny cause of sear money generation- It is very fountainhead known that the international smugglers or the traders in new(prenominal) illicit trade cannot complete their monetary legal proceeding through any nationalized or other occult legal banks in India. Also, the amount of money in which the drugs and other weapons are imported or exportationed is preferably large, usually in billions. 5.Trans performances is real estate property- Since the deal of property on lease hold is permitted by the government only at a stipend of certain amount of premium to it, the lessee generally completes this consummation through the power of attorney so that they grapple from chip ining the premium which is fixed on the tush of the difference amid the current market monetary value and the scathe fixed by the government.\r\n6.Inflation †Both a Cause and Consequence of dumb Money- During inflation there is a general rise in the consumer price index or simply the cost of backup of the people. As such, the workers and the motley labors in the labor pr ocess demand a rise in their advantage to hear the rise in expenditure. This lead to gain in the cost of production of the products. They try to meet this increased cost of production by increasing the wampum margin through sales price. 7.Deterioration of the lineament and Morality of the General Masses- The objective of the commerce is generally profit maximization and that of government is social judge and quality that goes against each other.\r\nBut it seems that both have joined hands to maximize their own profits at the s see of the frequent people. Bribing the government officials and allow them earn whatsoever commissions on the foreign export and import by urging them to abridge the impost duties and simplify the procedure of documentation are some of the common phenomenon in our daily life. 8.Donation to political Parties- perpetually since the political science decided to ban donations to political kick downstairsies in 1968; it officioused business communi ty to fund political parties, especially the judgment party, with the help of swarthy money. Ostensibly, this decision was detractn to reduce the influence of life-size business on the electoral process, but in practice what happened was precisely the opposite.\r\nbusinessmen everywhere have by now learnt that they should pay a certain charge out of the black money to the coffers of political parties, resulting, relaxation of various controls, permitting business houses to enter areas reserved for the popular sector, putting a large descend of banned items on the escaped General License list etc. 9.The Political Instability Witnessed in the Country- In various states far-flung horse-trading of the MLAs at the state levels and MPs at the cardinal level. In this process of buying political support, black money plays a crucial role. Consequently the aim of the ruling political party to curb black money has become very weak. As a consequence, businessmen feel they have an unfet tered license to spin black money, pay a subatomic part to the political parties as donations and then enrapture the rest the way they like.\r\nUnless the link among black money and political power is broken, there is no hope of controlling the generation of black money or its link with crime. 10.Ineffective Enforcement of Tax Laws- Whereas the Government has an stock list of tax laws pertaining to income tax, sales tax, stamp duties, excise barter etc., their enforcement is very weak due to widespread corruption in these departments. . The high rates of these taxes induce businessmen to avoid recording of these transactions. This evasion largely goes unchecked and gum olibanum sets in a chain reaction for the generation of black money at the wholesale, retail as well as production levels. 11.Generation of Black Money in the Public Sector- Every serial five-year plan is planned for a larger size of investing in the public sector.\r\nThe projects undertaken by the public se ctor have to be monitored by the bureaucrats in Government departments and public sector undertakings. Tenders are invited for the various works and these tenders are awarded by the bureaucracy in consultation with the political bosses. 12.A Symbiotic Relationship Develops between the Contractors, Bureaucracy and the Politicians- A symbiotic relationship develops between the contractors, bureaucracy and the politicians and by a large number of devices costs ‘are artificially escalated and black money is generated by underhand deals. Instability of the political system has given a further momentum to this process.\r\nSince the ministers are not sure of their tenure and in a majority of cases, the tenure is very short, the principle ‘ bring forth hey while the sun shines’ is adopted by close of them. The larger numbers of scandals that are unearthed by the reverse only support the contention that huge investment in the public sector is a big potential source for b lack money generation. In this process, bureaucrats act as brokers for political leaders and thus the nexus between business, bureaucracy and politicians promotes the generation of black money. 13.Ceiling on Depreciation and Other Business Expenses- Government has imposed restriction. It has also circumscribed expenses on advertisement, entertainment, lymph node houses, and payment of perquisites to directors.\r\nThe purpose of these restrictions is to protect the shareholders and consumers from the unscrupulous action of businessmen. But businessmen feel that these restrictions are un solelyified. They take the maximum advantage of these provisions but do not like to part with the remaining part of by various clandestine devices; they convert it into black money and use it either for conspicuous production to satisfy the wants of the rich and elite sections of society. 14.Capitation Fees- Capitation fees are a very common term used in the context of admissions in big educational i nstitutes and universities.\r\nCapitation fees if other(prenominal) term used for the donations given to these universities for the purpose of pursuance admissions when the students fails to secure the minimum cut off persona required. Generally, the money rose by these colleges and institutes through these methods are not revealed to the income tax departments. They are also called the enigmatical income of these educational temples. Moreover, the amount of capitation fees for big in diminished Scale institutes ranges in lakh and not just in thousands. 15.Unawareness of the Consumers’ Rights and Duties- Unawareness of the consumer’s rights and duties is also another cause for the generation of black money.\r\nFor example, the consumers fail to take a proper invoice from the shopkeepers so as to evade the tax to be paid on the purchase of those goods. There are more of such instances where the shopkeeper too fools the consumers. Sometimes, they charge more that me ntioned as MRP on the packet. They even paste false stickers on the packets to hide the real value of the good. The extra money charged above the MRP is kept by them as black money. They do not pay taxes in such income. 16.Donations to Charitable and Temple’s Trusts- Donations to kindly and temples trusts are another source of black income.\r\nThere are various issues related to the income of these trusts. It is generally the ignorance of devotees that spry such a large amount of donations to these temples. 17. compensable Bribes- Paying bribes to the government officials for various purposes has become very common in modern times. Paying bribes for obtaining legal sanctions for the embezzled immovable property, paying bribes to the traffic constables and others on the usurpation of the rules and norms etc. are some of the examples of our malicious acts. It is we that prompt and encourage these public servants to accept bribes from the public and sour them.\r\n'