India loses Rs 10 lakh crore from black economy every year
Your rightful indulgences like shopping, eating out, going to movies, most certainly have a bolstering effect on the economy. But, there exists a dark side which cleverly evades taxes to generate what is colloquially referred to as 'black money'.
This 'sin' economy, comprising fake and counterfeit products, smuggled and pirated goods, unauthorised gambling, bribery and prostitution, among a host of other sinister activities that go unaccounted, has a draining effect on the economy. So Just how big is the black economy?
While there are no authentic figures, economists feel that it is in the region of 40% of India's gross domestic product (GDP). Professor of economics, Jawaharlal University, Arun Kumar, who has written one of the most authentic books on the subject, 'The black economy in India', puts the figure at around 50% of the GDP.
According to the latest estimate of Central Statistical Organisation (CSO), the size of the Indian economy is around Rs 61,64,000 crore. Thus, the size of the black economy, taking it at 40% of GDP, is around Rs 25,00,000 crore or around $500 billion.
If black money is declared by individuals or corporate houses as income, it becomes legal and would be taxed at 30%. If all the estimated black money is declared, it could generate a tax revenue of Rs 7,50,000 crore for the government! This is more than total tax collection at Rs 6,41,000 crore for 2009-10. Kumar puts the potential tax revenue figure much higher at around Rs 10,00,000 crore.
Surely, the government can make better use of this amount. Additional tax income to the government, said Kumar, would not only have helped the government to expand its welfare programmes, but also enabled it to take up more infrastructure projects.
Besides, revenues of individual sectors get impacted by counterfeit products. Take the fast-moving consumer goods (FMCG) industry for instance. It loses 6-7% of its turnover due to counterfeit products and illegal imports. The size of the FMCG industry is around Rs 1,00,000 crore, which pegs the losses to the sector from counterfeiting at Rs 7,000 crore. With the excise rate applicable on personal care products being 8%, the duty evasion is well over Rs 500 crore annually. "Spurious and counterfeit products is a cause of serious concern. It not only affects the industry but, more importantly impacts, consumer interests,'' said a HUL official. Pharma is no different. According to Ranjit Shahani, vice-chairman and managing director, Novartis India, what is more alarming is the economic value loss, which is multifold.
Of the drugs tested in a countrywide survey conducted by the Drug Controller-General of India, 0.4% were found to be spurious. The size of India's pharmaceutical industry is Rs 90,000 crore. Thus, the estimated size of the counterfeit market is around Rs 360 crore. Apply a multiplier effect of ten, and the economic value loss would be in excess of Rs 3,000 crore.
According: The Economic Times.
This 'sin' economy, comprising fake and counterfeit products, smuggled and pirated goods, unauthorised gambling, bribery and prostitution, among a host of other sinister activities that go unaccounted, has a draining effect on the economy. So Just how big is the black economy?
While there are no authentic figures, economists feel that it is in the region of 40% of India's gross domestic product (GDP). Professor of economics, Jawaharlal University, Arun Kumar, who has written one of the most authentic books on the subject, 'The black economy in India', puts the figure at around 50% of the GDP.
According to the latest estimate of Central Statistical Organisation (CSO), the size of the Indian economy is around Rs 61,64,000 crore. Thus, the size of the black economy, taking it at 40% of GDP, is around Rs 25,00,000 crore or around $500 billion.
If black money is declared by individuals or corporate houses as income, it becomes legal and would be taxed at 30%. If all the estimated black money is declared, it could generate a tax revenue of Rs 7,50,000 crore for the government! This is more than total tax collection at Rs 6,41,000 crore for 2009-10. Kumar puts the potential tax revenue figure much higher at around Rs 10,00,000 crore.
Surely, the government can make better use of this amount. Additional tax income to the government, said Kumar, would not only have helped the government to expand its welfare programmes, but also enabled it to take up more infrastructure projects.
Besides, revenues of individual sectors get impacted by counterfeit products. Take the fast-moving consumer goods (FMCG) industry for instance. It loses 6-7% of its turnover due to counterfeit products and illegal imports. The size of the FMCG industry is around Rs 1,00,000 crore, which pegs the losses to the sector from counterfeiting at Rs 7,000 crore. With the excise rate applicable on personal care products being 8%, the duty evasion is well over Rs 500 crore annually. "Spurious and counterfeit products is a cause of serious concern. It not only affects the industry but, more importantly impacts, consumer interests,'' said a HUL official. Pharma is no different. According to Ranjit Shahani, vice-chairman and managing director, Novartis India, what is more alarming is the economic value loss, which is multifold.
Of the drugs tested in a countrywide survey conducted by the Drug Controller-General of India, 0.4% were found to be spurious. The size of India's pharmaceutical industry is Rs 90,000 crore. Thus, the estimated size of the counterfeit market is around Rs 360 crore. Apply a multiplier effect of ten, and the economic value loss would be in excess of Rs 3,000 crore.
According: The Economic Times.
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