A study about the effects of black money in our national economy has revealed many interesting facts and this time I am going to show them to you. It is believed by some experts in economics that recession and such phenomena are possible only in white money. In black or unaccounted money they are not evident. This is possible because all the so called controls those various governmental bodies such as Reserve Bank introduce and due to which recession is caused are not affecting this black money. Black money economy is always parallel to white money economy but unaffected by the rules those control white money. We may say that laws of natural economy control black money movement while laws of artificial economics control movements of white money. 

Now we will have to know how black money is generated out of white money and how these two economies co-exist. In our country as everybody knows that black money is generated in the government itself. We shall see how that happens. when people want to do any work corrupt government officers often demand bribe this bribe is the beginning of the black money. Not every time though, in most of the work, which is out of regular, or illegal, payment of bribe or hafta (payola) is essential. Interesting part is that in such cases party offering to get work done is interested in paying the bribe. For normal work to expedite it some bribe is demanded and reluctantly though it is paid to the corrupt government employees. I am not making any unusual statement in saying it, every body who has to do work with government or any such public body like municipality, zilla parishad etc., payment of bribe either to get out of normal work or to get normal work in time bribes are paid. You can imagine daily how much bribe paid to these government workers at all India level. One estimate is that about one billion rupees are paid in bribe to get things done every day. This bribe is the first step of the black money. Before payment of the bribe that money was white and as it is paid it becomes black! This black money is usually shared by other staff in the department and it is believed that in some cases the share of the bribe goes up to the chief minister! Or even to the central ministers! Can’t believe? Believe it. 

Originally people were giving bakshis on doing good work to the concerned staff but later on it was converted in a bribe and demanded before work in done. Bakshis was given voluntarily while bribe is per force. 

We have seen the first step of black money creation, now this black money is spent by the recipients to purchase many necessities of those people. It can be anything, daily grocery or a car or enjoyment in a night club, expensive hotels, liquor, gambling, prostitution almost any thing is done with this money. This creates second phase of black money. At this phase it is believed that the money grows as it attracts some white money in it. When this money is spent to buy some innocent purchases they are paid by some receipt. Every time payment is made through a sales tax paid receipt that black money becomes white. In this way, usually some black money gets back into the white money. Observers believe that this conversion is comparatively of very little consequence. May be something like 15 to 20 % black money does go back into white but measure part remains in the black phase and there it keeps growing.

We shall see the third and the most important phase of the movement of black money. Strategically placed people Government employees make black money, amass black money in large amount and now the question before them is how to keep it. Keeping money in the banks in savings account has definite limitations and when it exceeds that limit, the problem becomes heavy on them. At that time some people who have paid them the black money to get their things done come to their rescue. They offer to keep that money and some times they even offer some meager interest also. The black money owner is not interested in that interest and is more interested in safe keeping of the amount; gives the money to these businessmen. Now this black money is in the market to grow more because every deal made with it is again black and the profits out of that business is also black! Now it becomes easy for the bribers to pay the bribe since now they are paying the bribe out of the black money itself. They find no difficulty in keeping the books of accounts. In short we understand that black money is the money which is not accounted for in the tax regime.

It is believed that at present almost 65% money moving in the market is black! Government from time to time makes various precautionary measures to curb growth of black money but those are not implemented effectively for obvious reason and that is that the people who are supposed to implement them are themselves involved in making black money. It amounts to expecting the thief to do the policing!

Relation 

Relation between the regular payers of the bribe who are most of the times agents and the officer concerned is very intimate. Very often they go together to the same prostitute or gambling den, liquor bar etc., and they do share some very intimate moments. This is required to make the black money owner or the officer to entrust that black money to the agent. These agents know a few tricks of that business and work very well. First finding the weak points of the officer and then using that to pressurize him to give that black money to them. Very often the whole range of officers in that department is linked to these agents and so if a officer refuses to oblige they complain to the higher officer and many a times officer who does not take bribe and wants to work honestly is transferred. We have witnessed a great deal of politics involved in it. 

Where black money is stacked? 

All political parties, temples, NGOs, charitable and educational institutes particularly those run by politicians are places where black money is stacked up for safe keeping. We read that a temple received gold garland of so many lacs worth, know for sure, that gold garland is made from black money. Most of the donations to political parties are from this black money and so we can say with surety that our political parties are, run with this black money. When this is the situation one can understand, why no effective control on black money is possible. You shall see many politicians have become very wealthy while there seems no source of income to them for example, Sharad Pawar from Maharashtra, has been in politics ever since his college days, he never did any service or business and still he is now a very wealthy man. Another example we see of Home minister of Government of Maharashtra, Mr. R. R. Patil, he was a pauper now he is worth a few crores. How these things can happen? This is possible all due to black money. Most of the times these politicians are paid donations by unknown people (unknown for book keeping) this money is turned white to some proportion for safe book keeping and in that our Chartered Accountants are well trained. The technology of converting black into white and visa versa is well developed in our country almost any well trained CA can do it with ease. And thus Black money keeps growing.

 How it helps avoid recession 

We have seen at the beginning that recession is due to artificial economic rules made to help vested interests in the market or due to over doing of it. In India we never had recession like condition because until now our economy has been as per the laws of natural economics. And as we know that in natural economics recession is not possible. Even today our country is not suffering from recession; but only to appease US government our slavish government is pretending to show that India is also having recession. We have begun to indulge in artificial economics and it may cause some severe recessions in the future. Artificial economics is primarily developed to help vested interests of MNCs and as yet we do not have any MNC worth the name but Reliance group is coming up and most probably it will be first MNC to control our otherwise naturally controlled economics. The rigging of petrol prices, electricity charges and other things are the beginning of such events. Mentality of reliance is that of any MNC, when Dhirubhai Ambani proclaimed the slogan, “karlo dunia muthhimei”, it became clear. Next to Reliance Tata group under Ratan Tata is heading to become second MNC. The racket of iodized salt and using judiciary as a tool to promote it are all signs of that beginning.

Black money is uncontrollable by the government agencies and so it is not affected by any type of recession. One observer suggested that so long as we have a lot of black money even though in government’s book keeping we find recession, in actual life it will not be felt. In US recession was felt because the percentage of black money there may be little! 

Increase in the food (grain, oils, pulses etc.) prices we experienced today is because government has allowed increasing them for the benefit of the farmers; it has nothing to do with so called recession. Only those activities connected with US market such as IT and BOP are mainly to suffer and the total effect of that is trivial. Overall market situation is not so bad but the media and the government is making fuzz over it to impress US to show that India is also having recession. US government is made of sick people, they expect that if US is suffering then all world must suffer and to keep with that and through that to get some advantage; most probably, our government is doing all that pretension of recession. It is also said by some knowledgeable people that congress party and other political parties have demanded a very large sum from traders to finance recent election and the forth coming assembly election and to recover that overall increase in prices are experienced. They say after the assembly elections are over this excess increase in prices would go.

Bad side of this effect is that ordinary people are not saddled with extra black money and having only white money, so they most of the times suffer due to this rise in prices of commodities. To absorb this ever increasing black money one suggestion is that we should have income tax free years in between; so that this money can be shown as income during that period and then it will become white money. This I suggest because total revenue due from personal income tax is very small. Other suggestion is that income tax authorities will not ask as to how the money is earned, which is the practice today. Tax payer will file the return without mentioning how he or she has earned the money. You may see my previous post, titles, “Cause of Black money”. In this case, people, who make black money may not hide it and may be government shall get some extra revenue out of this large chunk of black money. Other modifications in the present income tax are also recommended by other experts. One drastic suggestion is that abolish income tax on individual income completely so that all black money will automatically become white! This I say because, it is a person who makes black money and not a company. When I asked some officers from the Income tax department, they told me government would never make such a correction in the present Income tax law due to prestige issue. This if true with the government, we may understand that our government is not really interested in resolving the problem of black money.

As for pricing of food grains and other grocery, they recommend that farmers (up to five hectors) who till their farm will get a salary by the government to cover their house expenses (up to Rs. 6000/-) and education of children (up to graduation) free. On implementation of this, even if farmers do not get appropriate price for their produce they can sustain and will not have to take to suicide. To avoid exploitation of helpless farmers by private moneylenders they suggest that any loan given to farmers without consent by the collector shall be invalid and no recovery of such loans permitted. Cost of this is worthwhile to evade cost rise. In that event farmers shall produce as national service. In spite of this arrangement, I suggest that farmers allowed, selling their produce in free market to get proper price.

We see that people having access to black money earning such as government department employees, employees from MHADA, municipality, other semi government agencies, Doctors, Cinema actors, political leaders, agents, Chartered accountants, Judiciary staff and Legal practitioners where black money is generated are seen spending the money freely without bother for the current recession. One estimate suggests that the population benefiting by black money is about 26% in cities. This does not include the notorious black money lobby (BML) of high command and other creamy layer of the political parties.

    You may contact me on my Email ID given below, 

ashokkothare@yahoo.co.in 

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Ashok Kothare 

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