Corruption & Black Economy in India

Today India is facing difficulties irrespective of any sector.One of the major causes for this is the corruption.We as citizens of INDIA took this step to curb this dangerous social evil affecting the society and enlighten the citizens.

Effect of Corruption on 'Developing India'

In India, the black economy has resulted in an immense loss of tax revenue. If it accounted for 40% of GDP in 1998-99, the loss of direct tax revenue at the prevailing rate would amount to at least Rs. 200,000 crore, or 47.5 billion U.S. Dollars. According to the BBC (2004), only 2 million of India's billion people pay taxes, just 2% of the population. The government therefore suffers a perennial shortage of funds and public services languish. To make matters worse, public services and public enterprises are themselves extremely corrupt - the Public Works Department and the State Electricity Boards that are responsible for the provision, maintenance, and distribution of infrastructure and energy respectively, are among the most corrupt departments in India.In the capital city of Delhi itself the transmission and distribution losses in the power sector are estimated to be over 50%, out which almost 30% is attributed to theft which is done with the connivance of the electricity board employees. Due to corruption, public sector enterprises appear to be inefficient and making large losses. In 1991, they lost over Rs. 30,000 crore, or $7.1 billion due to corruption; if not for illegal activity, profit margins would have been 30% as opposed to the reported 5%.

Black incomes also form a major tax on investment. Rather than being spent and injected into the economy, they tend to be mostly saved. Furthermore, these savings tend to be concentrated in areas that do not further investment. Black money tends to be laundered in destabilizing speculative bubbles such as real estate and gold, or deposited outside the country. Income from corruption constitutes a significant leakage from the economy, amounting to a tax on investment of almost 20 percentage points.

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