The Black Economy in India

334 Pages·2017·2.82 MB·English

by  Arun Kumar

ARUN KUMAR

THE BLACK ECONOMY IN INDIA
Revised and Updated
PENGUIN BOOKS
Contents
List of Appendices
List of Tables
Foreword
Preface
Prologue
1. Introduction
2. Defining the Black Economy
3. Measuring the Black Economy
4. The Macroeconomic Linkages
5. Causes of Black Income Generation
6. Consequences of the Black Economy
7. Remedies for Curbing the Black Economy
Appendices
Statistical Appendices
Glossary of Technical Terms
Bibliography
Follow Penguin
Copyright
PENGUIN BOOKS
THE BLACK ECONOMY IN INDIA
Arun Kumar is the country’s leading authority on black economy and has
written, studied and lectured extensively on the subject for nearly four decades.
He studied at Delhi University, Jawaharlal Nehru University (JNU) and
Princeton University, USA. He taught economics at JNU for three decades till
2015. Among his other areas of interest are public finance, development
economics, public policy and macroeconomics.
Kumar has written widely on these subjects, both in the popular press and for
academic journals. At present, he is the Malcolm S. Adiseshiah Chair Professor
at the Institute of Social Sciences, New Delhi.
This book is dedicated to the memory of my father,
Prof Asha Ram,
whose implicit and explicit support to me
in my experimentation with ideas has made this book possible.
List of Appendices
1.1 Important Corruption Cases in India; 1995–1996
2.1 Harassment of Businessmen
2.2 Undeclared Incomes in the Teaching Profession
2.3 Medical Profession
2.4 Army Canteen
2.5 The Judiciary
2.6 Police Hafta
2.7 Illegal Activities in the International Arena
2.7.1 Money Laundering: A Frankenstein’s Monster
2.8 Stock Exchange Practices
2.9 Real Estate
2.10 Tax Department
3.1 Actual Investment, Savings, Export and Imports: Definitions
3.2 Estimates of Elements of Black Investment and Savings
3.3 Reassessment of NAS: What is Included and Excluded
3.4 Employment and Incomes in Illegal Activities in India
5.1 1998 General Election Expenses of a Sample of Candidates
5.2 Source of Election Financing
5.3 Total Expenditures in 1998 Elections
5.4 General Comments from Politicians
6.1 Increase in Costs of Production in Organized Industry
7.1 Direct Tax Buoyancy Post-1991
List of Tables
II.1 Estimates of the Size of the Black Economy in Select Countries
II.1.1 Estimates of the Size of the Black Economy in Select European Countries
II.2 Corrected Values of Key Macro Variables (1990–91)
III.1 Growing Share of Tertiary Sector and Non-Wage and Salary Income (Surplus) in NDP
III.2 Calculation of Black Income Shares in GDP in 1995–96
III.3 National Accounts Statistics: Sectoral Composition for 1995–96
V.1 Who Paid How Much Tax in 1992–93?
V.2.a The Number of Assessees (Other than Company) 1993–97
V.2.b Number of Returns, Gross Income and Gross Tax by Source of Income Assessment Year: 1994–
95
V.3 Category-wise Break-up of Income Tax Assessees as on 31st March 1997
V.4 Maximum Marginal Tax Rate and the Level of Personal Income at Which It Becomes Effective
V.5 Income Level at Which Personal Income Tax Liability Begins and Subsequent Structure of the
Marginal Tax Rates during 1984–85
V.6 Size of Government and Tax—GDP Ratio of Select Countries (% of GDP)
V.7 Government the World Over Has Expanded Since 1960
V.8 The State Has Grown Everywhere This Century
V.9 Many Countries Are Loosening Restraints on International Capital
V.10 Politicians Who Have Benefited from Proximity to Leaders or because of Family
V.11 Election Expenses of Select Candidates in 1998 Election
V.12 Sources of Financing of Expenditure in 1998 Election
V.13 Calculation of the Average Election Expenditure Based on Estimates Given by Political Leaders
VII.1 Employment and Compensation of Employees in the Public and Private Sectors in the Mid-
nineties.
VII.2 Number of Returns, Gross Income and Gross Tax from Business and Profession by Nature of
Business
VII.3 Direct Taxes and Their Tax Base: Has Compliance Improved?
VII.4 Gross Profit and Taxes Paid by Public Limited Companies: Are They Paying These Taxes?
VII.5 Amnesty Schemes of Government of India since Independence
VII.6 Those Paying Direct Taxes as on 31st March 1997
Foreword
I have known Arun Kumar since 1988. I requested him to help in the drafting of
the National Front manifesto and later interacted with him on various public
issues, like the New Economic Policies and policies for youth. He always linked
these issues to the black economy.
The black economy has interested me for a long time and I have personally
believed that it is an evil that needs to be confronted head-on rather than brushed
under the carpet. So I welcome the present book which explains how the system
works and suggests ways of dealing with it in an integrated manner. This was
one of the main issues in the struggle of 1987 that I along with others had
launched.
The book in hand, The Black Economy in India, deals with a contemporary
reality of India. We are daily bombarded with news about corruption and there
have been many books on the subject recently. The present book deals with the
subject differently; neither does it sensationalize the subject nor does it present it
anecdotally. It treats the subject holistically and presents the black economy as a
system, in the process giving us valuable insights into the existing Indian social,
political and economic reality. Additionally, it situates the matter in the context
of globalization—a reality which is increasingly hitting the people of this
country.
Why has the black economy been growing so rapidly in India? Arun Kumar
has an interesting formulation for this. He points out that the black economy
needs to control politics for the charmed existence of the elite. If the bureaucracy
were to refuse to carry out the illegal acts of the political masters and the
judiciary acted fairly and firmly in the cases brought before it, illegality would
not become systemic, but remain sporadic. It is in this sense that the bureaucracy
and the judiciary are clubbed together with corrupt politicians and businessmen
to form ‘the triad’. It is argued, ‘for the generation of black incomes, the
businessmen, the politicians and the bureaucrat have to be involved. Even if one