This post is in response to the previous blog post in which we had asked 10 most important questions on demonetization for UPSC Mains. This is the answer to the first question.
Q. 1. Black money is not just an economic, but a social menace as well. Critically examine.
A. “Black money is the money on which appropriate taxes have not been paid to the government. It is generally obtained illegally and thus kept away from declaration. It is an economic menace as it deprives the government of the legitimate share it deserves in the taxation. This blocks the circulation of money and leads to its accumulation of money, which remains unaccounted.
Due to the unaccounted nature of it, this money is the most important and accessible lubrication for a number of illegal activities. The business of illegal drugs, human trafficking, terrorism are totally dependent on the easy availability of unaccounted money. It leads to rise in the social evils present in the society and reinforce the challenge the state faces in tackling them. Apart from these, availability of black money in the market creates excess of liquidity of which the government is not aware. This creates a mismatch in the process of liquidity optimisation and leads to inflation, especially in sectors like real estate. This has created an acute housing crisis in India. Because of the socially acceptable and respectable avenues’ availability to park the black money, it increases the social aspiration, giving rise to incident of materialisation of society and incidents of corruption. Thus, it can be concluded that black money acts as the nodal point of unwanted influences on any nation state, which keep swinging within the categories of economic and social evils.”
If you want to further discuss this issue, you may post your comments and answers and we will get back to you. We will keep posting the answers to the rest of questions as well at regular intervals. Stay tuned!