Black economy comprises 40 percent of Indian GDP

New Delhi: While there are no authentic figures about the black economy in India, 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 40 percent of the GDP.

According to the latest estimate of Central Statistical Organisation (CSO), the size of the Indian economy is around 61,64,000 crore. Thus, the size of the black economy, taking it at 40 percent of GDP, is around 25,00,000 crore or around $500 billion.

If every citizen or corporate house declares black money as income, it becomes legal and would be taxed at 30 percent. If all the estimated black money is declared, it could generate a tax revenue of 7,50,000 crore for the government, reported Prabhakar Sinha and Namrata Singh of Economic Times.

Apart from that revenues of individual sectors get impacted by counterfeit products. The fast-moving consumer goods (FMCG) industry loses 6-7 percent of its turnover due to counterfeit products and illegal imports. The size of the FMCG industry is around 1,00,000 crore, which pegs the losses to the sector from counterfeiting at 7,000 crore. With the excise rate applicable on personal care products being eight percent, the duty evasion is well over 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.
According to Kamal Nayan Kabra, Former Professor of National Institute of Public Administration, economic liberalization not only helped corporate houses in hiding their income, but also in deploying the same back in the economy by re-routing it to tax havens, through hawala channels.

Despite computerization and issuance of permanent account number (PAN) to all the taxpayers, benami transactions are still rampant. According to a finance ministry source, 30 percent of the high-value transactions of total value of over 55 lakh crore are without PAN.