Chapter 58

Got it! I'll stick to the original structure and only translate the paragraphs into Hinglish after each one, along with the
highlights. Here's the content as requested:

Original:

"Black economy, parallel economy', 'black money, black income", "unaccounted income, 'illegal economy,
"underground wealth', 'shadow economy", "unofficial economy are terms which are used interchangeably in
economic literature and this is the practice we have adopted in this chapter also. In the post-Independence period, the
size of the black economy has increased considerably in India giving immense power to unscrupulous people to
influence State policies in their favour and marginalise the common and poor people. In this chapter, we propose to
discuss:

• The meaning of black money

• Methods of estimating black money
• Estimates of the size of the black economy
• Causes of black money
• Consequences of black economy
• Government policy to curb black money
• Appendix I to Chapter 58: Demonetisation
• Appendix II to Chapter 58: Corruption Perception Index

Translation (Hinglish):
"Black economy, parallel economy", "black money, black income", "unaccounted income, illegal economy",
"underground wealth, shadow economy", aur "unofficial economy" jaise shabdon ka arth lagbhag ek hi hota hai, aur
isi prakriya ko humne is chapter mein apnaya hai. Independence ke baad se, Bharat mein black economy ka size kaafi
badh gaya hai, jo ki unscrupulous logon ko apne favor mein State policies ko influence karne aur aam aur garib logon
ko marginalise karne ki shakti deta hai. Is chapter mein, hum discuss karenge:

• Black money ka matlab

• Black money ko estimate karne ke tareeqe
• Black economy ke size ka estimation
• Black money ke kaaran
• Black economy ke consequences
• Black money ko control karne ke liye Government policies
• Chapter 58 ka Appendix I: Demonetisation
• Chapter 58 ka Appendix II: Corruption Perception Index

Highlights:

1. Various terms like "black money" and "shadow economy" are used interchangeably in economics.
2. Black economy in India has grown significantly post-Independence.
3. The chapter will explore the meaning, causes, consequences, and policies related to black money.

Original:

DEFINITION OF BLACK MONEY

The White Paper on Black Money released by the Government of India in May 2012 defined black money as assets
or resources that have neither been reported to the public authorities at the time of their generation nor disclosed at
any point of time during their possession. This definition is in consonance with the definition used by the National
Institute of Public Finance and Policy (NIPFP) in its Report on Aspects of the Black Economy in India released in
1985. NIPFP had defined black income as "the aggregate of incomes which are taxable but are not reported to the tax
authorities. Further, black incomes or unaccounted incomes are "the extent to which estimates of national income and
output are biased downwards because of deliberate, false reporting of incomes, output and transactions for reasons of
tax evasion, flouting of other economic controls and relative motives." Thus, black money includes (1) tax evaded
income, and (ii) unaccounted income.

Translation (Hinglish):
Black Money ki Paribhasha
White Paper on Black Money, jo Government of India ne May 2012 mein release kiya tha, usne black money ko aise
assets ya resources ki tarah define kiya jo unke generation ke samay ya possession ke kisi bhi stage par public
authorities ko report nahi kiye gaye. Ye definition National Institute of Public Finance and Policy (NIPFP) ki 1985 ki
Report, "Aspects of the Black Economy in India", ke definition ke sath milti hai. NIPFP ne black income ko define
kiya tha "aise taxable incomes ke aggregate ke roop mein jo tax authorities ko report nahi kiye jaate." Black incomes
ya unaccounted incomes ko further define kiya gaya tha "aise national income aur output ke estimates jo jaan-bujh
kar false reporting ke wajah se neeche dikhaye jaate hain, jiska karan tax evasion, anya economic controls ka
violation, aur relative motives hote hain." Is tarah se, black money mein shamil hain:

1. Tax evaded income

2. Unaccounted income

Highlights:

1. Black money refers to assets/resources not disclosed to public authorities.

2. It includes taxable but unreported income.
3. False reporting for tax evasion and other motives biases national income estimates.

Original

Generation of Black Money

From the above definition, it is clear that black money is used to refer to money that is not fully legitimate in the
hands of the owner. Such money can be generated either through illegal or legal means.

Translation (Hinglish):
Black Money ka Utpatti
Upar di gayi definition se ye spasht hai ki black money ka matlab hai paisa jo owner ke paas poori tarah legitimate
nahi hai. Aisa paisa illegal ya legal dono tareeqon se generate ho sakta hai.

Highlights:

• Black money refers to money not fully legitimate in the hands of the owner.
• It can be generated either through illegal or legal methods.

Original

1. Illegal Means. Black money can arise from illegal activities such as crime and corruption. The criminal
component of black money may include proceeds from a range of activities including racketeering, trafficking
in counterfeit and contraband goods, smuggling, production and trade of narcotics, forgery, illegal mining,
illegal felling of forests, illicit liquor trade, robbery, kidnapping, human trafficking, sexual exploitation and
prostitution, cheating and financial fraud, embezzlement, drug money, bank frauds, and illegal trade in arms.
The corrupt component of such money could stem from bribery and theft by those holding public office such
as by grant of business, leakages from government social spending programmes, speed money to circumvent
or fast-track procedures, black-marketing of price-controlled services, and altering land-use regularising
unauthorised colonies. All these activities are illegal per se and a result of human greed combined with
 declining societal values and inability of the State to prevent them. Factors leading to their generation are both
social and administrative.

Translation (Hinglish):

1. Illegal Means (Gair-Kanooni Tareeqe). Black money aise illegal activities se generate ho sakta hai jaise
crime aur corruption. Black money ke criminal component mein racketeering, counterfeit aur contraband
goods ka trafficking, smuggling, narcotics ka production aur trade, forgery, illegal mining, forests ka illegal
katav, illicit liquor trade, robbery, kidnapping, human trafficking, sexual exploitation, prostitution, cheating
aur financial fraud, embezzlement, drug money, bank frauds aur arms ki illegal trade shamil hain. Corruption
ka black money bribery aur public office ke theft ke wajah se generate ho sakta hai, jaise business ka grant
karte waqt, government ke social spending programs mein leakages, procedures fast karne ke liye speed
money lena, black-marketing of price-controlled services, aur unauthorized colonies ka regularisation. Yeh
sab activities illegal hain aur human greed, girte social values, aur State ki inefficiency ka parinaam hain. Inke
generation ke kaaran social aur administrative dono hote hain.

Highlights:

• Illegal activities like crime, corruption, and bribery contribute to black money.
• Activities include smuggling, forgery, narcotics trade, robbery, and financial fraud.
• Social and administrative factors drive the generation of black money.

Original

2. Legal Means. Black money is usually generated and accumulated by failing to pay the dues to the public
exchequer in one form or the other. In this case, the activities undertaken by the perpetrator could be
legitimate and otherwise permissible under the law of the land, but he has failed to report the income so
generated, comply with the tax requirements, or pay the dues to the public exchequer, leading to the
generation of this wealth. Black money generation through legal means can be discussed under two headings:
(i) Generation of black money through manipulation of accounts. Any transaction entered into by the
taxpayer must be entered into books of account which are summarised at the end of the year in the form of
financial statements. Tax evaders resort to different kinds of manipulations of financial statements resulting in
tax evasion and the generation of black money. These can be broadly divided into categories: (1) out of book
transactions, and (2) manipulation of books of accounts. Out of book transactions is one of the simplest and
most widely adopted methods of tax evasion and generation of black money. Transactions that may result in
taxation of receipts or income are not entered in the books of accounts by the taxpayer. The taxpayer either
does not maintain books of account or maintains two sets or records partial receipts only.

Translation (Hinglish):
2. Legal Means (Kanooni Tareeqe). Black money aksar public exchequer ke dues ko pay nahi karne ke kaaran
generate hota hai. Is case mein jo activities ki gayi hain wo legitimate aur kanooni tor par permissible ho sakti hain,
par perpetrator ne apna income report nahi kiya, tax requirements ko pura nahi kiya, ya public exchequer ke dues pay
nahi kiye, jo is wealth ke generation ka kaaran banta hai. Legal means se black money generation ko do headings
mein discuss kiya ja sakta hai:
(i) Accounts ke manipulation ke zariye black money generation. Taxpayer dwara ki gayi koi bhi transaction
accounts ki books mein enter honi chahiye, jo financial statements ke roop mein summarise hoti hai. Tax evaders
alag-alag tareeqon se financial statements ka manipulation karte hain, jisse tax evasion aur black money generate hota
hai. Yeh do categories mein divide hota hai: (1) Out of book transactions, aur (2) Books of accounts ka manipulation.
Out of book transactions ek simple aur widely adopted tarika hai tax evasion aur black money generation ka.
Transactions jo receipts ya income ke taxation ka karan banti hain, wo taxpayer ke dwara books of accounts mein
enter nahi ki jati.

Highlights:

• Black money is generated legally when public dues or taxes are evaded.
• Legitimate activities become sources of black money if income is not reported.
 • Common methods include manipulating accounts and out-of-book transactions.

Original

Manipulation of sales or receipts is the easiest method of tax evasion. Other innovative means may include diversion
of sales to associated enterprises, which may become more important if such enterprises are located in different tax
jurisdictions and thereby may also give rise to issues related to international taxation and transfer pricing. At times,
dummy/associated entities might be used for generating black money. In its simplest form, the associate entity may
not report its activities or income at all. The main entity may show sales to such a dummy associate entity at a lower
price, thereby reducing its reported profits. Manipulation of production figures is another means of artificially
reducing tax liability. It may be resorted to for the purpose of evading central excise, sales tax, or income tax. A
practice widely prevalent is the 'inflation of expenses.' Since the income on which taxes are payable is arrived at after
deduction of expenses, blowing up of expenses (frequently by obtaining bogus or inflated invoices) pulls down the
tax liability. A number of other methods like manipulation of capital expenses, etc., may also be used to reduce the
profit of the business and reduce tax liability.

Translation (Hinglish):
Sales aur receipts ka manipulation tax evasion ka sabse asaan tareeka hai. Kuch innovative methods mein sales ko
associated enterprises ki taraf divert karna shamil hai, jo tab aur important ban jata hai jab yeh enterprises alag-alag
tax jurisdictions mein hote hain, aur yeh international taxation aur transfer pricing se judi problems ko bhi janam de
sakta hai. Kabhi-kabhi dummy/associated entities ka use black money generate karne ke liye kiya jata hai. Sabse
simple form mein, yeh associate entity apni activities ya income bilkul report nahi karti. Main entity apne sales
dummy associate entity ko lower price par dikhata hai, jisse uska reported profit kam ho jata hai. Production figures
ka manipulation ek aur tareeka hai tax liability ko artificially kam karne ka. Yeh central excise, sales tax, ya income
tax evasion ke liye kiya ja sakta hai. Ek aur aam practice hai expenses ka 'inflation' karna. Tax liability expenses
deduct karne ke baad calculate hoti hai, isliye bogus ya inflated invoices ke zariye expenses badhakar tax liability
kam ki jati hai. Aur bhi methods, jaise capital expenses ka manipulation, business ka profit aur tax liability kam karne
ke liye use hote hain.

Highlights:

• Manipulating sales or receipts is the simplest way to evade taxes.

• Diversion of sales to associated enterprises can create issues like international taxation problems.
• Dummy entities may not report income, reducing profits for the main entity.
• Inflation of expenses, such as using bogus invoices, is a common practice to lower tax liability.
• Other methods include manipulating production figures or capital expenses.

Original Text

(ii) Generation of black money in some vulnerable sections of the economy. While the source of generation of black
money may lie in any sphere of economic activity, there are certain sectors of the economy, or activities, which are
more vulnerable to this menace. In this context, White Paper specifically mentions the following sectors (or
activities): real estate, the bullion and jewellery market, financial markets, public procurement, non-profit
organisations, external trade, international transactions involving tax havens, and the informal service sector. As far
as real estate is concerned, the tax incidence applicable on real estate in the form of stamp duty and capital gains tax
creates incentives for tax evasion through under-reporting of transaction price. This can lead to both generation and
investment of black money. As far as cash sales in gold and jewellery trade are concerned, they allow the buyer the
option of converting black money into gold and bullion while they give the trader the option of keeping his
unaccounted wealth in the form of stock, not disclosed in the books or valued at less than market price. Financial
market transactions can involve black money in different forms like rigging of markets by the market operators.
Public procurement in India has grown phenomenally over the years. Estimates range from 20 per cent to 30 per cent
of GDP. Competition Commission of India has estimated the annual public sector procurement at ₹8 lakh crore, while
a rough direct estimation of direct government procurement is between ₹2.5 and ₹3 lakh crore. This puts the total
public procurement figure for India at around ₹10 to ₹11 lakh crore. As far as the non-profit sector is concerned,
taxation laws allow certain privileges and incentives for promoting charitable activities. Misuse of such benefits and
manipulations through entities claimed to be constituted for non-profit motives are sources of generation of black
money. Cash transactions in the informal economy also lead to the generation of black money. White Paper mentions
the use by MNCs of their various operations across a number of countries to transfer profit/income to no tax or low-
tax jurisdictions. According to the White Paper, transfer pricing has now emerged as the biggest tool for the
generation and transfer of black money. Christianaid estimates that developing countries may be losing over US$ 160
billion of tax revenues a year, primarily through transfer pricing strategies. The illicit money transferred outside India
may also come back to India through various methods such as hawala, mispricing, foreign direct investment (FDI)
through beneficial tax jurisdictions, raising of capital by Indian companies through global depository receipts
(GDRs), and investment in Indian stock markets through participatory notes (PNs). Many other channels are also
being used for the generation of black money, like tax havens, introduction of new instruments in the capital market
that are not covered by regulatory mechanisms, etc.

Translation in Hinglish

(ii) Economy ke kuch vulnerable sections mein black money ka generation. Black money ka source kisi bhi economic
activity mein ho sakta hai, lekin kuch economic sectors ya activities is menace ke liye zyada vulnerable hote hain. Iss
context mein, White Paper specifically in sectors ya activities ka zikr karta hai: real estate, bullion aur jewellery
market, financial markets, public procurement, non-profit organisations, external trade, international transactions jo
tax havens se judi hain, aur informal service sector. Jahan tak real estate ka sawal hai, real estate par lagne wali tax
incidence jaise stamp duty aur capital gains tax tax evasion ke liye incentives create karte hain through under-
reporting of transaction price. Ye black money ke generation aur investment dono ko lead kar sakta hai. Jahan tak
gold aur jewellery trade ki cash sales ka sawal hai, ye buyer ko black money ko gold aur bullion mein convert karne
ka option dete hain aur trader ko apni unaccounted wealth ko stock ke roop mein rakhne ka option dete hain jo books
mein disclose nahi hoti ya market price se kam value par hoti hai. Financial market transactions alag-alag forms mein
black money involve karte hain, jaise ki market operators ke dwara markets rig karna. Public procurement India mein
over the years phenomenally grow hua hai. Estimates GDP ka 20-30% range karte hain. Competition Commission of
India ne annual public sector procurement ko ₹8 lakh crore estimate kiya hai, jabki direct government procurement ka
ek rough estimate ₹2.5 aur ₹3 lakh crore ke beech ka hai. Yeh total public procurement figure ko ₹10 se ₹11 lakh
crore tak le jata hai. Jahan tak non-profit sector ka sawal hai, taxation laws kuch privileges aur incentives dete hain
charitable activities ko promote karne ke liye. In benefits ka misuse aur manipulations jo non-profit motives ke liye
banayi gayi entities ke dwara hota hai, black money generate karne ka ek source hain. Informal economy mein cash
transactions bhi black money ke generation mein madad karte hain. White Paper mention karta hai ki MNCs apni
different countries mein operations ka use karte hain profits ya income ko low-tax ya no-tax jurisdictions mein
transfer karne ke liye. White Paper ke mutabik, transfer pricing ab black money generate karne aur transfer karne ka
sabse bada tool ban gaya hai. Christianaid estimate karta hai ki developing countries $160 billion se zyada ka tax
revenues har saal khote hain, primarily transfer pricing strategies ke through. Illicit money jo India ke bahar transfer
hota hai, woh wapas India hawala, mispricing, foreign direct investment (FDI) jo beneficial tax jurisdictions ke
through hota hai, Indian companies ke dwara global depository receipts (GDRs) ke through capital raise karne, aur
Indian stock markets mein participatory notes (PNs) ke through aata hai. Aur bhi kai channels ka use kiya jata hai
black money ke generation ke liye, jaise tax havens, naye instruments ka capital market mein introduction jo
regulatory mechanisms ke under nahi hote, etc.

Here are the highlights from the paragraph:

1. Sectors vulnerable to black money generation:

o Real estate, bullion and jewellery market, financial markets, public procurement, non-profit
organisations, external trade, international transactions with tax havens, and informal service sector.
2. Real estate:
o Stamp duty and capital gains tax incentivize tax evasion through under-reporting transaction prices,
leading to black money generation and investment.
3. Gold and jewellery trade:
o Cash sales allow buyers to convert black money into gold and bullion.
 o Traders can keep unaccounted wealth in stock, either undisclosed in books or undervalued.
4. Financial markets:
o Black money can be involved in rigging markets by operators.
5. Public procurement:
o Estimated at ₹10-11 lakh crore annually, contributing significantly to black money generation.
6. Non-profit sector:
o Tax privileges and incentives for charitable activities are misused, leading to black money generation.
7. Informal economy:
o Cash transactions are a major source of black money.
8. Multinational Corporations (MNCs):
o Use operations across countries to transfer profits to low-tax or no-tax jurisdictions (transfer pricing).
o Transfer pricing is identified as the largest tool for black money generation.
9. Global estimates of tax revenue loss:
o Developing countries lose over $160 billion annually due to transfer pricing strategies.
10. Illicit money return to India:
o Methods include hawala, mispricing, foreign direct investment (FDI), global depository receipts
(GDRs), and participatory notes (PNs).
11. Other channels:
o Tax havens and new capital market instruments outside regulatory mechanisms also contribute to
black money generation.

METHODS OF ESTIMATING BLACK MONEY

Paragraph 1:

Estimating the size of the black economy is very difficult. This is due to the reason that the black economy exists in
the shadows and no one reports their black incomes. One cannot simply add up reported figures. Therefore,
estimation has to be done through indirect ways. Among the estimates made so far, there is no uniformity, unanimity,
or consensus about the best methodology or approach to be used for this purpose. Different economists have used
different methods and the sources of data also vary considerably. Accordingly, there are large differences in the
figures of black money estimated.

Hinglish Translation:
Black economy ka size estimate karna bohot mushkil hai. Iska karan hai ki black economy shadow mein chalti hai
aur koi bhi apni black incomes report nahi karta. Reported figures ko sirf jod kar estimate nahi kiya jaa sakta. Isliye
estimation ke liye indirect tareeqon ka istemal karna padta hai. Ab tak kiye gaye estimations mein kisi ek
methodology ya approach ko lekar koi uniformity, ekta, ya consensus nahi hai. Alag-alag economists ne alag methods
use kiye hain aur data ke sources bhi bohot alag hain. Isi wajah se black money ke estimates mein kaafi fark aata hai.

Highlights:

1. Estimating the black economy is difficult as it operates in the shadows, and black incomes are not reported.
2. Estimation requires indirect methods; there is no consensus on the best approach.
3. Different economists use varying methods, resulting in significantly different estimates.

Paragraph 2:

The main methods adopted for estimating the quantum of black money in India are as follows:

1. Input/output method: This method consists of using the input/output ratio along with the input to calculate
the true output. It estimates black money as the difference between the declared output and the output
expected on the basis of the input/output ratio. As noted by the White Paper, this method is deceptively simple
and, though it may have some utility if applied to a uniform industry or a specific sector of the economy, it is
 unlikely to be of much help if applied to the economy as a whole. It also ignores structural changes in the
economy, including those related to technology.

Hinglish Translation:
Input/output method: Is method mein input/output ratio ka istemal input ke sath karke true output calculate kiya jata
hai. Is method ke zariye black money ka estimation declared output aur input/output ratio ke aadhar par expect kiye
gaye output ke beech ka antar nikal kar kiya jata hai. White Paper ke anusaar, yeh method dekhne mein simple lagta
hai, aur ek uniform industry ya economy ke specific sector par lagu karne par kuch fayda ho sakta hai. Lekin, yeh
economy ke poore structure par lagoo karna mushkil hai. Yeh economy mein hone wale structural changes, jaise
technology ke changes ko ignore karta hai.

Highlights:

1. Input/output method calculates black money by comparing declared output and expected output based on
the input/output ratio.
2. Useful for specific sectors or industries but not effective for the whole economy.
3. Fails to account for structural and technological changes in the economy.

2. The Monetary Approach

This approach is based on the fact that money is needed to circulate incomes in both the "black" and accounted
sectors of the economy. As the accounted sector of the economy is known, the difference between the amount used in
this sector and the money in circulation could be assumed to be circulating in the black economy. An estimate of the
velocity of money (that is to say the average number of times currency changes hands in a year) enables an estimation
of income circulated annually. A comparison of that with the income captured in the National Accounting System
(NAS) gives the income which could be considered as the black money in the economy. However, the assumption
that the NAS represents accounted incomes accurately is not always true. Large proportions of income, such as those
falling in the unorganised sector, are not accurately captured in the NAS. Thus, there may be an upward bias in the
estimate of black money so derived.

Hinglish Translation:
Yeh approach is baat par based hai ki paise ka zaroorat hota hai black aur accounted dono sectors mein income ko
circulate karne ke liye. Jabki accounted sector ka pata hota hai, is sector mein use hone wale paise aur circulation
mein paise ke beech ka difference black economy mein circulate hone wale paise ka andaza lagaya jaa sakta hai.
Money ki velocity ka estimate (jo ki currency ke saath badalne ki average number ko refer karta hai) ek saal mein
circulate hone wali income ka estimate karne mein madad karta hai. Jab isko National Accounting System (NAS) se
compare kiya jata hai, toh yeh black money ko estimate karne mein madad karta hai. Lekin, yeh assumption ke NAS
accounted incomes ko accurately represent karta hai, hamesha sach nahi hota. Kaafi income jo unorganised sector
mein hoti hai, wo NAS mein accurately capture nahi hoti. Isliye, aise estimated black money mein upar ki taraf bias
ho sakta hai.

Highlights:

1. Money needed to circulate in both "black" and accounted sectors of the economy.
2. Estimates black money by comparing money circulation with income captured in NAS.
3. Assumption that NAS accurately represents accounted incomes is not always true, especially with the
unorganised sector.

3. Survey Approach

In this method, sample surveys are carried out. They may be on the consumption pattern of a representative
population sample, which is then compared to the total consumption of the country. In this method, the problems
consist in getting a truly representative sample, unambiguous set of questions, and the willingness of the persons in
the sample size to reveal the true facts. Often the comfort level with the interviewers is listed as a problem, as people
are generally unwilling to admit any illegality before strangers.

Hinglish Translation:
Is method mein sample surveys kiye jate hain. Yeh surveys representative population sample ke consumption pattern
par ho sakte hain, jise phir country ke total consumption se compare kiya jata hai. Is method mein problems yeh hoti
hain ki ek truly representative sample milna, clear questions ka set tayar karna, aur sample size ke logon ko asli facts
reveal karne ke liye ready karna. Zyada tar logon ke liye interviewer ke saath comfort level ka issue hota hai, kyunki
log aam taur par strangers ke saamne kisi bhi illegal kaam ko admit nahi karte.

Highlights:

1. Sample surveys on consumption patterns used to estimate black money.

2. Challenges in ensuring a truly representative sample and clear questions.
3. Reluctance of participants to admit illegality during interviews.

4. Fiscal Approach

The underlying basis of this approach is to view the economy as comprising several sectors, each having its own sets
of practices. The contribution of these sectors to black money generation is separately worked out, which when added
would give the size of the black economy. However, the manner of identifying the 'black component' in these sectors
and the assumptions suffer from inherent subjectivity of the researcher and lack of uniform standards.

Hinglish Translation:
Is approach ka basic idea yeh hai ki economy ko kai sectors mein divide kiya jaye, jisme har ek sector apni practices
rakhta hai. In sectors ke contribution ko black money generate karne mein separately calculate kiya jata hai, jise add
karne par black economy ka size milta hai. Lekin, yeh 'black component' identify karne ka tareeqa aur assumptions
researcher ke apne perspective pe depend karte hain aur isme uniform standards ki kami hoti hai.

Highlights:

1. Economy divided into sectors, with each contributing to black money generation.
2. The process of identifying black money contributions is subjective and lacks uniform standards.

Estimates of the Size of Black Economy

In this section, we present some of the estimates of black money in India prepared by different economists and
agencies from time to time.

Hinglish Translation:
Is section mein, hum kuch estimates present karenge jo alag-alag economists aur agencies ne time-to-time India mein
black money ke size ke liye kiye hain.

Highlights:

1. Section presents estimates by different economists and agencies.

N. Kaldor's Estimates

Probably the first estimate of black money in India was made by Kaldor for the year 1953-54 in his Report published
in 1956. Kaldor estimated the black incomes generated in each of the thirteen sectors of NAS: He assumed that no
black incomes are generated from the wage and salary component. For the remaining part of each of the sectors, he
applied ratios which gave the amount of black income generated in that sector. The black income in each sector was
taken to be the difference between the estimated non-salary income above the exemption limit and the actual non-
salary income assessed to tax. Kaldor estimated the amount of black money at 600 crore in 1953-54, which was 6.0
percent of GNP at market prices in that year (9,993 crore).

Hinglish Translation:
Shayad India mein black money ka pehla estimate Kaldor ne 1953-54 ke liye apne Report mein diya tha, jo 1956
mein publish hui thi. Kaldor ne NAS ke 13 sectors mein generate hone wali black incomes ka estimate diya. Unhone
assume kiya ki wage aur salary component se koi black income nahi generate hoti. Baaki sectors mein, unhone ratios
apply kiye jo us sector mein generate hone wali black income ka estimation dete the. Har sector mein black income
ko unhone exemption limit ke upar estimated non-salary income aur actual non-salary income jo tax assess ki gayi
thi, ke beech ka difference maana. Kaldor ne 1953-54 mein black money ka amount 600 crore estimate kiya, jo us
saal ke GNP ka 6.0 percent tha (9,993 crore).

Highlights:

1. Kaldor's estimate in 1953-54 was the first estimate of black money.

2. Estimated black money at 600 crore (6% of GNP in 1953-54).
3. Estimated based on the difference between non-salary income and income assessed for tax.

Wanchoo Committee's Estimates

The Wanchoo Committee (Direct Taxes Enquiry Committee) followed Kaldor's methodology of estimation of black
incomes with some modification. It estimated assessable non-salary income for the year 1961-62 as 2,665 crore. As
against this, the non-salary income actually assessed to tax was 1,875 crore. Thus, the income which escaped tax was
811 crore. After making some adjustments to this figure, the Wanchoo Committee scaled down the estimate of black
money to 700 crore, which was 4.4 percent of the GNP at market prices in the year 1961-62 (15,879 crore). For the
year 1965-66, the Wanchoo Committee estimated the black money as 1,000 crore, which was 4.2 percent of the GNP
in that year.

Hinglish Translation:
Wanchoo Committee (Direct Taxes Enquiry Committee) ne Kaldor ki methodology ko kuch modifications ke saath
follow kiya. Usne 1961-62 ke liye assessable non-salary income ko 2,665 crore estimate kiya. Iske comparison mein,
jo non-salary income actual mein tax ke liye assess ki gayi thi, wo 1,875 crore thi. Isliye, jo income tax se bach gayi
thi wo 811 crore thi. Is figure mein kuch adjustments karne ke baad, Wanchoo Committee ne black money ka
estimate 700 crore tak scale down kiya, jo us saal ke GNP ka 4.4 percent tha (15,879 crore). 1965-66 ke liye,
Wanchoo Committee ne black money ko 1,000 crore estimate kiya, jo us saal ke GNP ka 4.2 percent tha.

Highlights:

1. Wanchoo Committee used Kaldor's method with modifications.

2. Estimated black money in 1961-62 at 700 crore (4.4% of GNP).
3. For 1965-66, estimated black money at 1,000 crore (4.2% of GNP).

Rangnekar's Estimates

D.K. Rangnekar, a member of the Wanchoo Committee, dissented from the estimates of the Wanchoo Committee.
According to him, tax evaded income for 1961-62 was 1,150 crore, against the Committee's estimate of 811 crore.
For 1965-66, it was 2,350 crore, against the Committee's estimate of 1,000 crore.

Hinglish Translation:
D.K. Rangnekar, jo Wanchoo Committee ke member the, unhone Wanchoo Committee ke estimates se disagree kiya.
Unke mutabik, 1961-62 ke liye tax evaded income 1,150 crore thi, jo Committee ke estimate 811 crore se kaafi zyada
thi. 1965-66 ke liye, yeh 2,350 crore thi, jo Committee ke estimate 1,000 crore se bhi zyada thi.
Highlights:

1. Rangnekar disagreed with the Wanchoo Committee's estimates.

2. Estimated tax evaded income for 1961-62 at 1,150 crore.
3. Estimated tax evaded income for 1965-66 at 2,350 crore.

O.P. Chopra's Estimates

In his study published in 1982, O.P. Chopra presented estimates of black money in India for a period of 17 years
(1960-61 to 1976-77). He used the methodology adopted by the Wanchoo Committee with some modifications. In
Chopra's study also, as in Kaldor and Wanchoo Committee's study, the difference between the assessable and the
assessed non-salary income was taken as the measure of unaccounted income. According to Chopra's estimates, black
money in 1960-61 was 7916 crore, which was 6.3 percent of GNP at factor cost in that year. This rose to 8,098 crore
in 1976-77 (11.4 percent of GNP). Three important results arrived at by Chopra are as follows: (1) tax evasion is
more likely the higher the rate of tax; (2) increase in prices leads to an increase in unaccounted income; and (3) the
funds are diverted to agriculture to convert unaccounted income into legal money.

Hinglish Translation:
Apni 1982 mein publish hui study mein, O.P. Chopra ne 17 saalon (1960-61 se 1976-77 tak) ke liye India mein black
money ke estimates diye. Unhone Wanchoo Committee ke methodology ko kuch modifications ke saath use kiya.
Chopra ki study mein bhi, jaise Kaldor aur Wanchoo Committee ki study mein tha, assessable aur assessed non-salary
income ke beech ka difference unaccounted income ke measure ke roop mein liya gaya. Chopra ke estimates ke
mutabik, 1960-61 mein black money 7916 crore thi, jo us saal ke GNP ka 6.3 percent tha. Yeh 1976-77 mein 8,098
crore tak badh gayi (GNP ka 11.4 percent). Chopra ne teen important results nikaale: (1) tax evasion tab zyada hoti
hai jab tax rate zyada ho; (2) prices ke badhne se unaccounted income badh jaati hai; aur (3) funds ko agriculture
mein divert kiya jata hai taaki unaccounted income ko legal money mein convert kiya ja sake.

Highlights:

1. O.P. Chopra's estimates for 1960-61 to 1976-77.

2. Estimated black money in 1960-61 at 7916 crore (6.3% of GNP).
3. Estimated black money in 1976-77 at 8,098 crore (11.4% of GNP).
4. Important findings: higher tax rates increase tax evasion, prices increase unaccounted income, funds diverted
to agriculture to legitimize unaccounted money.

Estimates by Poonam Gupta and Sanjeev Gupta

In their study published in 1982, Poonam Gupta and Sanjeev Gupta presented estimates of black money in India over
the period 1967-68 to 1978-79. According to them, the estimates of the black economy which are based on GNP are
serious underestimates since the income generated in the parallel economy is not reported for the calculation of
official GNP. They use the methodology developed by Feige (1979) for estimating the magnitude and growth of the
black income. Feige assumed that if all the transactions paid for by cheque and by cash were added up, then the value
of total transactions would represent total economic activity in any society. He further assumed that the ratio of total
transactions to total income was relatively stable. Now, the total volume of transactions includes both legal and illegal
transactions while GNP, as officially given, measures only legal transactions. Accordingly, if a proportional
relationship exists between transactions and income, then significant increases in this ratio would be due to the
growth of illegal activity.

Hinglish Translation:
Apni 1982 mein publish hui study mein, Poonam Gupta aur Sanjeev Gupta ne 1967-68 se 1978-79 tak India mein
black money ke estimates diye. Unke mutabik, jo estimates GNP par based hote hain, wo kaafi underestimates hote
hain kyunki parallel economy mein jo income generate hoti hai, wo official GNP calculation ke liye report nahi hoti.
Unhone Feige (1979) dwara develop ki gayi methodology ko use kiya black income ke magnitude aur growth ko
estimate karne ke liye. Feige ne assume kiya tha ki agar saare transactions jo cheque aur cash ke through kiye jate
hain, unhe add kiya jaye, toh total transactions ka value total economic activity ko represent karega. Unhone yeh bhi
assume kiya ki total transactions aur total income ke beech ka ratio relatively stable hota hai. Ab, total transactions ka
volume legal aur illegal dono transactions ko include karta hai, jabki GNP jo officially diya gaya hai, sirf legal
transactions ko measure karta hai. Isliye, agar transactions aur income ke beech ek proportional relationship hai, toh
is ratio mein significant increase illegal activity ke growth ke karan ho sakta hai.

Highlights:

1. Gupta and Gupta's estimates for 1967-68 to 1978-79.

2. GNP-based estimates are serious underestimates of the black economy.
3. Used Feige's methodology, assuming total transactions represent total economic activity.
4. Significant increase in transaction-income ratio indicates growth of illegal activity.

Poonam Gupta and Sanjeev Gupta's Estimates (Feige Method)

While applying the method developed by Feige to estimate black money in India, Poonam Gupta and Sanjeev Gupta
averaged the ratios for three years 1949-50, 1950-51, and 1951-52 and used them as the reference point for estimating
the size of the black economy. The choice of these base years was based on the premise that in these pre-planning
years, the underground economy was relatively small. Table 3 of their study reveals the estimated size of the black
economy in India over the period 1967-68 to 1978-79. According to this Table, the size of the black economy in
1967-68 was 3,034 crore, and this rose to as high as 46,867 crore in 1978-79, that is, more than 15 times. In
percentage terms, in 1967-68, the underground economy formed nearly 9.5 percent of measured GNP. By 1978-79, it
had jumped to 48.8 percent. Thus, in 1978-79, almost half of the official income was being produced outside the
'legal sector.' Not only had the black economy become a substantial proportion of the regular economy, but it had also
grown at a rate faster than that of the official economy. The authors argued that high taxes contributed significantly to
the growth of the unofficial economy. Their study indicated that a 1 percent increase in overall taxes led to more than
a 3 percent increase in the black economy relative to the official economy.

Hinglish Translation:
Feige method ko apply karte hue, Poonam Gupta aur Sanjeev Gupta ne 1949-50, 1950-51, aur 1951-52 ke ratios ko
average karke use black economy ke size ko estimate karne ke liye reference point banaaya. In base years ka chunaav
is premise par tha ki planning se pehle ki years mein underground economy kaafi chhoti thi. Unki study ke Table 3
mein 1967-68 se 1978-79 tak ke liye black economy ka estimated size dikhaya gaya hai. Is Table ke mutabik, 1967-
68 mein black economy ka size 3,034 crore tha, jo 1978-79 mein 46,867 crore tak pahuch gaya, yaani 15 times se bhi
zyada. Percentage terms mein, 1967-68 mein underground economy ne measured GNP ka lagbhag 9.5 percent hissa
banaya. 1978-79 tak yeh 48.8 percent ho gaya. Iska matlab hai ki 1978-79 mein, lagbhag aadha official income 'legal
sector' ke bahar produce ho raha tha. Na sirf black economy regular economy ka ek bada hissa ban gayi thi, balki yeh
official economy se bhi zyada tezi se badh rahi thi. Authors ne yeh argue kiya ki high taxes unofficial economy ke
growth mein significant role play karte hain. Unki study mein yeh dikhaya gaya ki overall taxes mein 1 percent
increase hone par, black economy mein official economy ke mukable mein 3 percent se zyada increase hota hai.

Highlights:

1. Feige method applied to estimate black economy from 1967-68 to 1978-79.

2. Black economy grew from 3,034 crore in 1967-68 to 46,867 crore in 1978-79.
3. In 1978-79, black economy formed 48.8% of GNP.
4. High taxes contributed significantly to the growth of the unofficial economy.
5. 1% increase in taxes led to a 3% increase in the black economy.

NIPFP's Estimates

A study on black income conducted by the National Institute of Public Finance and Policy (NIPFP) under the
guidance of Shankar Acharya was published in 1985. As stated earlier, the study defined black money as the
aggregate of incomes which were taxable but which were not reported to the tax authorities. The study, however,
gave a broader definition of black income and called it 'unaccounted income' for purposes of clarity. As there was a
lack of sufficient data, the NIPFP study followed the minimum estimate approach. That is to say, not being able to
ascertain the most probable degree of under-declaration or leakage, it used a degree of under-declaration which could
safely be regarded as the minimum in the relevant sector. In several cases, the study also made use of a range rather
than a single figure of underestimation.

Hinglish Translation:
National Institute of Public Finance and Policy (NIPFP) ki ek study jo Shankar Acharya ke guidance mein ki gayi thi,
1985 mein publish hui thi. Jaise pehle kaha gaya, study ne black money ko un incomes ke aggregate ke roop mein
define kiya tha jo taxable thi par tax authorities ko report nahi ki gayi thi. Lekin study ne black income ka ek broader
definition diya aur use 'unaccounted income' kaha clarity ke liye. Kyunki data ki kami thi, NIPFP study ne minimum
estimate approach ko follow kiya. Matlab, jo probable degree of under-declaration ya leakage ka pata nahi chal pa
raha tha, usne ek aise degree ka use kiya jo relevant sector mein minimum maana jaa sake. Kai cases mein, study ne
underestimation ka single figure dene ke bajaye, ek range ka use kiya.

Highlights:

1. NIPFP's study on black income conducted under Shankar Acharya in 1985.

2. Black money defined as taxable income not reported to tax authorities.
3. Used a 'minimum estimate approach' due to lack of sufficient data.
4. In some cases, a range of underestimation figures used instead of a single number.

Estimating the Components of Black Income (NIPFP Study)

While preparing the estimate of black income, the study excluded incomes generated through illegal activities like
smuggling, black market transactions, and acceptance of bribes and kickbacks. To prepare a global estimate of black
income, the study confined itself to the following six areas: (1) factor incomes received either openly or covertly
while participating in the production of goods and services; (2) black income generated in relation to capital receipts
on sale of assets; (3) black income generated in fixed capital formation in the public sector; (4) black income
generated in relation to the private corporate sector; (5) black income generated in relation to exports, and (6) black
income generated through over-invoicing of imports by the private sector and sale of import licenses.

Hinglish Translation:
Jab black income ka estimate tayar kiya gaya, study ne illegal activities jaise smuggling, black market transactions,
aur bribes aur kickbacks lene se hone wali incomes ko exclude kiya. Global estimate of black income prepare karte
waqt, study ne apne aapko kuch specific cheezon tak simit rakha: (1) Factor incomes jo goods aur services ke
production mein openly ya covertly participate karte waqt milti hain; (2) Capital receipts jo assets ke sale se generate
hoti hain; (3) Fixed capital formation mein black income jo public sector mein hoti hai; (4) Private corporate sector se
related black income; (5) Exports se related black income; aur (6) Imports ke over-invoicing aur import licenses ke
sale se private sector dwara generate hoti black income.

Highlights:

1. Excluded illegal activities like smuggling, black market, bribes, and kickbacks.
2. Focused on 6 key areas to estimate black income.
3. Included factors like factor incomes, capital receipts, and income from private sector and exports.

NIPFP's Quantification of Black Money

After aggregating the different components of black income, the study quantified the extent of black money for
different years as shown in Table 58.1. As Table 58.1 shows, NIPFP estimated the size of the black economy at about
20 percent of GDP (not accounting for smuggling and illegal activities) during the period 1980 to 1985. However,
many economists pointed out that the size of the black economy was much larger than this. For instance, Suraj B.
Gupta pointed out some erroneous assumptions of the NIPFP study and estimated black income at 42 percent of GDP
in 1980-81 and 51 percent of GDP in 1987-88.

Hinglish Translation:
Black income ke alag components ko aggregate karne ke baad, study ne different years ke liye black money ka extent
quantify kiya, jo Table 58.1 mein dikhaya gaya hai. Jaise Table 58.1 mein dikhaya gaya, NIPFP ne black economy ka
size 1980 se 1985 ke dauran GDP ka lagbhag 20 percent estimate kiya (smuggling aur illegal activities ko exclude
karke). Lekin, kai economists ne yeh point out kiya ki black economy ka size isse kaafi zyada tha. Maan lo, Suraj B.
Gupta ne NIPFP study ke kuch galat assumptions ko point out karte hue black income ko 1980-81 mein GDP ka 42
percent aur 1987-88 mein GDP ka 51 percent estimate kiya.

Highlights:

1. NIPFP estimated black economy at 20% of GDP from 1980-1985 (excluding illegal activities).
2. Suraj B. Gupta criticized the assumptions and estimated black income at 42% of GDP in 1980-81 and 51% in
1987-88.
3. Some economists believe the black economy is much larger than the NIPFP estimate.

Arun Kumar's Estimates

Arun Kumar has estimated the size of the black economy for the years 1990-91, 1995-96, and 2016-17. According to
his estimates, the black income was about 35 percent of GDP in 1990-91 and about 40 percent of GDP in 1995-96.
Arun Kumar has projected the size of the black economy in 2016-17 at 62 percent of GDP, generating about 93 lakh
crore of revenue (or $1.4 trillion). It is larger than the income generated by agriculture and industry put together and
larger than the size of government (Centre plus States) spending, which is about 27 percent of GDP. According to
Kumar, on account of the existence of such a large black income, the country's economy has been losing on an
average 5 percent growth (when compared to official figures) since the mid-1970s when the black economy became
significant.

Hinglish Translation:
Arun Kumar ne 1990-91, 1995-96 aur 2016-17 ke liye black economy ka size estimate kiya hai. Unke estimates ke
mutabik, 1990-91 mein black income GDP ka lagbhag 35 percent thi aur 1995-96 mein yeh 40 percent thi. Arun
Kumar ne 2016-17 mein black economy ka size GDP ka 62 percent estimate kiya hai, jo lagbhag 93 lakh crore
revenue generate karta hai (yaani $1.4 trillion). Yeh agriculture aur industry ke total income se bhi zyada hai, aur
government (Centre plus States) spending se bhi zyada hai, jo GDP ka 27 percent hai. Kumar ke mutabik, itni badi
black income hone ke kaaran, desh ki economy average 5 percent growth lose kar rahi hai (official figures ke
comparison mein) mid-1970s se jab black economy significant ho gayi thi.

Highlights:

1. Arun Kumar estimated black economy at 35% of GDP in 1990-91 and 40% in 1995-96.
2. In 2016-17, black economy projected at 62% of GDP, generating 93 lakh crore.
3. Larger than agriculture, industry, and government spending combined.
4. Estimated loss of 5% GDP growth due to black economy since mid-1970s.

Illicit Money Transferred Outside India: Reports of GFI

Illicit flows to other countries constitute a major source of domestic resource leakage, which drains foreign exchange,
reduces tax collections, restricts foreign investments, and worsens poverty in developing countries. Illicit flows are all
unrecorded private financial outflows involving capital that is illegally earned, transferred, or utilized, generally used
by residents to accumulate foreign assets in contravention of applicable capital controls and regulatory frameworks.
Thus, even if the funds are legitimate, such as the profits of a legitimate business, their transfer abroad in violation of
exchange control regulations or corporate tax laws would render the capital illicit.
Hinglish Translation:
Illicit flows dusre deshon mein domestic resource leakage ka ek major source hai, jo foreign exchange ko drain karta
hai, tax collections ko reduce karta hai, foreign investments ko restrict karta hai aur developing countries mein
poverty ko badhata hai. Illicit flows wo sab unrecorded private financial outflows hote hain jisme illegal tarike se
kamai gayi, transfer ki gayi ya utilize ki gayi capital hoti hai, jo generally residents foreign assets accumulate karne
ke liye use karte hain, jo applicable capital controls aur regulatory frameworks ke against hoti hai. Isliye, agar paise
legitimate hain, jaise ek legitimate business ke profits, to bhi agar unhe exchange control regulations ya corporate tax
laws ke against transfer kiya jaye, to wo capital illicit ho jati hai.

Highlights:

1. Illicit flows drain foreign exchange, reduce tax collections, and restrict foreign investments.
2. Illicit capital is used to accumulate foreign assets illegally.
3. Transfer of legitimate funds abroad against regulations makes it illicit.

GFI (2010 Report)

The international watchdog Global Financial Integrity (GFI) released its report titled The Drivers and Dynamics of
Illicit Financial Flows from India 1948-2008 in November 2010. The report estimates that over the 61-year period
from 1948-2008, illicit capital flight from India amounted to a total of USD 213.2 billion, or about 16.6 percent of
India’s GDP. This does not include the compounded interest on these assets, which would push the gross transfers of
illicit assets by Indian residents to a staggering amount of about USD 462 billion as of the end of 2008. This is almost
22.5 lakh crore. Almost 77.6 percent of illicit capital over the period 1948-2008 has been through trade mispricing.
This is how it works: an importer declares a higher import value to the customs department than the value of goods
recorded by the exporting partner country. Similarly, an exporter understates the value of goods exported in relation
to the imports recorded in the importing partner country. In both cases, the balance of funds is kept abroad.

Hinglish Translation:
International watchdog Global Financial Integrity (GFI) ne apni report The Drivers and Dynamics of Illicit Financial
Flows from India 1948-2008 November 2010 mein release ki thi. Report ke mutabik, 1948-2008 ke dauran, India se
illicit capital flight ka total amount USD 213.2 billion tha, jo India ke GDP ka lagbhag 16.6 percent hai. Yeh interest
ko shamil nahi karta, jo ki in assets par compounded hota, jo Indian residents ke illicit assets ko USD 462 billion tak
le jata hai 2008 ke end tak. Yeh lagbhag 22.5 lakh crore hai. 1948-2008 ke dauran, 77.6 percent illicit capital trade
mispricing ke through gaya hai. Yeh kaise kaam karta hai: importer apne customs department ko goods ki value
zyada declare karta hai, jo exporting partner country ke records se zyada hoti hai. Isi tarah, exporter apni exports ki
value ko kam declare karta hai jo importing country ke records mein hoti hai. Dono cases mein, funds ka balance
abroad rakha jata hai.

Highlights:

1. GFI's 2010 report estimates illicit capital flight from India at USD 213.2 billion (16.6% of GDP).
2. Excluding compounded interest, the total illicit transfers reach USD 462 billion (22.5 lakh crore).
3. 77.6% of illicit capital was due to trade mispricing.
4. Trade mispricing involves declaring higher import values or understating export values to keep funds abroad.

Post-Reform Period and Illicit Flows

In the post-reform period (since 1991), trade liberalization has led to more trade openness. However, a larger trade
sector has also provided increasing opportunities for traders to misinvoice trade. Moreover, growth in the post-reform
period has not been inclusive, and the faster pace of growth has worsened income distribution to some extent. As
pointed out in the report, "As income distribution worsens, there are a larger number of high net-worth individuals
who are the main drivers of illicit financial flows. In this way, faster economic growth can actually drive capital
flight." This is evident from the fact that while the growth rate of real illicit flows was 9.08 percent per annum in the
pre-reform period (1948-1990), it was as high as 16.40 percent per annum in the post-reform period (1991-2008).
Over the entire 61-year period (1948-2008), the growth rate of real illicit flows was 6.38 percent per annum.

Hinglish Translation:
Post-reform period (1991 ke baad) mein trade liberalization ne trade openness ko badhaya hai. Lekin, ek bada trade
sector hone ke saath traders ko trade misinvoice karne ke liye zyada opportunities mil gayi hain. Iske alawa, post-
reform growth inclusive nahi rahi, aur growth ki tezi ne income distribution ko kuch had tak kharaab kiya hai. Jaise
report mein kaha gaya hai, "Jab income distribution kharaab hoti hai, to high net-worth individuals ki sankhya badh
jati hai, jo illicit financial flows ke main drivers hote hain. Aise mein, tez economic growth actually capital flight ko
drive kar sakti hai." Yeh fact se sabit hota hai ki pre-reform period (1948-1990) mein real illicit flows ka growth rate
9.08 percent per annum tha, jabki post-reform period (1991-2008) mein yeh 16.40 percent per annum tak pahuncha.
Poore 61 saal ke period (1948-2008) mein real illicit flows ka growth rate 6.38 percent per annum raha.

Highlights:

1. Post-reform period saw increased trade liberalization but also trade misinvoicing.
2. Economic growth in this period worsened income distribution, driving more illicit financial flows.
3. The growth rate of illicit flows was higher in the post-reform period (16.40%) than in the pre-reform period
(9.08%).
4. Over 61 years (1948-2008), illicit flow growth rate was 6.38% per annum.

GFI (2010 Report) Continued

The report also presents estimates of the size of the black economy in India. According to it, the size of the black
economy has grown considerably in the Indian economy over the years, from USD 5.3 billion (9.1% of GDP) in 1961
to USD 17.6 billion (28.6% of GDP) in 1981, USD 128.1 billion (44.6% of GDP) in 1991, USD 198.4 billion (41.1%
of GDP) in 2001, and further to as high as USD 640.7 billion (50% of GDP) in 2008. Thus, according to the report,
the size of the black economy in India in 2008 was 50% of the GDP.

Hinglish Translation:
Report mein India ke black economy ke size ke estimates bhi diye gaye hain. Iske mutabik, black economy ka size
India ki economy mein time ke saath kaafi badha hai, 1961 mein USD 5.3 billion (GDP ka 9.1%) se lekar 1981 mein
USD 17.6 billion (GDP ka 28.6%), 1991 mein USD 128.1 billion (GDP ka 44.6%), 2001 mein USD 198.4 billion
(GDP ka 41.1%), aur 2008 mein USD 640.7 billion (GDP ka 50%) tak. Isliye, report ke mutabik, 2008 mein India ki
black economy ka size GDP ka 50% tha.

Highlights:

1. The size of India's black economy has increased significantly over the years.
2. In 2008, the black economy was 50% of India's GDP.
3. Black economy growth from USD 5.3 billion (1961) to USD 640.7 billion (2008).

Illicit Capital Held Abroad vs. Domestically

Since the size of the black economy in India in 2008 was estimated at USD 640.7 billion, while illicit capital flight
abroad in the same year is estimated at USD 462 billion, it means that as much as 72.2% of India’s illicit assets are
held abroad, and only about 28% are held domestically. This further supports the argument that the desire to amass
wealth without attracting government attention is one of the primary motivations behind the cross-border transfer of
illicit capital.

Hinglish Translation:
2008 mein India ki black economy ka size USD 640.7 billion estimate kiya gaya tha, jabki usi saal illicit capital flight
abroad ka estimate USD 462 billion tha, iska matlab hai ki India ke illicit assets ka 72.2% abroad rakhe gaye hain, aur
sirf 28% domestic mein. Yeh aur bhi strong karta hai yeh argument ki illicit capital ko cross-border transfer karne ka
main reason yeh hai ki log wealth accumulate karna chahte hain bina government ka attention khinchne ke.

Highlights:

1. In 2008, 72.2% of India’s illicit assets were held abroad.

2. Only 28% of illicit assets were held domestically.
3. Desire to avoid government attention is a major motivation for cross-border illicit capital transfer.

Illicit Funds Abroad and Government’s Role

The transfer of illicit funds abroad, supported by soft governments who seem indifferent to the looting of national
wealth, violates a host of criminal codes, tax laws, customs regulations, VAT assessments, and banking regulations.
These funds may have been lockbacks for arms deals, bribes for awarding contracts, or corporates skimming off their
profits and diverting them into foreign bank accounts. There are at least 50 destinations that aggressively solicit such
funds. The most popular destinations are Switzerland, Luxembourg, Liechtenstein, Cayman Islands, and Bahamas. As
stated earlier, economic liberalization in the post-reform period has accelerated the outflow of illicit money.
According to the Director of GFI, Raymond W. Baker, "Opportunities for trade mispricing have grown, and the
expansion of the global shadow financial system accommodates hot money, particularly in island tax havens.
Disguised corporations situated in secrecy jurisdictions enable billions of dollars fleeing out of India to 'round-trip',
coming back in short-term and long-term investments, often with the intention of generating unrecorded transfers
again in a self-reinforcing cycle."

Hinglish Translation:
Illicit funds ka abroad transfer, jo soft governments ki madad se ho raha hai jo national wealth ke loot par indifferent
hain, kai criminal codes, tax laws, customs regulations, VAT assessments, aur banking regulations ko violate karta
hai. Yeh funds arms deals ke liye lockbacks ho sakte hain, contracts dene ke liye bribes, ya corporates apne profits ko
skim karke foreign bank accounts mein divert kar rahe hote hain. Aise funds ko solicit karne ke liye kam se kam 50
destinations hain. Sabse popular destinations Switzerland, Luxembourg, Liechtenstein, Cayman Islands, aur Bahamas
hain. Jaise pehle bataya gaya, post-reform period mein economic liberalization ne illicit money ke outflow ko
accelerate kiya hai. GFI ke Director, Raymond W. Baker ke mutabik, "Trade mispricing ke liye opportunities badh
gayi hain aur global shadow financial system ka expansion hot money ko accommodate karta hai, khaas kar island tax
havens mein. Secrecy jurisdictions mein disguise ki gayi corporations, India se bhaag rahe billions of dollars ko
'round-trip' karne mein madad karti hain, jo short-term aur long-term investments mein wapas aati hain, aksar
unrecorded transfers generate karne ke intention ke saath, ek self-reinforcing cycle mein."

Highlights:

1. Illicit funds transfer abroad violates various laws and regulations.

2. Popular destinations for illicit funds include Switzerland, Luxembourg, and the Cayman Islands.
3. Post-reform economic liberalization has increased illicit money outflow.
4. The global shadow financial system helps in "round-tripping" illicit funds.

GFI (2015 Report)

GFI released its report Illicit Financial Flows from Developing Countries 2004-2013 authored by Dev Kar and
Joseph Spanjers in December 2015. According to this report, India occupies the fourth place in the world after China,
the Russian Federation, and Mexico in terms of black money outflows, with a whopping USD 51 billion siphoned out
of the country per annum between 2004-2013. Thus, over the decade 2004-2013, as much as USD 510 billion (which
would amount to 33.6 lakh crore at a conversion rate of 66 per US dollar) were siphoned off from the country. The
illegal capital flows stem from tax evasion, crime, corruption, and other illicit activity.

Hinglish Translation:
GFI ne apni report Illicit Financial Flows from Developing Countries 2004-2013 Dev Kar aur Joseph Spanjers ke
dwara December 2015 mein release ki thi. Is report ke mutabik, India duniya mein fourth place par hai, China,
Russian Federation, aur Mexico ke baad, black money outflows ke terms mein, jahan per saal USD 51 billion ka
siphoning hota hai 2004-2013 ke dauran. Is tarah, 2004-2013 ke dauran, USD 510 billion (jo 33.6 lakh crore ho jata
hai 66 per US dollar ke conversion rate par) desh se siphoned ho gaye. Yeh illegal capital flows tax evasion, crime,
corruption aur dusri illicit activities se aate hain.

Highlights:

1. India ranked 4th globally in black money outflows (USD 51 billion per year).
2. Over 2004-2013, USD 510 billion was siphoned off from India.
3. Illegal flows stem from tax evasion, crime, corruption, and illicit activities.

GFI (2020 Report)

According to the report titled "Trade-related Illicit Financial Flows" in 135 developing countries: 2008-2017, India
has the third-highest trade-related illicit financial flow among these countries, with a whopping USD 83.5 billion
escaping the government’s tax net owing to trade-based money-laundering tactics. China topped the list with a value
gap of USD 457.7 billion, followed by Mexico with a value gap of USD 85.3 billion, India with a value gap of USD
83.5 billion, Russia with a value gap of USD 74.8 billion, and Poland with a value gap of USD 66.3 billion.

Hinglish Translation:
Report ke mutabik "Trade-related Illicit Financial Flows" jo 135 developing countries mein 2008-2017 ke dauran tha,
India ka trade-related illicit financial flow in countries mein teesra sabse zyada tha, jahan per USD 83.5 billion
government ke tax net se bacha liya gaya tha trade-based money-laundering tactics ke chalte. China ne list mein sabse
upar jagah banayi thi jiska value gap USD 457.7 billion tha, uske baad Mexico tha jiska value gap USD 85.3 billion,
India ka value gap USD 83.5 billion tha, Russia ka value gap USD 74.8 billion, aur Poland ka value gap USD 66.3
billion tha.

Highlights:

1. India ranked third in trade-related illicit financial flows (USD 83.5 billion).
2. China was the top, followed by Mexico and India in illicit flows.
3. Trade-based money-laundering tactics contributed significantly to tax evasion.

Understood! I will now follow the original structure and simply translate each paragraph after it, providing the
highlights afterward, without changing the original text.

Value Gaps Identified for India

About the value gaps identified for India, GFI's senior economist Rick Rowden said "a good way to think about a
value gap is the amount of trade that was not properly taxed" by the governments of the importers and exporters
involved. "This is why GFI believes the practice of trade misinvoicing is such a big problem it leads to huge amounts
of trade that are not being properly taxed, thus countries are losing out on billions of dollars of uncollected trade taxes
each year."

Hinglish Translation:
India ke liye value gaps ke baare mein, GFI ke senior economist Rick Rowden ne kaha, "Value gap ko samajhne ka
ek accha tareeka hai wo trade jo sahi tarike se tax nahi kiya gaya." Unhone yeh bhi kaha, "Isi liye GFI ko lagta hai ki
trade misinvoicing ek bada samasya hai—yeh bohot saare trade ko bina tax kiye chhupata hai, jiski wajah se desh har
saal billion dollars ka tax lose karte hain."

Highlights:
 1. Value gap refers to untaxed trade between countries.
2. Trade misinvoicing leads to billions of dollars in lost taxes annually.

India’s Trade with Global Partners

For India's trade with all its global partners, in terms of the sum of all the value gaps identified in the country's trade
with all its global trading partners, we identified gaps totaling 83.5 billion dollars for the year of 2017, and an average
sum of 77.9 billion dollars over the ten-year period 2008-17, he said, citing the report.

Hinglish Translation:
India ke trade ke liye apne saare global partners ke saath, humne saare value gaps ko milakar 2017 ke liye USD 83.5
billion ka gap identify kiya, aur 2008-2017 ke dauran average USD 77.9 billion ka gap dekha gaya, unhone report ka
zikr karte hue kaha.

Highlights:

1. In 2017, value gaps in trade were estimated at USD 83.5 billion.

2. Over 2008-2017, the average annual value gap was USD 77.9 billion.

Bilateral Trade and Value Gaps

In terms of the value gaps in the bilateral trade between 135 developing countries and the 36 advanced countries in
US dollars, India consistently ranked among the top ten largest value gaps across the ten-year period examined.

Hinglish Translation:
135 developing countries aur 36 advanced countries ke beech bilateral trade mein value gaps ke hisaab se, India
consistently top ten largest value gaps mein rank karta raha hai, puri 10 saal ki period mein.

Highlights:

1. India was among the top ten largest value gaps in bilateral trade.
2. This ranking held consistently over the 10-year period.

India’s Ranking in Value Gaps

"Specifically, India registered the 6th largest value-gap for the last six years of the ten-year period and ranked 6th in
terms of the largest average size of the value-gaps among the 135 developing countries over the ten-year period,"
Rowden said.

Hinglish Translation:
"Specifically, India ne last six saal ke dauran 10 saal ki period mein 6th largest value-gap register kiya aur 135
developing countries mein sabse zyada average size of value-gaps ke terms mein 6th position par rank kiya," Rowden
ne kaha.

Highlights:

1. India ranked 6th in the largest value-gaps in the last six years of the period.
2. India maintained the 6th rank for the average size of value-gaps over ten years.

Causes of Black Money

1. Money Laundering
Money laundering is a term to describe the process whereby cash from illegal activities (like racketeering, trafficking
in counterfeit and contraband goods, smuggling, production and trade of narcotics, forgery, illegal mining, illegal
felling of forests, illicit liquor trade, robbery, kidnapping, human trafficking, sexual exploitation and prostitution,
cheating and financial fraud, embezzlement, drug money, bank frauds, and illegal trade in arms) is converted to an
alternate form in a manner that conceals its origin, ownership, or other potentially embarrassing factors. By
increasing the number of steps involved in laundering illegal funds, criminals try to obscure the origin of funds used
to acquire assets. This renders it extremely difficult to make inferences about the presumed origin of those funds, at
least with enough credibility to satisfy legal standards of proof.

Hinglish Translation:
Money laundering ek term hai jo illegal activities (jaise ki racketeering, counterfeit aur contraband goods ka
trafficking, smuggling, narcotics ka production aur trade, forgery, illegal mining, illegal forest cutting, illicit liquor
trade, robbery, kidnapping, human trafficking, sexual exploitation aur prostitution, cheating aur financial fraud,
embezzlement, drug money, bank frauds, aur illegal arms trade) se paise ko ek aise tareeke se badalta hai jo uske
origin, ownership ya dusre embarrassing factors ko chhupata hai. Criminals illegal funds ko launder karne ke liye
jyada steps lete hain taaki funds ke origin ko chhupaya ja sake. Isse funds ke origin ka inference karna mushkil ho
jata hai.

Highlights:

1. Money laundering hides the origin of illegal funds.

2. Criminals use multiple steps to conceal the source of funds.

The role of foreign and offshore banking in money laundering has taken centrestage in most recent reviews of
laundering activities. As noted by B.V. Kumar, "foreign banking secrecy probably will continue to frustrate the
investigation of substantial number of laundering schemes, and no short-term remedy promises much of a change."

Hinglish Translation:
Money laundering mein foreign aur offshore banking ka role recent reviews mein sabse zyada discuss kiya gaya hai.
B.V. Kumar ne kaha, "Foreign banking secrecy shayad laundering schemes ki investigation ko frustrate karte rahegi,
aur koi short-term remedy ismein zyada badlav ka waada nahi kar sakti."

Highlights:

1. Foreign banking secrecy is a major obstacle in money laundering investigations.

2. No short-term solutions are likely to change this issue significantly.

2. High Tax Rates and Black Incomes

Some economists have pointed out that very high rates of taxation on income above a certain limit are expropriatory
in nature. In this connection, it is often said that in India, the marginal rate of income tax was very high in the pre-
1991 period and this provided a strong incentive to tax evasion. For example, the marginal rate of income tax was as
high as 97.5 per cent in 1971. This provided a strong incentive to tax evasion which, in turn, generated considerable
black money.

Hinglish Translation:
Kuch economists ne yeh point out kiya hai ki agar income per bahut high tax rate laga ho to wo expropriatory nature
ka hota hai. Is connection mein, yeh kaha jata hai ki India mein pre-1991 period mein income tax rate bohot high tha
aur isne tax evasion ko strong incentive diya tha. Jaise 1971 mein income tax rate 97.5% tha. Yeh tax evasion ko
strong incentive deta tha jisse kaafi black money generate hoti thi.

Highlights:

1. High tax rates incentivized tax evasion in India, especially before 1991.
 2. In 1971, the income tax rate was as high as 97.5%.

The logic of this argument is that a higher tax rate resulting in a higher net gain from tax evasion would lead to a
larger size of the black economy. Accordingly, the high rates of income tax were brought down considerably in the
post-1991 period. In 1997-98, the highest income tax rate was lowered to 30 percent. Lowering of income tax rate
was justified on the ground that it would lead to better tax compliance and thus the size of the black incomes would
decline.

Hinglish Translation:
Is argument ka logic yeh hai ki agar tax rate zyada ho, toh tax evasion se zyada net gain hota hai, jo black economy
ko bada deta hai. Isliye, post-1991 period mein income tax rates ko kaafi kam kiya gaya. 1997-98 mein, highest
income tax rate ko 30 percent tak ghata diya gaya. Income tax rate ghataane ka justification yeh tha ki isse tax
compliance improve hoga aur black incomes ka size kam hoga.

Highlights:

1. Higher tax rates can increase the size of the black economy due to greater incentives for tax evasion.
2. Income tax rates were reduced post-1991 to encourage better tax compliance and reduce black money.

Tax Rates and Tax Evasion

However, the relationship between tax rates and tax evasion is not clear-cut. As noted by Arun Kumar, a lowering of
tax rates may draw some of the successful dodgers into the tax net so that, at least theoretically, tax revenues may go
up despite lower tax rates and reduced payments by those already paying taxes. However, this is most unlikely since
once in the tax net, previous accounts may also be opened up or the option of dodging in the future may be closed. In
fact, in his study, K.N. Kabru found that despite reduction in tax rates, tax evasion which was 1,890 crore in 1971-72
rose to as high as 5,400 crore in 1978-79. In fact, reduction in marginal rates of taxation is no guarantee that tax
evasion would not be resorted to, if the costs and risks involved in tax evasion are significantly lower than the
benefits obtained through tax evasion. Kabra is very right in his assertion that, "In a regime which induces reduction
in tax evasion by a method 'soft' on tax evaders (like cut in tax rates) rather than by 'harder' method which enhances
the costs and risks of tax evasion, it would be difficult to expect a better tax compliance through 'soft methods. In
other words, while effective implementation may reduce tax evasion, lowering tax rates hardly guarantees it."

Hinglish Translation:
Lekin tax rates aur tax evasion ke beech ka relationship bilkul clear nahi hai. Arun Kumar ne kaha ki tax rates ko kam
karne se kuch successful dodgers tax net mein aa sakte hain, aur theoretical roop se, tax revenues badh sakte hain,
chahe tax rates kam hon aur jo already taxes de rahe hain unke payments bhi kam ho. Lekin yeh bohot unlikely hai
kyunki jab koi tax net mein aa jata hai, toh purane accounts bhi khol sakte hain ya future mein dodging ka option
band ho sakta hai. K.N. Kabru ne apni study mein yeh dikhaya ki tax rates ko kam karne ke bawajood, tax evasion jo
1971-72 mein 1,890 crore tha, woh 1978-79 mein 5,400 crore tak badh gaya. Kabra ne bilkul sahi kaha hai, "Aise
regime mein jahan tax evasion ko 'soft' tareeke se reduce karne ka prayaas kiya jata hai (jaise tax rates mein kami) aur
'harder' tareeke se nahi jahan tax evasion ke costs aur risks ko badhaya jaye, wahan better tax compliance expect
karna mushkil hai."

Highlights:

1. Reducing tax rates doesn’t always reduce tax evasion.

2. Lowering tax rates may not guarantee better tax compliance if the costs and risks of evasion remain low.
3. Evidence shows that tax evasion increased despite rate reductions in some cases.

3. State Controls and the Black Economy

Controls and regulations have been important causes for black money generation in India. Economists like Bhagwati
and Desai, T.N. Srinivasan, and others have noted that the entire system of industrial licensing and controls in the
pre-1991 period led to considerable corruption and generation of black money. This was due to the vast discretionary
powers of the licensing authorities.
Hinglish Translation:
Controls aur regulations India mein black money generation ke important causes rahe hain. Bhagwati aur Desai, T.N.
Srinivasan aur dusre economists ne yeh note kiya hai ki pre-1991 period mein industrial licensing aur controls ke
poore system ne corruption aur black money generation ko badhava diya. Yeh mainly licensing authorities ke vast
discretionary powers ki wajah se tha.

Highlights:

1. State controls led to corruption and black money generation in India before 1991.
2. Licensing authorities had significant discretionary powers that promoted corruption.

As noted by the Dutt Committee (1967), the licensing authorities many times misused their discretionary powers in
favor of the large houses. "This has been revealed through their different practices, eg, their early intimation of
impending licensing to an applicant, inadequate scrutiny and/or expeditious disposal of licence applications, on file
decisions without going through the Licensing Committee, reversal of earlier decisions, etc." Martinussen has noted
that because of the considerable powers vested in the regulatory agencies, the whole system tended to promote
corruption, rent-seeking, and discrimination based on personalistic relationships. In this context, Martinussen
emphasizes two features of the formal bureaucratic institutions functioning in India:

Hinglish Translation:
Dutt Committee (1967) ne kaha ki licensing authorities ne kai baar apne discretionary powers ka misuse kiya, khaas
kar bade houses ke faayde mein. "Yeh unke kai practices se sabit hota hai, jaise applicant ko impending licensing ke
baare mein jaldi batana, inadequate scrutiny aur/ya expeditious disposal of licence applications, file decisions bina
Licensing Committee ke through jaana, purani decisions ka reversal, etc." Martinussen ne yeh kaha ki regulatory
agencies ke paas zyada powers hone ki wajah se poora system corruption, rent-seeking aur personalistic relationships
ke basis par discrimination ko badhava deta hai. Is context mein, Martinussen ne India mein bureaucratic institutions
ke do features ko emphasize kiya:

Highlights:

1. Licensing authorities misused discretionary powers for the benefit of large corporations.
2. Regulatory agencies promoted corruption and rent-seeking due to their considerable powers.
3. Bureaucratic institutions in India fostered personalistic relationships and discrimination.

Government Officials and Social Networks

First, "although separated from the rest of society by effective socialization processes and specific rules which govern
their behavior, government officials often remain loyal to outside social networks. They are inclined in general to
favor members of their own social network. Second, "the individual government official at higher levels of the
hierarchy is vested with considerable discretionary powers in his discharging of administrative functions. This has
increased the scope for outside influence and the discrimination based on personalistic relationships. In fact, the
whole system of operational controls favored a selected few and led to widespread corruption and generation of black
incomes."

Hinglish Translation:
Pehla, "Jabki government officials ko society ke baaki hisson se alag kiya jata hai unke socialization processes aur
specific rules ke zariye, government officials aksar apne bahar ke social networks ke liye loyal rehte hain. Wo
generally apne social network ke members ko zyada pasand karte hain. Dusra, "higher levels pe jo government
officials hote hain unke paas administrative functions ko perform karte waqt kaafi discretionary powers hote hain.
Isse bahar ke prabhav aur personalistic relationships pe discrimination ka scope badh gaya hai. Actually, puri
operational controls ki system ne kuch chuninda logon ko faayda diya aur widespread corruption aur black income ka
generation kiya."

Highlights:

1. Government officials tend to favor their own social networks.

 2. Higher-ranking officials have significant discretionary powers, leading to increased corruption.
3. Operational controls favored a few, promoting black income generation.

Urban Land and Property Deals

One of the important sources of black money in India is the sale and purchase of land and property in urban areas.
The actual registered value of land and buildings is generally much less than the value agreed upon. In most cases, as
much as 60 percent payment is in terms of black money, while the white component (i.e., the declared cost of the
property registered in the Registrar's Office) is merely 40 percent of the actual value.

Hinglish Translation:
India mein black money ka ek important source urban areas mein land aur property ki sale aur purchase hai. Actual
registered value jo land aur buildings ki hoti hai, wo aksar agreed value se kaafi kam hoti hai. Zyada cases mein, 60
percent payment black money ke roop mein hoti hai, jabki white component (jo declared cost hoti hai jo Registrar's
Office mein register hoti hai) actual value ka sirf 40 percent hota hai.

Highlights:

1. Land and property deals in urban areas are a significant source of black money.
2. The actual cost of property is often underreported, with a large portion paid in black money.

Complex Structure and Poor Enforcement of Tax Laws

The Indian tax structure is complex. Therein a multiplicity of taxes and a variety of tax rates. This makes the task of
tax administration difficult. Moreover, there are many loopholes which are fully exploited by tax dodgers.
Complexity and loopholes have enabled the large businessmen, professionals, and politicians to evade taxes on a
large scale often with the connivance of tax authorities. Widespread corruption in tax departments has led to poor
enforcement of tax laws and helped tax evasion.

Hinglish Translation:
Indian tax structure kaafi complex hai. Yahan kai tarah ke taxes aur tax rates hain. Isse tax administration ka kaam
mushkil ho jata hai. Upar se, kai loopholes hain jo tax dodgers ne puri tarah se exploit kiye hain. Complexity aur
loopholes ne bade businessmen, professionals, aur politicians ko tax evasion mein madad ki hai, aksar tax authorities
ke connivance ke saath. Tax departments mein widespread corruption ne tax laws ki enforcement ko weak kiya aur
tax evasion ko help kiya.

Highlights:

1. The complexity of the Indian tax system makes administration challenging.

2. Tax dodgers exploit loopholes to evade taxes, often with the help of authorities.
3. Corruption in tax departments weakens enforcement and aids in tax evasion.

Generation of Black Money in the Public Sector

Massive investments have been made in the post-Independence period in the setting up of a large number of public
sector enterprises across the length and breadth of the country. The usual procedure is to invite tenders for the various
works to be undertaken and the awarding of contracts is usually done by bureaucrats in consultation with their
political bosses. The nexus between contractors, bureaucrats, and politicians results in the generation of a large
amount of black money as the costs are often artificially escalated and underhand dealings are quite common.

Hinglish Translation:
Post-Independence period mein kaafi massive investments ki gayi hain jisse country ke har kone mein public sector
enterprises ka establishment kiya gaya. Jo usual procedure hai, woh hai tenders ko invite karna jo kaam karne ke liye
liye jaane hote hain aur contracts ka award bureaucrats karte hain apne political bosses ke saath consultation karke.
Contractors, bureaucrats, aur politicians ke beech ka nexus kaafi black money generate karta hai kyunki costs ko
artificially badhaya jata hai aur underhand dealings kaafi common hoti hain.

Highlights:

1. Public sector investments post-independence have led to widespread corruption.

2. Nexus between contractors, bureaucrats, and politicians results in black money generation.
3. Artificially inflated costs and underhand dealings contribute to the problem.

Corruption in Awarding Public Works

There is widespread corruption in awarding public works. The most recent example is Commonwealth Games which
were held in Delhi in the year 2010. As reports of Comptroller and Auditor General (CAG) have shown, there was
massive escalation of costs in most of the works undertaken and large sums of public money were pocketed by some
influential men who were given the responsibility of awarding the projects and overseeing their execution. Total
value scam is estimated to be about 70,000 crore.

Hinglish Translation:
Public works award karne mein kaafi corruption hota hai. Sabse recent example Commonwealth Games hai jo 2010
mein Delhi mein huye the. Comptroller aur Auditor General (CAG) ki reports ne yeh dikhaya ki bohot saare works
mein costs ka massive escalation hua aur kaafi public money kuch influential logon ne pocket ki jo projects ko award
karne aur unke execution ko oversee karne ka zimma diye gaye the. Total scam ka value lagbhag 70,000 crore hai.

Highlights:

1. There is widespread corruption in the awarding of public works.

2. The Commonwealth Games project saw massive cost escalations and misuse of public funds.
3. Influential individuals involved in the project pocketed large sums of public money.

Telecom and Mining Scams

Massive amounts of money have been siphoned off in recent years by political bosses and top bureaucrats through
many scams that have been reported by CAG and media in recent times. The scams that have particularly shaken the
conscience of the common people are the auction of telecom spectrum by the telecom department of the Government
of India and the allocation of coal blocks in an arbitrary manner. For instance, in its Report on auction of 26 spectrum
in 2007-08, CAG concluded that the government exchequer incurred a loss between 67,364 to 1,76,645 crore on
account of such allotment. CAG reported that there were irregularities in the process followed by the Department of
Telecommunications (DoT) for the verification of licenses and there was total lack of diligence, fairness, and
transparency. CAG claimed that 70 percent of the 122 new telecom licenses were issued to companies that did not
meet the basic eligibility conditions set by 1001 and had suppressed facts, disclosed incomplete information, and
submitted fictitious documents for getting licenses and thereby access to spectrum. As far as allocation of coal blocks
is concerned, it was done in an arbitrary manner and the CAG has alleged that this allocation caused a massive 1.86
lakh crore loss to the exchequer (the coal scam is frequently referred to as "Coalgate scam"). Open bidding method
was not adopted and large grafts in coal blocks allocation cannot be ruled out. Illegal iron ore mining in some states,
practices of sand mafia, stone crushers, etc., have also resulted in loss of large amounts of revenue to the government
and to the generation of black money.

Hinglish Translation:
Recent years mein massive amounts of money political bosses aur top bureaucrats ne siphon off kiya hai kai scams ke
through jo CAG aur media ne report kiye hain. Jo scams common logon ki conscience ko sabse zyada hilaye hain wo
hain telecom spectrum ka auction jo Government of India ke telecom department ne kiya aur coal blocks ka
allocation jo arbitrary manner mein kiya gaya. Jaise, 2007-08 mein 26 spectrum ke auction par CAG ne report diya ki
government ko is allotment ke chalte 67,364 crore se leke 1,76,645 crore ka loss hua. CAG ne report kiya ki
Department of Telecommunications (DoT) ne licenses ki verification process mein irregularities ki aur poori
diligence, fairness, aur transparency ka kami thi. CAG ne yeh bhi claim kiya ki 122 naye telecom licenses mein se 70
percent companies ko diye gaye jo basic eligibility conditions ko meet nahi karte the aur jo companies facts ko
suppress kar rahi thi, incomplete information disclose kar rahi thi aur fictitious documents submit kar rahi thi license
aur spectrum access paane ke liye. Coal blocks ka allocation bhi arbitrary manner mein kiya gaya aur CAG ne yeh
allegation lagaya ki is allocation se 1.86 lakh crore ka massive loss exchequer ko hua (coal scam ko aksar "Coalgate
scam" kaha jata hai). Open bidding method adopt nahi kiya gaya aur coal

blocks allocation mein large grafts ki sambhavna ko rule out nahi kiya ja sakta. Kuch states mein illegal iron ore
mining, sand mafia aur stone crushers ke practices bhi large amounts of revenue loss aur black money generation ka
sabab bane hain.

Highlights:

1. Political bosses and bureaucrats have siphoned off massive amounts of money through telecom and mining
scams.
2. The telecom spectrum auction and coal block allocation led to significant losses for the government.
3. Corruption and lack of transparency in these sectors have contributed to black money generation.

Bribes for Out-of-Turn Favours

The experience of common people in this country is that they have to offer bribes to get any work done in the
government departments. The public officials even demand bribes for performing their assigned duties. Sometimes,
bribes are offered by people to get out-of-turn favours or for indulging in illegal activities (for example, getting
electricity without paying any charges, regularization of illegal building structures, and violation of tax laws, etc.).

Hinglish Translation:
Is desh ke common logon ka anubhav yeh hai ki unhe koi bhi kaam karane ke liye government departments mein
bribes dene padte hain. Public officials apne assigned duties ko perform karne ke liye bhi bribes demand karte hain.
Kabhi-kabhi, log out-of-turn favours ya illegal activities karwane ke liye bribes dete hain (jaise, bina koi charges diye
electricity lena, illegal building structures ka regularisation, aur tax laws ka violation, etc.).

Highlights:

1. Common people have to offer bribes to get work done in government departments.
2. Public officials demand bribes even for performing their assigned duties.
3. Bribes are sometimes paid for out-of-turn favours or illegal activities.

Translation and Highlights:

Paragraph 1: It is often said that low salaries of public servants are a cause for the menace of bribes and corruption.
However, as correctly pointed out by Arun Kumar, salary is hardly a consideration in a bribe. In fact, what is given as
a bribe bears no relation to the salary of the functionary, it depends on the benefit that the functionary allows to the
person offering the bribe. Moreover, it should not be forgotten that public functionaries already get salaries which are
a large multiple of the per capita income of the country.

Hinglish Translation:
Yeh aksar kaha jata hai ki public servants ke low salaries hi bribes aur corruption ka karan hain. Lekin Arun Kumar
ne bilkul sahi kaha hai ki salary bribe ka ek zyada important factor nahi hai. Jo bhi bribe diya jata hai, uska relation
functionary ki salary se nahi hota, yeh un benefits par depend karta hai jo functionary bribe dene wale ko de raha hota
hai. Aur yeh bhi nahi bhoolna chahiye ki public functionaries ko aise salaries milti hain jo country ki per capita
income se kaafi zyada hoti hain.

Highlights:

1. Bribes are not primarily influenced by the salary of public servants.

2. The bribe amount depends on the benefit provided by the public servant.
3. Public servants earn salaries significantly higher than the country's per capita income.

Paragraph 2: Donations to political parties. Political parties frequently require large sums of money to fight
elections and a substantial chunk of this money is provided by big business in the form of donations which are not
accounted for under any head (thus they are 'unaccounted' or 'black money"). The entire purpose behind these
donations by big business is to influence the economic policies in its favour. In recent times, a lot of horse trading of
MLAs at the State level and MPs at the Central level has taken place to buy political support and, in this process,
black money has played a crucial role.

Hinglish Translation:
Political parties ko donations: Political parties ko elections ladne ke liye kaafi paise ki zarurat hoti hai aur yeh paise
bade businesses donations ke roop mein dete hain jo kisi bhi head ke under account nahi kiye jaate (isliye yeh
'unaccounted' ya 'black money' hote hain). In donations ka main purpose yeh hota hai ki business apne economic
policies ko apne favor mein influence kare. Aajkal, MLAs (State level pe) aur MPs (Central level pe) ka horse trading
bohot ho raha hai taaki political support khareeda ja sake, aur is process mein black money ne kaafi bada role play
kiya hai.

Highlights:

1. Political parties often receive large donations in unaccounted or black money.

2. Big businesses use donations to influence economic policies.
3. Black money plays a crucial role in political support through horse trading.

Consequences of Black Economy

Paragraph 3: The existence and spread of black economy has serious consequences for the socio-economic fibre of
the country as would be clear from the discussion below.

Hinglish Translation:
Black economy ka hona aur iska failna desh ke socio-economic structure par kaafi serious consequences daal raha
hai, jo aap neeche diye gaye discussion se samajh sakte hain.

Highlights:

1. Black economy has serious socio-economic consequences for the country.

Paragraph 4:

1. Loss of revenue. The direct effect of black money is the loss of revenue to the State Exchequer. The various
estimates of tax evasion given earlier indicate the direct loss to the State Exchequer as this is the amount of
money that could have accrued to it.

Hinglish Translation:
 1. Revenue ka loss. Black money ka direct effect State Exchequer ko revenue ke loss ke roop mein hota hai.
Pehle diye gaye tax evasion ke estimates se yeh pata chalta hai ki State Exchequer ko kitna direct loss hua hai,
yeh woh paisa hota jo uske paas aa sakta tha.

Highlights:

1. Black money results in a direct loss of revenue for the State Exchequer.
2. Tax evasion contributes to the loss of funds that could have benefited the government.

Paragraph 5: 2. Loss of control over policy. As the size of the black economy expands, the control of the State on
economic policies declines. This, Arun Kumar calls, 'policy failure'. This policy failure has two aspects: inadequate
allocations and ineffective expenditures. In this respect, Arun Kumar specifically focuses on social infrastructure, i.e.,
education, health, drinking water, sanitation, housing, etc. Because of resources siphoned off by the black economy,
allocations to social infrastructure have proved to be highly inadequate vis-à-vis the requirements in India. In
addition, whatever resources are allocated are utilised in a sub-optimal manner due to the increasing spread of the
black economy. The primary concern has shifted from providing good social infrastructure to making as much money
as possible by indulging in all sorts of illegal activities and utilising the government resources for personal benefits.
The contractors, engineers, bureaucrats and politicians siphon off the resources meant for the provision of social
infrastructure with the result that the quality of the social infrastructure actually provided to the masses is extremely
poor.

Hinglish Translation:
2. Policy pe control ka loss. Jaise-jaise black economy ka size badhta hai, waise-waise State ka control economic
policies par kam hota jata hai. Arun Kumar isko 'policy failure' kehte hain. Policy failure ke do aspects hote hain:
inadequate allocations aur ineffective expenditures. Is point pe Arun Kumar specifically social infrastructure par
focus karte hain, jaise education, health, drinking water, sanitation, housing, etc. Black economy ke chalte resources
siphon off hone ki wajah se social infrastructure ko diye gaye allocations kaafi inadequate hain, jo India ki
requirements ke comparison mein bahut kam hain. Aur jo resources allocate kiye jaate hain, woh bhi sub-optimal
tarike se utilise hote hain kyunki black economy ka spread badhta ja raha hai. Government ka main concern achha
social infrastructure provide karne se badhkar illegal activities mein paise kamane aur government resources ka
personal benefits ke liye use karne tak shift ho gaya hai. Contractors, engineers, bureaucrats aur politicians social
infrastructure ke liye allocated resources ko siphon karte hain, jiska result yeh hota hai ki jo social infrastructure
masses ko mil raha hai, woh bohot poor quality ka hota hai.

Highlights:

1. Black economy leads to a loss of control over economic policies.

2. Social infrastructure allocations are highly inadequate due to siphoning off of resources by black economy.
3. Black money diverts resources from public welfare to personal gain, leading to poor social infrastructure.

Paragraph 6: Not only on social infrastructure, the loss of State's control on economic policy can reduce the
effectiveness of State's intervention in other sectors as well. For example, take the case of monetary policy. The
Reserve Bank may tighten monetary policies in order to curb liquidity to control speculation in commodities in short
supply. However, liquidity from the black economy can quickly thwart this with the result that there may be little
impact on speculation and prices.

Hinglish Translation:
Social infrastructure par hi nahi, State ka economic policy pe control ka loss doosre sectors mein bhi State ke
intervention ki effectiveness ko kam kar sakta hai. Misal ke liye, monetary policy ka case lo. Reserve Bank monetary
policies ko tighten kar sakta hai taaki liquidity ko curb kar sake aur short supply mein commodities pe speculation ko
control kiya ja sake. Lekin, black economy se liquidity quickly isko thwart kar sakti hai, jiska result yeh hota hai ki
speculation aur prices par kam impact padta hai.

Highlights:
 1. Loss of control over economic policies reduces the effectiveness of State intervention in various sectors.
2. Black economy liquidity can undermine the effects of monetary policies.

Paragraph 7: 3. Unproductive investments. A large amount of black money finds its way into unproductive
channels like gold, jewellery, precious stones, etc. Thus, resources that could have been utilized for productive
purposes are wasted. As a result, economic growth suffers.

Hinglish Translation:
3. Unproductive investments. Black money ka ek bada hissa unproductive channels mein jaata hai jaise gold,
jewellery, precious stones, etc. Isse woh resources jo productive purposes ke liye use ho sakte the, waste ho jaate
hain. Jiska result yeh hota hai ki economic growth suffer karta hai.

Highlights:

1. Black money is often invested in unproductive assets like gold and jewellery.
2. Wasting resources on unproductive investments hampers economic growth.

Paragraph 8: 4. Transfer of funds. The black money is mostly stashed in various accounts held in different
countries. As stated earlier, according to the GPI Report (2010), almost $462 billion, equivalent to 22.5 lakh crore,
was spirited out of India illegally to foreign bank accounts over the same decades period spanning 1948-2008. This
money is enough to satisfy India's infrastructure needs as would be clear from the fact that the Planning Commission
had set a target of ₹5,500 billion for investment in infrastructure during the Eleventh Plan period (i.e., the period
2007-12). According to GFI Report (December 2015), black money stashed abroad was as much as $510 billion (3.76
lakh crores) during the period of just one decade (2004-13).

Hinglish Translation:
4. Funds ka transfer. Black money zyada tar alag-alag deshon mein accounts mein rakha jata hai. Jaise pehle kaha
gaya tha, GPI Report (2010) ke mutabik, lagbhag $462 billion, jo ki 22.5 lakh crore ke barabar hai, India se illegally
foreign bank accounts mein transfer kiya gaya hai 1948-2008 ke period mein. Yeh paisa India ki infrastructure needs
ko pura karne ke liye kaafi hota hai, jaise ki Planning Commission ne Eleventh Plan period (2007-12) mein ₹5,500
billion ka target set kiya tha infrastructure mein investment ke liye. GFI Report (December 2015) ke mutabik, black
money jo abroad stash kiya gaya tha, woh $510 billion (3.76 lakh crore) tha ek hi decade (2004-13) ke period mein.

Highlights:

1. Black money is transferred to foreign accounts, depleting domestic resources.

2. The amount of black money stashed abroad is significant enough to cover infrastructure investment needs.
3. Large sums of black money have been siphoned off over decades.

Paragraph 9: 5. Corrupts the political system. Black money breeds corruption. As various Reports released over
the years have shown, black money is used unashamedly in funding political parties and in horse trading to buy the
support of MPs in Parliament at the Centre and MLAs in the State Legislatures.

Hinglish Translation:
5. Political system ko corrupt karta hai. Black money corruption ko badhawa deta hai. Jaise ki kai reports mein
dikhaya gaya hai, black money ka use political parties ko fund karne mein aur MPs (Centre mein) aur MLAs (State
Legislatures mein) ka support khareedne ke liye horse trading mein hota hai.

Highlights:

1. Black money is used to fund political parties and buy political support through horse trading.
 2. Corruption in politics is fueled by black money.

Paragraph 10: 6. Pushes up urban land values. A substantial amount of black money is spent in the purchase of
urban real estate. This has pushed up the land and housing prices in many cities (particularly the metropolitan cities)
to exorbitantly high levels, with the result that the middle class and the fixed-income group finds itself priced out in
the purchase of land or houses.

Hinglish Translation:
6. Urban land values ko push karta hai. Black money ka ek substantial hissa urban real estate ke purchase par
kharch hota hai. Isse kai cities (especially metropolitan cities) mein land aur housing prices bohot zyada badh gaye
hain, jiska result yeh hota hai ki middle class aur fixed-income group ko land ya houses khareedne mein mushkil ho
jaati hai.

Highlights:

1. Black money contributes to the inflation of real estate prices in urban areas.
2. The middle class and lower-income groups are priced out of the housing market due to black money.

Paragraph 11: 7. Criminalization. Deteriorating law and order is a consequence of the growing black economy.
This is due to the reason that there is a close nexus between illegality and criminalization. As illegal transactions
spread in the economy and as the money power of the people engaged in such activities increases, the respect for law
declines. Laws are systematically flouted and might becomes 'right'.

Hinglish Translation:
7. Criminalization. Black economy ke badhne se law and order ki situation khatam ho rahi hai. Iska reason yeh hai
ki illegal activities aur criminalization ka ek close nexus ban raha hai. Jaise-jaise illegal transactions economy mein
failte hain aur ismein involved logon ka paisa badhta hai, waise-waise law ka respect kam hota jaata hai. Laws ko
systematically flout kiya jaata hai aur jo galat hai, woh 'right' ban jata hai.

Highlights:

1. Black economy leads to a breakdown in law and order.

2. There is a growing connection between illegal activities and criminalization in society.
3. Respect for the law diminishes as black money powers illegal actions.

Paragraph 12: 8. Spread of rottenness in public life. As correctly pointed out by Arun Kumar, today there is no
area of public life where work is done as a matter of routine, it is inevitably done as a favour. Whether it is to obtain a
driving licence, or to obtain an assessment order from the income tax office or to seek an electricity connection or to
get work done in any government office, one needs either contacts or money or both to avoid facing harassment.
Those in power derive strength from this system. It also suits the rich since they have the money to jump any queue
or to buy influence. They can get work done, legal or illegal.

Hinglish Translation:
8. Public life mein badbu ka failna. Arun Kumar ne bilkul sahi kaha hai ki aaj ke time mein public life ka koi bhi
area aise kaam nahi karta jahan kaam routine ka hissa ho, woh hamesha kisi favour ke roop mein hota hai. Chahe woh
driving licence lene ka kaam ho, income tax office se assessment order lena ho, electricity connection chahiye ho ya
kisi government office mein kaam karwana ho, aapko ya to contacts chahiye hote hain ya paisa ya dono, taaki aapko
harassment ka samna na karna pade. Jo log power mein hain, unhe is system se taqat milti hai. Yeh system rich logon
ko bhi suit karta hai kyunki unke paas paisa hota hai jisse woh queue ko jump kar sakte hain ya influence khareed
sakte hain. Woh legal ya illegal, koi bhi kaam karwa sakte hain.

Highlights:
 1. Public life is corrupt, with work done as favours instead of routine tasks.
2. Power and money allow individuals to bypass rules, leading to systemic corruption.
3. The rich exploit this system to get work done, whether legal or illegal.

Paragraph 1: We conclude this section with the following scathing comment of Arun Kumar, "The existence of the
black economy signifies illegality and if the phenomenon is as widespread as the numbers imply there is much to
worry about. The black economy has had a strong demonstration effect in society. Those with large black incomes
live ostentatiously and not only get away with it but also because of their position in society enjoy a certain prestige
and so they become examples for others (especially, the young and those aspiring to rise) to emulate, thereby
glorifying the use of illegal means to success."

Hinglish Translation:
Hum is section ko Arun Kumar ke ek kadve comment ke saath samapt karte hain, "Black economy ka hona illegal hai
aur agar yeh phenomenon jitna wide hai utna hi chinta ka baat hai. Black economy ka society mein strong
demonstration effect hai. Jinke paas bade black incomes hote hain, woh show-off karte hain aur sirf isliye nahi bach
jaate, balki unki social position ki wajah se unhein prestige bhi milti hai, aur is tarah se woh doosron ke liye example
ban jaate hain (khaas kar, jo young hain aur jo upar uthna chahte hain), aur isse illegal tareeqon se safalta ko glorify
kiya jaata hai."

Highlights:

1. Black economy indicates widespread illegality and poses a serious concern.

2. People involved in black economy gain prestige, setting a negative example for others to follow, especially
the youth.
3. Illegal means to success are glorified in society.

Paragraph 2: GOVERNMENT POLICY TO CURB BLACK MONEY

The Government of India has introduced some steps in the post-Independence period to tackle the menace of black
money but the actual success achieved has been too little. In fact, as shown earlier, the size of the parallel economy
has continued to grow. Below we consider some of the important measures taken by the government to check the
growth of black money.

Hinglish Translation:
BLACK MONEY KO ROKNE KI SARKARI NITI
Bharat sarkar ne post-independence period mein black money ke khilaf kuch kadam uthaye hain, lekin asli safalta
bohot kam mili hai. Pichle discussions ke hisaab se, parallel economy ka size badhta gaya hai. Neeche kuch important
measures diye gaye hain jo government ne black money ke growth ko rokne ke liye uthaye hain.

Highlights:

1. Government has taken steps to tackle black money post-Independence.

2. Despite efforts, the size of the parallel economy continues to grow.

Paragraph 3:

1. Measures to check tax evasion. One of the main causes of black money generation is tax evasion. Therefore,
the government has undertaken various measures to check tax evasion by plugging loopholes in tax laws
based on the recommendations of various Commissions and Committees appointed over a period of time like
Nicholas Kaldor's proposals for Indian Tax Reforms (1956), Recommendations of the Administrative
Reforms Committee (1969), Direct Tax Enquiry Committee (1971), etc. However, not much could be
 achieved as there was a total lack of commitment to implement the tax laws with full honesty and
determination.

Hinglish Translation:

1. Tax evasion ko rokne ke measures. Black money generate karne ka ek main reason tax evasion hai. Isliye,
government ne kai measures liye hain tax evasion ko rokne ke liye, jaise ki tax laws mein loopholes ko
bandhna, jo various Commissions aur Committees ke recommendations par based hain, jaise Nicholas Kaldor
ke proposals for Indian Tax Reforms (1956), Administrative Reforms Committee (1969), Direct Tax Enquiry
Committee (1971) etc. Lekin, jyada kuch nahi ho saka kyunki tax laws ko implement karne mein poori
imaandari aur determination ki kami thi.

Highlights:

1. Tax evasion is a key reason for black money.

2. Various measures have been proposed, but lack of commitment has hindered progress.

Paragraph 4: The frequent argument that has been put forward in this country is that high tax rates lead to black
income generation and therefore they should be brought down. Based on this logic, income tax rates have been
brought down considerably in the post-economic reform period (i.e., the period since 1991). As a result, income tax
collection has increased considerably. Does this imply that as tax rates have been cut, there is better compliance so
that black income generation has declined as tax rates have become reasonable? At first glance, this seems to be
correct. However, as argued by Arun Kumar, this is not the correct interpretation. This result is also possible if
income distribution gets highly skewed in favour of the taxpayers. This is exactly what has happened in post-1991
period as under the New Economic Policy, business incomes and incomes of the managerial class have risen sharply.
Moreover, due to the award of the Fifth and Sixth Pay Commissions, there has been a spurt in income tax collection.

Hinglish Translation:
Bharat mein baar-baar yeh argument diya gaya hai ki high tax rates black income generate karte hain, isliye unhe kam
karna chahiye. Is logic ke basis par, post-economic reform period (i.e., 1991 ke baad) mein income tax rates ko kaafi
kam kiya gaya hai. Iska result yeh hua ki income tax collection kaafi badh gaya. Kya iska matlab yeh hai ki jab tax
rates kam kiye gaye hain, toh compliance behtar hua hai aur black income generation kam ho gayi hai kyunki tax
rates ab reasonable ho gaye hain? Pehli nazar mein, yeh sahi lagta hai. Lekin, Arun Kumar ke mutabik, yeh sahi
interpretation nahi hai. Yeh result tab bhi ho sakta hai agar income distribution taxpayers ke favour mein bohot
skewed ho. Yeh wahi hua hai post-1991 period mein, jab New Economic Policy ke tehat, business incomes aur
managerial class ki incomes sharply badh gayi hain. Aur, Fifth aur Sixth Pay Commissions ke award ki wajah se,
income tax collection mein spurt aayi hai.

Highlights:

1. The argument that lower tax rates reduce black income is prevalent.
2. Despite reduced tax rates, compliance has improved due to skewed income distribution in favour of taxpayers,
especially business and managerial classes.

Paragraph 5: 2. Demonetisation. Demonetisation of large denomination currency notes has been suggested from
time to time as a restrictive measure. The Government of India attempted demonetisation in 1978 when it
demonetised high denomination notes (1,000 and 5,000). This measure had no effect as only 165 crore worth of these
notes were in circulation. A much bolder measure with profound implications was announced on November 8, 2016
when the two largest denomination notes, 500 and 1,000 were 'demonetised' with immediate effect. At one fell stroke,
as much as 86 per cent of the cash in circulation was thereby rendered invalid. For details of this move, see Appendix
1 to this chapter.

Hinglish Translation:
2. Demonetisation. Bade denomination currency notes ko demonetise karna kabhi-kabhi ek restrictive measure ke
roop mein suggest kiya gaya hai. Government of India ne 1978 mein demonetisation ki koshish ki thi jab usne high
denomination notes (1,000 aur 5,000) ko demonetise kiya tha. Yeh measure koi effect nahi hua kyunki sirf 165 crore
ke notes hi circulation mein the. Ek zyada bold measure jo bohot gehra prabhav daalne wala tha, wo 8 November,
2016 ko announce kiya gaya jab 500 aur 1,000 ke do sabse bade denomination notes ko 'demonetise' kiya gaya tha.
Ek hi stroke mein, jo cash circulation mein tha, uska 86 percent invalid ho gaya. Is move ke details ke liye Appendix
1 dekhen.

Highlights:

1. Demonetisation was attempted multiple times, with notable efforts in 1978 and 2016.
2. In 2016, 86% of circulating cash became invalid with the demonetisation of ₹500 and ₹1,000 notes.

Paragraph 6: 3. Special Bearer Bond Scheme. The Government of India announced a Special Bearer Bond Scheme
in 1981 for canalising unaccounted (black) money into productive uses. The Special Bearer Bonds, 1981 of the face
value of ₹10,000 each were issued at par with a maturity period of 10 years. On maturity, the holders of these bonds
were to receive ₹12,000. Complete immunity was granted to the original subscriber or possessor of the bonds from
being questioned about the possession of the bonds or about the sources of money used to acquire these bonds. The
total amount collected under the scheme was ₹964.3 crore.

Hinglish Translation:
3. Special Bearer Bond Scheme. Government of India ne 1981 mein Special Bearer Bond Scheme announce ki thi
jo unaccounted (black) money ko productive uses mein canalise karne ke liye thi. Special Bearer Bonds, 1981 ke face
value ₹10,000 each the, jo par par issue kiye gaye the aur 10 saal ke maturity period ke saath. Maturity par, in bonds
ke holders ko ₹12,000 milne the. Original subscriber ya bond ke possessor ko bonds ki possession ya bonds ko
acquire karne ke liye use kiye gaye paise ke sources ke baare mein poochne se puri immunity di gayi thi. Is scheme
ke tehat kul ₹964.3 crore collect kiye gaye.

Highlights:

1. The Special Bearer Bond Scheme was introduced to canalize black money into productive uses.
2. Bonds were issued at ₹10,000 with a 10-year maturity, offering immunity to holders.
3. ₹964.3 crore was collected under the scheme.

Paragraph 7: 4. Voluntary Disclosure Schemes. The Government of India has floated various voluntary disclosure
schemes from time to time. The Direct Taxes Enquiry Committee (1971) rightly opposed the introduction of such
schemes as they "placed a premium on fraud and are unfair to honest tax payers." These schemes not only serve as
conduits to convert black money into white on payment of a small amount of money as tax, but they also help many
declarants to turn habitual tax evaders.

Hinglish Translation:
4. Voluntary Disclosure Schemes. Government of India ne time-to-time voluntary disclosure schemes launch ki
hain. Direct Taxes Enquiry Committee (1971) ne in schemes ke introduction ka virodh kiya tha kyunki unhone kaha
tha ki yeh "fraud par premium daalti hain aur honest tax payers ke saath anyaay karti hain." Yeh schemes sirf black
money ko white mein convert karne ka rasta nahi deti, balki yeh kai declarants ko habitual tax evaders banne mein
madad karti hain.

Highlights:

1. Voluntary Disclosure Schemes have been introduced over time.

2. These schemes allow conversion of black money to white money by paying a small tax.
3. Critics argue these schemes reward fraud and are unfair to honest taxpayers.
Paragraph 8: One of the important and highly publicised schemes was the Voluntary Disclosure of Income Scheme
(VDIS) announced in the 1997-98 Budget. In this scheme, irrespective of the year or nature of the source of funds,
the amount disclosed either as cash, securities or assets, whether held in India or abroad, was charged to tax at 30%
for individuals and 35% for corporations. Total immunity was granted for any action under the scheme under the
Income Tax, Wealth Tax Acts, and FERA. A total of ₹10,000 crore was collected under VDIS.

Hinglish Translation:
Ek important aur highly publicised scheme thi Voluntary Disclosure of Income Scheme (VDIS) jo 1997-98 Budget
mein announce ki gayi thi. Is scheme mein, chahe funds ka source kisi bhi saal ka ho ya kis nature ka ho, jo amount
disclose kiya gaya chahe wo cash, securities ya assets ho, chahe India mein ho ya abroad, uspar individuals ke liye
30% aur corporations ke liye 35% tax lagaya gaya tha. Is scheme ke tehat Income Tax, Wealth Tax Acts, aur FERA
ke tahat kisi bhi action se puri immunity di gayi thi. VDIS ke tehat ₹10,000 crore collect kiye gaye.

Highlights:

1. VDIS allowed disclosure of income at 30% tax for individuals and 35% for corporations.
2. Immunity was granted for any actions under Income Tax, Wealth Tax Acts, and FERA.
3. ₹10,000 crore was collected under the scheme.

Paragraph 9: A very tough sounding law, the Black Money (Undisclosed Foreign Income and Assets) and
Imposition of Tax Act, 2015 was enacted in 2015. A one-time compliance window under the aforesaid new law was
provided from July to September 2015 as an opportunity to declarants to declare their undisclosed foreign assets
subject to certain prescribed conditions. According to reports, this measure resulted in a little over 600 declarations
and over ₹2,000 crore in tax being collected. Since the amount held abroad is in lakhs of crores of rupees, not even
1% of the illicit funds taken out of the country since 1948 has been disclosed under the scheme. According to Arun
Kumar, the reason for this is simple "People who have funds abroad know that the government has not been able to
track them or trace their wealth over the last seventy years and the new bill does not have any provision by which
they can be tracked. So, they have little to be worried about."

Hinglish Translation:
Ek bohot tough sounding law, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,
2015 ko 2015 mein enact kiya gaya tha. Is naye law ke tehat ek time-bound compliance window diya gaya tha jo July
se September 2015 tak tha, jisme declarants ko apne undisclosed foreign assets declare karne ka mauka diya gaya tha,
kuch prescribed conditions ke saath. Reports ke mutabik, is measure ke tehat thoda 600 declarations hue aur ₹2,000
crore se zyada tax collect kiya gaya. Jabki jo amount abroad rakhi gayi hai, woh lakhs of crores of rupees mein hai,
ab tak jo illicit funds 1948 se lekar bahar nikale gaye hain, unka 1% se bhi kam disclose kiya gaya hai is scheme ke
tehat. Arun Kumar ke mutabik, iska reason simple hai "Jo log funds abroad rakhte hain, unhe pata hai ki government
unhe track nahi kar paayi hai aur na hi unki wealth ko trace kar paayi hai pichle sattar saalon mein, aur naye bill mein
koi aisi provision nahi hai jisse unhe track kiya ja sake. Isliye, unhe jyada dar nahi hai."

Highlights:

1. The Black Money (Undisclosed Foreign Income and Assets) Act, 2015 was enacted with a compliance
window from July to September 2015.
2. Over ₹2,000 crore in tax was collected, but less than 1% of illicit funds abroad were disclosed.
3. People with foreign funds are not worried as the government lacks provisions to track them.

Paragraph 1:

An Income Declaration Scheme (IDS) was announced in the 2016-2017 Budget. The scheme provided an opportunity
to people having undisclosed income to come clean through a one-time compliance window of four months (from
June 1, 2016 to September 30, 2016). Individual taxpayers who had not disclosed income in the past were provided
an opportunity to disclose such income and be compliant by paying tax at the rate of 30% as increased by a surcharge
of 7.5% and a penalty of 7.5%, which would sum up to a total of 45% on undisclosed income. Under this scheme,
64,275 people came forward to declare ₹65,250 crore of black money. No doubt, this is the largest amount of
declaration of black money in the history of Indian taxation. However, as can be seen from the data given here, the
average amount of black income per declaration was only about ₹1 crore. If we take Arun Kumar's estimate of black
income at ₹92 lakh crore (i.e., 62% of GDP) in 2016 into account, it would appear that only 0.7% of the black income
generation in that year was declared. In this context, Arun Kumar points out that in the 1997 scheme, what was
declared was roughly 5% of the black income generated in that year. The number of declarations in 1997 was over
four lakh, while in 2016, surprisingly, it is a sixth of this number.

Hinglish Translation:
2016-2017 Budget mein Income Declaration Scheme (IDS) announce ki gayi thi. Is scheme ke tehat logon ko apni
undisclosed income ko clean declare karne ka mauka diya gaya tha, ek baar ke liye compliance window ke through,
jo 4 mahine tak tha (June 1, 2016 se September 30, 2016 tak). Jo individual taxpayers ne pehle apni income disclose
nahi ki thi, unhe apni income disclose karke 30% tax, 7.5% surcharge aur 7.5% penalty dene ka mauka diya gaya tha,
jo total 45% ho jata tha undisclosed income par. Is scheme ke tehat 64,275 logon ne ₹65,250 crore ka black money
declare kiya. Yeh sach mein India ke taxation history mein sabse zyada black money declaration ka record hai. Lekin
data se yeh pata chalta hai ki per declaration black income ka average amount sirf ₹1 crore tha. Agar Arun Kumar ka
estimate ₹92 lakh crore black income ka 2016 mein dekha jaye, toh lagta hai ki sirf 0.7% black income declare ki
gayi thi uss saal. Arun Kumar kehte hain ki 1997 scheme mein jo declare kiya gaya tha, wo roughly 5% tha uss saal
ki black income ka. 1997 mein 4 lakh se zyada declarations hui thi, jabki 2016 mein yeh number surprisingly ek
chhathai tha.

Highlights:

1. IDS provided a four-month window for people to disclose undisclosed income.

2. The scheme collected ₹65,250 crore, but it represented only 0.7% of the estimated black income for 2016.
3. The number of declarations in 2016 was surprisingly low compared to 1997.

Paragraph 2:

The second voluntary disclosure scheme announced in the financial year 2016-17 (after IDS covering the four-month
period June 1, 2016 to September 30, 2016) and the first after the November 2016 demonetisation was the Pradhan
Mantri Garib Kalyan Yojana (PMGKY) 2016 covering the period December 17, 2016 to March 31, 2017. Persons
declaring cash deposits under the scheme were required to pay a tax of 50% (which breaks down into 30% tax, 33%
surcharge, and 10% penalty). In addition to this, 25% of the amount declared will go into the non-interest-bearing
Pradhan Mantri Garib Kalyan Deposit Scheme, 2016, for four years. The government could manage to garner only
₹2,300 crore through PMGKY.

Hinglish Translation:
Dusri voluntary disclosure scheme jo 2016-17 ke financial year mein announce ki gayi thi (IDS ke baad jo June 1,
2016 se September 30, 2016 tak thi) aur pehli scheme November 2016 ke demonetisation ke baad thi, wo thi Pradhan
Mantri Garib Kalyan Yojana (PMGKY) 2016, jo December 17, 2016 se March 31, 2017 tak thi. Is scheme ke tehat
cash deposits declare karne wale logon ko 50% tax dena padta tha (jo 30% tax, 33% surcharge aur 10% penalty mein
divide hota hai). Iske alawa, declare ki gayi rakam ka 25% non-interest-bearing Pradhan Mantri Garib Kalyan
Deposit Scheme, 2016 mein daalna padta tha, jo 4 saal tak locked rahegi. Government ko PMGKY ke through sirf
₹2,300 crore hi collect ho paye.

Highlights:

1. PMGKY was launched after demonetisation for cash deposit declarations.

2. A tax of 50% was levied, and 25% of declared amounts were locked in a deposit scheme for 4 years.
3. The scheme only raised ₹2,300 crore for the government.

Paragraph 3:
 5. Prevention of Money Laundering Act, 2002. The Prevention of Money Laundering (PML) 2002 was
enacted to prevent money laundering and provide for the confiscation of property derived therefrom, or
involved in, money laundering and for matters connected therewith or incidental thereto. The Act came into
force from July 1, 2005. The Act was amended by the Prevention of Money Laundering (Amendment) Act
2009 with effect from June 1, 2009. The Act was further amended by the Prevention of Money Laundering
(Amendment) Act 2012 with effect from February 15, 2013. According to Section 3 of PMLA, 2002,
whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually
involved in any process or activity connected with the proceeds of crime including its concealment,
possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of the offence
of money laundering. As per Sections 48 and 49 of the PMLA, the officers of the Directorate of Enforcement
have been given powers to investigate cases of money laundering. The officers have also been authorised to
initiate proceedings for attachment of property and to launch prosecution in the designated Special Court for
the offence of money laundering.

Hinglish Translation:
5. Prevention of Money Laundering Act, 2002. Prevention of Money Laundering (PML) Act, 2002 ko money
laundering ko rokne aur usse judi property ko confiscate karne ke liye enact kiya gaya tha. Act 1 July 2005 se lagu
hua. Is Act ko Prevention of Money Laundering (Amendment) Act 2009 ke through amend kiya gaya, jo 1 June 2009
se lagu hua. Phir is Act ko Prevention of Money Laundering (Amendment) Act 2012 ke through amend kiya gaya, jo
15 February 2013 se lagu hua. PMLA 2002 ke Section 3 ke mutabik, jo bhi vyakti directly ya indirectly crime ke
proceeds se judi activity mein shamil hota hai, usko money laundering ka guilty maana jayega. Sections 48 aur 49 ke
tahat, Directorate of Enforcement ke officers ko money laundering cases ko investigate karne aur property attachment
proceedings initiate karne aur prosecution launch karne ki authority di gayi hai.

Highlights:

1. The Prevention of Money Laundering Act (PMLA) was enacted to prevent money laundering and confiscate
related property.
2. The Act was amended multiple times to strengthen its provisions.
3. Officers have the authority to investigate money laundering cases and initiate proceedings for property
attachment and prosecution.

Paragraph 4:

6. Right to Information Act. The entire political and economic system in this country has for most of the period
since Independence worked in a highly non-transparent manner with the result that no one knows what is
going on in the government or the private sector. Companies have been manipulating balance sheets to
hoodwink the investing public and financial institutions. Many in the government have been committing all
types of wrong, secure in the knowledge that their wrongdoings will not be exposed. Accountability of the
government officials has been mostly missing. This explains the reason why in spite of growing corruption,
no politician or bureaucrat in this country has been successfully prosecuted.

Hinglish Translation:
6. Right to Information Act. Is desh ki poori political aur economic system ne independence ke baad ke kaafi samay
tak ek non-transparent tareeke se kaam kiya hai, jiska natija yeh hua ki kisi ko nahi pata ki government ya private
sector mein kya ho raha hai. Companies apne balance sheets ko manipulate kar rahi thi taaki investing public aur
financial institutions ko dhokha diya ja sake. Government ke kai log galtiyan kar rahe the, is vishwas ke saath ki unki
galtiyan kabhi expose nahi hongi. Government officials ki accountability kaafi samay tak nahi thi. Iska reason yeh hai
ki badhti hui corruption ke bawajood, is desh mein koi bhi politician ya bureaucrat successfully prosecute nahi kiya
gaya.

Highlights:

1. The political and economic system in India was historically non-transparent, with little accountability.
2. Many companies and government officials manipulated systems, knowing their wrongdoings would not be
exposed.
 3. Despite growing corruption, no successful prosecutions were made against politicians or bureaucrats.

Paragraph 5:

In the light of this scenario, the enactment of the Right to Information Act in 2005 is a welcome measure. The RTI
Act seeks to empower citizens, promote transparency and accountability in the working of the government, contain
corruption, and make democracy work for people in a real sense. The Act gives all citizens the right to seek
information held by any authority or body or institution of self-government established or constituted by or under the
constitution, or by any other law made by the Parliament or a State Legislature; or by notification issued or order
made by the Central government or a State government. Bodies owned, controlled, or substantially financed by the
Central government or a State government and non-government organisations substantially financed by the Central
government or a State government also fall within the definition of public authority. The procedure for seeking
information under the Act is very simple. Whoever wants any information from any office of the government has to
simply make a request to the Public Information Officer of the office. The request has to merely indicate the
information sought and the address at which the information is required. If the applicant does not get the information
within 30 days or if the applicant is not satisfied with the reply given to him, he can make an appeal within 30 days to
the appellate authority, which has to decide the appeal within 30 days of its receipt.

Hinglish Translation:
Is scenario ko dekhte hue, Right to Information Act ko 2005 mein enact karna ek acchi kadam tha. RTI Act ka
maksad hai citizens ko empower karna, government ke kaam mein transparency aur accountability ko promote karna,
corruption ko control karna, aur democracy ko logon ke liye sach mein kaam karne wala banana. Act sabhi citizens
ko yeh hak deta hai ki wo kisi bhi authority, body, ya self-government institution se information le sakte hain jo
constitution ke tehat banayi gayi ho ya Parliament ya State Legislature ke dwara banaye gaye kisi bhi law ke tehat ho,
ya Central ya State government ke notification ya order ke tehat ho. Agar koi body Central ya State government ke
dwara owned, controlled ya substantially financed hai, ya non-government organizations jo substantially Central ya
State government se finance hoti hain, to wo bhi public authority ki definition mein aati hain. Act ke tahat
information lene ka procedure kaafi simple hai. Jo bhi kisi government office se information chahta hai, use sirf
Public Information Officer ko request deni hoti hai. Request mein bas yeh batana hota hai ki kis information ki
zarurat hai aur kis address par woh information chahiye. Agar applicant ko 30 din ke andar information nahi milti ya
agar applicant reply se satisfied nahi hota, toh wo appellate authority ke paas appeal kar sakta hai, jo us appeal ko 30
din ke andar decide karna hota hai.

Highlights:

1. The Right to Information Act (RTI) was enacted to promote transparency, accountability, and reduce
corruption.
2. Citizens can seek information from government bodies, institutions, and organizations funded by the
government.
3. The procedure for seeking information is straightforward, and appeals can be made if information is not
received or if dissatisfied with the response.

Paragraph 6:

The law is very comprehensive and covers almost all levels of governance and has the widest possible reach. It has
been used by a number of RTI activists to get a wide variety of information from different government authorities on
a number of issues of public interest. However, the killing of some RTI activists in recent times has caused serious
concern among all right-thinking people. Such killings could scuttle the very purpose of the RTI Act.

Hinglish Translation:
Yeh kanun kaafi comprehensive hai aur governance ke lagbhag har level ko cover karta hai, aur iska reach kaafi wide
hai. Kai RTI activists ne iska istemal karke kai prashashnik authorities se public interest ke kayi mamle mein
information hasil ki hai. Lekin, kuch RTI activists ke maar diye jaane ki recent ghatnayein sabhi sahi soch wale logon
ke liye chinta ka kaaran ban gayi hain. Aise killings RTI Act ke asli maqsad ko hi nuksan pahucha sakti hain.
Highlights:

1. The law has a wide reach and covers all levels of governance.
2. RTI has been effectively used by activists to gather public interest information.
3. The killing of RTI activists poses a threat to the purpose of the RTI Act.

Paragraph 7:

Lokpal and Lokayukta Bill, 2013. Lokpal and Lokayukta Bill, 2011 was passed by the Parliament in December 2013.
The Bill seeks to establish an anti-corruption watchdog that will have within its purview even the office of the Prime
Minister. Important features of the Bill are: (1) Lokpal at the Centre and Lokayukta at the States, (2) The Lokpal
consists of a Chairperson and a maximum of eight members of which 50 per cent shall be judicial members, (3) The
Lokpal chairperson or member shall not be connected with any political party and one member will be an eminent
jurist nominated by the President, (4) The selection of Chairperson and members of Lokpal shall be through a
Selection Committee consisting of Prime Minister, Speaker of Lok Sabha, Leader of Opposition in the Lok Sabha,
Chief Justice of India or sitting Supreme Court Judge nominated by Chief Justice of India, and eminent jurist to be
nominated by President of India on the basis of recommendations of the four members of the selection Committee,
(5) All ministers including Prime Minister with some safeguards and senior public servants are covered by the
Ombudsman, excluding the public servants under Army. Navy and Coastal guard, (6) All entities receiving donations
from foreign sources in the context of the Foreign Contribution Regulation Act (FCRA) in excess of 10 lakh per year
are brought under the jurisdiction of Lokpal, (7) Provides adequate protection for honest and upright Public servants,
(8) Lokpal will have power of superintendence and direction over any investigation agency including CBI for cases
referred to them by Lokpal, (9) A high-powered Committee chaired by the Prime Minister will recommend the
selection of the Director, CBI, (10) Directorate of Prosecution headed by a Director of Prosecution under the overall
control of Director, (11) The appointment of the Director of Prosecution, CBI will be made on the recommendation
of the Central Vigilance Commission, (12) Transfer of officers of CBI investigating cases referred by Lokpal with the
approval of Lokpal, (13) The Bill also incorporates provisions for attachment and confiscation of property acquired
by corrupt means, even while prosecution is pending, (14) The Bill lays down clear time lines for preliminary enquiry
and investigation and trial and towards this end, the Bill provides for setting up of Special Courts, and (15) A
mandate for setting up the institution of Lokayukta through enactment of a law by the State Legislature within a
period of 365 days from the date of commencement of the Act.

Hinglish Translation:
Lokpal aur Lokayukta Bill, 2013. Lokpal aur Lokayukta Bill, 2011 ko December 2013 mein Parliament ne pass kiya.
Bill ka uddeshya ek anti-corruption watchdog sthapit karna hai, jisme Prime Minister ka office bhi shamil hoga. Bill
ke kuch mahatvapurn features hain: (1) Lokpal Centre mein aur Lokayukta States mein, (2) Lokpal mein ek
Chairperson aur adhiktam aath members honge, jisme 50 percent judicial members honge, (3) Lokpal ka chairperson
ya member kisi political party se sambandhit nahi hoga aur ek member ko President nominate karega jo ek prasiddh
jurist hoga, (4) Chairperson aur members ka selection ek Selection Committee ke dwara hoga jisme Prime Minister,
Lok Sabha ke Speaker, Lok Sabha mein Opposition ke Leader, Chief Justice of India ya Supreme Court ke Judge aur
ek prasiddh jurist hoga jise President nominate karenge, (5) Sabhi ministers, Prime Minister samet kuch suraksha ke
sath aur senior public servants ko Ombudsman ke under rakha jayega, Army, Navy aur Coastal guard ke public
servants ko chhodkar, (6) Foreign Contribution Regulation Act (FCRA) ke tahat 10 lakh se zyada foreign donations
lene wali entities ko Lokpal ke jurisdiction mein lana, (7) Imaandaar public servants ko protection dena, (8) Lokpal
ke paas CBI jaise investigation agencies par superintendence aur direction ka adhikar hoga jo Lokpal ke dwara bheje
gaye mamle ka investigation karenge, (9) Ek high-powered committee jo Prime Minister ke adhyakshata mein CBI
Director ka selection karegi, (10) Directorate of Prosecution ko CBI ke Director ke control mein kaam karna hoga,
(11) CBI ke Director of Prosecution ka appointment Central Vigilance Commission ke recommendation par hoga,
(12) CBI officers ko transfer karne ka adhikar hoga agar Lokpal ke dwara refer kiye gaye cases ka investigation ho,
(13) Bill mein corrupt tareeke se prapt property ki attachment aur confiscation ki provisions hain, jabki prosecution
abhi pending ho, (14) Bill preliminary enquiry, investigation aur trial ke liye clear time lines deta hai aur iske liye
Special Courts banayi jayengi, aur (15) State Legislature ko ek saal ke andar Lokayukta ko enact karna hoga.

Highlights:

1. The Bill aims to establish an anti-corruption watchdog, Lokpal, with jurisdiction over the Prime Minister.
 2. Lokpal will consist of a chairperson, judicial members, and a selection committee for appointing members.
3. It covers ministers, senior public servants, and foreign donation recipients under its jurisdiction.
4. Special provisions include property confiscation, clear timelines for investigation, and the establishment of
Special Courts.

Appendix 1 to Chapter 58 - Demonetisation:

On November 8, 2016, the government demonetised two largest denomination notes, 500 and 1,000 with immediate
effect and thus, they ceased to be legal tender. At one fell stroke, 86 per cent of the cash in circulation (amounting to
15.44 lakh crore) was thereby rendered invalid. These notes were to be deposited in the banks by December 30, 2016,
while restrictions were placed on cash withdrawals.

Hinglish Translation:
8 November 2016 ko, sarkar ne 500 aur 1000 ke do bade denomination notes ko turant prabhav se demonetise kar
diya, aur is tarah se ye legal tender nahi rahe. Ek hi kadam mein, circulation mein 86 percent cash (15.44 lakh crore
ke barabar) invalid ho gaya. In notes ko 30 December 2016 tak banks mein jama karna tha, jabki cash withdrawals
par bhi restrictions lagayi gayi thi.

Highlights:

1. The government demonetised 500 and 1000 notes, invalidating 86% of the cash in circulation.
2. Notes had to be deposited by December 30, 2016, with restrictions on withdrawals.

The basic objectives of this measure were:

(i) destroying the black economy by forcing the 'de-hoarding' of cash held by those generating black income, (ii)
curbing the use of high denomination notes used by terrorists and smugglers, (iii) eliminating counterfeit currency,
and (iv) curbing corruption.

Hinglish Translation:
Is measure ke basic objectives the:
(i) Kala economy ko destroy karna, un logon ke paas rakhe gaye cash ko 'de-hoarding' karke, jo kala dhan kama rahe
the, (ii) High denomination notes ka istemal rokna, jo terrorists aur smugglers dwara istemal ho rahe the, (iii) Nakli
currency ko khatam karna, aur (iv) Corruption ko rokna.

Highlights:

1. The aim was to destroy the black economy by forcing the de-hoarding of cash.
2. To curb the use of high denomination notes by terrorists and smugglers.
3. Eliminate counterfeit currency and reduce corruption.

Benefits from Demonetisation

1. Tax on black money: The most important way to view demonetisation is as a tax administration measure, one
designed to tax holdings of black money. However, since large denomination notes are also earned through genuine
channels and tax paid on their holdings, it is necessary to devise a mechanism that distinguishes between 'white' and
'black' income. Accordingly, the government scheme included a screening mechanism, aimed at separating 'white'
income from 'black'. Cash holdings arising from income that had been declared could be deposited at banks and
ultimately exchanged for new notes. But those with black money faced three difficult choices. They could: (i) declare
their unaccounted wealth and pay taxes at a penalty rate; (ii) continue to hide it, not converting their old notes and
thereby suffering a tax rate of 100 per cent; or (iii) launder their black money, paying a cost for converting the money
into white.
Hinglish Translation:
1. Kala dhan par tax: Demonetisation ko sabse zaroori tareeke se ek tax administration measure ke roop mein dekha
jaa sakta hai, jo kala dhan ke holdings par tax lagane ke liye design kiya gaya hai. Lekin, kyunki bade denomination
ke notes bhi asli channels se kamayi jaate hain aur unke holdings par tax diya jaata hai, isliye ek aise mechanism ki
zaroorat thi jo 'white' aur 'black' income ko alag kare. Isliye, government ne ek screening mechanism tayar kiya, jo
'white' aur 'black' income ko alag karne mein madad karega. Jo cash holdings declared income se aaye the, unhe
banks mein jama karke naye notes ke liye exchange kiya ja sakta tha. Lekin jo log kala dhan rakhte the, unke paas
teen mushkil choices thi. Wo: (i) apni undeclared wealth ko declare karen aur penalty rate par tax pay karein; (ii) ise
chhupaye rakhein, apne purane notes ko convert na karen aur 100 percent tax rate ka samna karein; ya (iii) apne kala
dhan ko white mein convert karne ke liye money laundering karen, jiska cost unhe dena padega.

Highlights:

1. Demonetisation was designed to target black money through a tax administration measure.
2. Mechanism to distinguish between 'white' and 'black' income was introduced.
3. Black money holders faced three choices: declare and pay taxes, hide it, or launder the money.

2. Transfer of wealth to the government: Demonetisation has effected a transfer of wealth from holders of illicit
black money to the public sector, which can be redeployed in various productive ways to retire government debt,
recapitalise banks, or even redistribute it back to the private sector.

Hinglish Translation:
2. Dhan ka transfer sarkar ko: Demonetisation ne illicit kala dhan ke holders se dhan ka transfer public sector ko
kiya hai, jise kai productive tareekon se redeploy kiya ja sakta hai, jaise ki government debt ko retire karna, banks ko
recapitalise karna, ya phir ise wapas private sector mein redistribute karna.

Highlights:

1. Demonetisation resulted in transferring wealth from black money holders to the government.
2. The government can use the wealth for debt reduction, bank recapitalisation, or redistribution to the private
sector.

3. Tax compliance: Demonetisation can be interpreted as a regime shift on the part of the government. According to
Economic Survey 2016-17, it is a demonstration of the government's resolve to crack down on black money, showing
that tax evasion will no longer be tolerated or accepted as an inevitable part of life. Tax evaders might decide in the
years to come that it would be better to pay a moderate regular tax, rather than risk having to pay a sudden penal tax.
Corruption and compliance could be permanently affected.

Hinglish Translation:
3. Tax compliance: Demonetisation ko sarkar ke taraf se ek regime shift ke roop mein samjha ja sakta hai. Economic
Survey 2016-17 ke mutabik, yeh sarkar ke irade ka pradarshan hai ki wo kala dhan par kadi karwai karegi, aur yeh
dikhaya ja raha hai ki tax evasion ko ab zindagi ka ek avashyak hissa nahi maana jaayega. Tax evaders aane wale
dino mein yeh soch sakte hain ki regular tax dena behtar hoga, rather than risk lene ke ki sudden penal tax na dena
pade. Corruption aur compliance par iska long-term effect ho sakta hai.

Highlights:

1. Demonetisation marks a shift in government policy towards cracking down on black money.
2. It aims to make tax evasion unacceptable, and in the long run, may affect tax compliance and corruption.
The question that we must address at this juncture is: did demonetisation result in better tax compliance?
In this context, Economic Survey 2017-18 notes that over the 13-month period since demonetisation (November
2016- November 2017), as many as 10.1 million new tax payers were added as compared with an average of 6.2
million in the preceding six years. However, not all increase can be attributed to demonetisation because there is
some natural increase in the number of tax payers. To account for this, a regression analysis is undertaken in the
Survey. This analysis reveals that 1.8 million additional tax payers were added over the said period due to
demonetisation-cum- GST representing 3 per cent of existing tax payers. However, most of the new filers reported
income close to the income tax threshold of 2.5 lakh limiting the early revenue impact. The Survey hopes that "as
income growth pushes many of the new tax filers over the threshold the revenue dividends should increase robustly."

Hinglish Translation:
Is point pe humein ek sawal ka jawab dena hoga: kya demonetisation ke baad tax compliance behtar hua?
Economic Survey 2017-18 ke hisaab se, demonetisation ke 13 mahine ke dauran (November 2016 se November 2017
tak), 10.1 million naye tax payers aaye hain, jabki pichle 6 saalon mein yeh average 6.2 million tha. Lekin, is badhotri
ka poora credit demonetisation ko nahi diya ja sakta, kyunki kuch natural increase hota hai tax payers ke number
mein. Survey mein regression analysis ki gayi hai jo yeh batata hai ki demonetisation aur GST ke wajah se 1.8
million extra tax payers aaye, jo existing tax payers ka 3% hai. Lekin, zyada tar naye filers ka income 2.5 lakh ke
threshold ke aas-paas tha, jis se early revenue impact limited raha. Survey ka hope hai ki "income growth se kai naye
filers threshold cross karenge, aur revenue ka growth achha hoga."

Highlights:

1. 10.1 million new taxpayers added after demonetisation, compared to 6.2 million in previous years.
2. 1.8 million additional taxpayers due to demonetisation and GST.
3. Most new filers reported income near the ₹2.5 lakh threshold, limiting the early revenue impact.

Digitisation.
One intermediate objective of demonetisation is to create a less-cash economy, as this is key to channeling more
saving channeled through the formal financial system and improving tax compliance. Since cash transactions are
anonymous, helping to preserve privacy, they are the main conduits of black money. As against this, digital
transactions are fully tracked and help control the flow of black money. Economic Survey 2016-17, mentions two
cardinal virtues of such transactions. First, they help bring people into the modern wired' era. Second, they bring
people into the formal economy, thereby increasing financial saving, reducing tax evasion, and leveling the playing
field between tax-compliant and tax-evading firms (and individuals).

Hinglish Translation:
Digitisation.
Demonetisation ka ek intermediate objective yeh tha ki kam-cash economy banayi jaaye, kyunki yeh formal financial
system ke through zyada savings ko channelise karna aur tax compliance improve karna ka zariya hai. Cash
transactions anonymous hote hain, jo privacy ko preserve karte hain, lekin yeh black money ke liye main conduit hote
hain. Iske opposite, digital transactions fully tracked hote hain aur black money ke flow ko control karte hain.
Economic Survey 2016-17 mein is tarah ke transactions ke do major benefits diye gaye hain: Pehla, yeh logon ko
modern wired era mein laate hain, aur doosra, yeh logon ko formal economy mein laaye jaate hain, jis se financial
savings badh jaati hain, tax evasion kam hoti hai, aur tax-compliant aur tax-evading firms ke beech ek level playing
field ban jata hai.

Highlights:

1. Demonetisation aimed at reducing cash transactions and boosting formal financial systems.
2. Cash transactions are linked to black money, while digital ones help track and control it.
3. Digital transactions promote tax compliance, savings, and reduce tax evasion.

Impact on real estate.

Demonetisation could have particularly profound impact on the real estate sector. In the past, much of the black
money accumulated was ultimately used to evade taxes on property sales. To the extent that black money is reduced
and financial transactions increasingly take place through electronic means, this type of tax evasion will also
diminish.

Hinglish Translation:
Real estate pe impact.
Demonetisation ka real estate sector pe kaafi gehra asar ho sakta tha. Pichle samay mein, zyada tar kala dhan jo
accumulate hota tha, woh property sales pe tax bachane ke liye use hota tha. Jab tak kala dhan kam hota hai aur
financial transactions zyada electronic methods ke through hote hain, is type ke tax evasion ko bhi kam kiya jaayega.

Highlights:

1. Demonetisation aimed at reducing black money in real estate.

2. Reduced black money and more digital transactions can reduce tax evasion in property sales.

The Costs and Demerits of Demonetisation

1. Inconvenience and economic disruption.

Cash is the lifeblood of the Indian economy where an overwhelming proportion of economic transactions (more than
95 per cent) are in cash. With as much as 86 per cent of this gone, there was widespread inconvenience to the public
and substantial economic disruption. Billions of man-hours were wasted in queues waiting for cash, millions of
persons lost jobs and incomes particularly in the informal sector and tragically many deaths were also reported. As far
as consumption expenditure is concerned, it dropped sharply while investment activity was also badly impacted
because of liquidity crunch. As a result, growth of income and output suffered a set-back as data presented in the next
sub-section shows.

Hinglish Translation:
Demonetisation ke kharche aur nuksaan.
Cash India ki economy ka lifeblood hai, jahan economic transactions ka ek bada hissa (95% se zyada) cash mein hota
hai. Jab 86% cash system se bahar ho gaya, tab logon ko kaafi pareshani hui aur economy ko kaafi disruption ka
samna karna pada. Billions of man-hours cash ke liye queues mein waste hue, millions logon ko jobs aur income
khoi, khaas kar informal sector mein, aur dukh ki baat yeh hai ki kai maut ki reports bhi aayi. Jahan tak consumption
expenditure ka sawaal hai, woh sharply gir gaya aur investment activity bhi liquidity crunch ki wajah se badly impact
hui. Iske nateeje mein income aur output ka growth setback ka samna kar gaya.

Highlights:

1. Cash transactions constitute over 95% of economic activity in India.

2. 86% of cash in circulation was removed, leading to inconvenience and disruption.
3. Job losses, income reduction, and economic growth slowdown occurred due to demonetisation.

2. Not much impact on black wealth.

Much of the public enthusiasm about demonetisation came from the expectation that those with hoards of cash would
not be able to exchange it in banks for new notes, and would therefore lose their ill-gotten money. This group
includes businessmen, or politicians (either on their own behalf or on behalf of political parties), or bribe-taking
bureaucrats. However, this has not materialised as this group of black money hoarders employed various means to
convert their black money into white sometimes in connivance with bank officials and sometimes by offering hefty
commissions of 30 to 40 per cent (or even more) to 'intermediaries' to exchange their currency. These intermediaries
organised large numbers of individuals who could take smaller "explainable amounts of cash (less than 2.5 lakh) to
the banks for deposit.

Hinglish Translation:
Kala dhan par zyada asar nahi.
Demonetisation ke baare mein public ki jo excitement thi, uska main reason yeh tha ki logon ka yeh expectation tha
ki jo log cash ke bohot zyada paise rakhte hain, woh unhe naye notes ke liye banks mein exchange nahi kar paayenge
aur apna ill-gotten paisa kho denge. Yeh group mein businessmen, politicians (apne liye ya political parties ke liye),
ya bribe lene wale bureaucrats shamil the. Lekin, yeh nahi hua, kyunki is group ke black money ke hoarders ne apne
kala dhan ko safed mein badalne ke liye kai tareeke apnaye, kabhi bank officials ke saath milke aur kabhi 30-40% ya
usse bhi zyada commission de kar 'intermediaries' ko apna currency exchange karne ke liye diya. Yeh intermediaries
kai logon ko organise karte the jo chhote "explainable amounts of cash (2.5 lakh se kam) bank mein deposit kar sakte
the.

Highlights:

1. The expectation was that cash hoarders would lose their black money, but this didn’t happen.
2. Black money hoarders found ways to convert their black money into white, sometimes with bank officials'
help.
3. Intermediaries helped in exchanging currency for hoarders with commissions.

As a result of these tactics adopted by the black money hoarders, the demonetisation exercise did not succeed.
The government had initially expected that around 25 per cent of the currency (15.44 lakh crore) would not return to
the system. However, according to Reserve Bank's Annual Report 2016-17, as many as 98.96 per cent of the 500 and
1,000 denomination notes returned to the banking system, which means that only 16,000 crore (1.04 per cent) did not
return. This shows that demonetisation as an instrument to control black money has been a complete failure. In this
context, it may be pointed out that in the demonetisations of 1946 and 1978, about 14 per cent and 10 per cent,
respectively, of high denomination currency did not return to the central bank.

Hinglish Translation:
Kala dhan ke hoarders dwara apnaye gaye in tareekon ki wajah se, demonetisation ka exercise safal nahi hua.
Sarkar ne shuruat mein yeh ummid ki thi ki lagbhag 25% currency (15.44 lakh crore) system mein wapas nahi aayegi.
Lekin, Reserve Bank ke Annual Report 2016-17 ke hisaab se, 500 aur 1000 denomination notes ka 98.96% banking
system mein wapas aaya, jo yeh dikhata hai ki sirf 16,000 crore (1.04%) hi wapas nahi aaye. Yeh dikhata hai ki
demonetisation kala dhan ko control karne ka ek complete failure raha. Is context mein, yeh bhi kaha ja sakta hai ki
1946 aur 1978 ki demonetisation mein bhi lagbhag 14% aur 10% high denomination currency central bank ke paas
wapas nahi aayi thi.

Highlights:

1. Only 1.04% of demonetised currency (₹16,000 crore) did not return to the banking system.
2. Demonetisation failed as a tool to control black money.
3. Previous demonetisations (1946, 1978) also had a similar return rate for high denomination currency.

3. Limited scope for digitisation.

Deepak Nayyar has pointed to the fact that in India, just 53 per cent of adults have bank accounts, but two-fifths of
these accounts are dormant. And only 15 per cent of existing bank accounts are used to make or receive payments.
Bank penetration would have been far less but for the 250 million accounts that were opened under the Pradhan
Mantri Jan Dhan Yojana (PMJDY) during 2014-16, of which 60 million accounts have zero balances even now. It is,
thus, clear that almost half of our population has no access to the banking system, and even a larger proportion does
not use it. Digitisation in such conditions is a difficult proposition especially taking into account the fact that the bulk
of India's population is not technology-savvy. There are also high cyber-security risks involved in a massive
transition to digitisation, exposing a vast number of bank accounts to fraud and thefts. Experience from developed
countries suggests that many years will pass before India can reduce cash transactions to 60 per cent from 95 per cent
in number and to 50 per cent from 75 per cent in value.

Hinglish Translation:
Digitisation ka limited scope.
Deepak Nayyar ne yeh point uthaya hai ki India mein sirf 53% adults ke paas bank accounts hain, lekin in accounts
mein se do-fifths dormant hain. Aur sirf 15% bank accounts payments lene ya bhejne ke liye use hote hain. Bank
penetration PMJDY ke tahat khule 250 million accounts ke wajah se kaafi badha hai (2014-16), jinmein se 60 million
accounts abhi bhi zero balance hain. Isse yeh clear ho jata hai ki humare population ka lagbhag aadha hissa banking
system tak access nahi rakhta, aur ek bada hissa use bhi nahi karta. Aise conditions mein digitisation ek mushkil
kaam hai, khaas kar jab dekha jaye ki Bharat ki kaafi population technology-savvy nahi hai. Iske alawa, massive
digitisation ke transition mein high cyber-security risks bhi hain, jo kai bank accounts ko fraud aur thefts ke liye
expose karte hain. Developed countries ka experience yeh suggest karta hai ki kai saal lag sakte hain India ko cash
transactions ko 95% se 60% tak aur value ke terms mein 75% se 50% tak kam karne mein.

Highlights:

1. Only 53% of adults in India have bank accounts, and 40% of them are inactive.
2. PMJDY helped increase bank accounts, but many still have zero balance.
3. Digitalisation is challenging due to low technological literacy and high cyber-security risks.
4. India will take years to reduce cash transactions significantly.

4. Not much effect on black economy.

According to Arun Kumar, the black money the government was targeting is only about 1 per cent of the black
wealth held in the country and only 3.5 per cent of the black income generated in 2016. Even if the government
managed to suck out all the black cash in circulation, it would not have much effect on the black economy which
involves various activities in which black incomes are generated. It is no secret that the big fish who have amassed
huge wealth from black money, hold most of it as real estate, gold and other real assets. Some of it is also held as
assets abroad. None of these are affected by demonetisation.

Hinglish Translation:
Black economy par jyada asar nahi.
Arun Kumar ke hisaab se, wo black money jo government target kar rahi thi, wo desh mein maujood black wealth ka
sirf 1% hai aur 2016 mein hone wali black income ka bas 3.5% tha. Agar government saari black cash ko circulation
se nikaal bhi leti, toh bhi uska zyada asar black economy par nahi padta, jisme kai tarah ki activities hoti hain jinmein
black incomes generate hoti hain. Yeh koi raaz nahi hai ki bade log jo black money se ameer hue hain, wo apna paisa
zyada tar real estate, sona, aur doosre real assets mein rakhte hain. Kuch paisa unhone foreign assets mein bhi rakha
hai. Inmein se koi bhi cheez demonetisation se affect nahi hui.

Highlights:

1. Black money targeted by the government is a very small fraction (1% of wealth, 3.5% of income).
2. Wealth accumulated from black money is mostly held in real estate, gold, and foreign assets.
3. Demonetisation did not affect these forms of wealth.

5. Demonetisation is not likely to tackle the problem of terrorism.

It was argued at the time of demonetisation that the scheme would nullify the counterfeit currency which is thought to
be used to finance terrorist activity. However, as pointed out by Percy C. Mistry, counterfeit money is too small a
proportion of the currency in circulation (under 400 crore out of over 16.6 lakh crore or 0.024 per cent) to be an issue.
Moreover, if the old notes could be counterfeited, it is likely that the same will happen to the new notes. It must also
be understood that terrorist activity is not just financed with Indian currency, it can be and is fuelled by dollars, gold,
diamonds, drugs and so on. Terrorism is a continuing problem, not a one-off thing.

Hinglish Translation:
Demonetisation terrorism ko tackle nahi kar sakta.
Demonetisation ke time yeh kaha gaya tha ki scheme counterfeit currency ko nulify karegi jo terrorism ko fund karne
ke liye use hoti hai. Lekin, Percy C. Mistry ne point out kiya hai ki counterfeit currency ka circulation mein bahut
chhota hissa hai (16.6 lakh crore mein se sirf 400 crore yaani 0.024% ka hissa). Iske alawa, agar purani notes
counterfeit ki ja sakti thi, toh nayi notes ko bhi counterfeit kiya ja sakta hai. Yeh bhi samajhna zaroori hai ki terrorist
activity sirf Indian currency se nahi fund hoti, yeh dollars, sona, heere, drugs wagaira se bhi ho sakti hai aur ho rahi
hai. Terrorism ek chalti-phirti problem hai, koi ek baar ka issue nahi.
Highlights:

1. Counterfeit money is a very small portion of currency in circulation (0.024%).

2. New notes can also be counterfeit in the future.
3. Terrorism is financed not just by currency, but also by other means like dollars, gold, and drugs.

6. Cost of remonetisation and pressure on RBI.

Printing of new notes to remonetise the economy cost the Reserve Bank 7,965 crore, more than double the amount it
had spent on printing in the previous year. The surplus transferred to the Government of India was only 30,659 crore,
less than half of what it was in the previous year. This diminished transfer to the government was in large part caused
by increased expenditure for the Reserve Bank due to demonetisation. Moreover, the surge of cash that entered the
banking system on account of demonetisation entailed banks having large deposits with the Reserve Bank. This
meant that the RBI had to pay more to these banks as interest payments.

Hinglish Translation:
Remonetisation ka cost aur RBI par pressure.
Naye notes print karne ka jo cost tha, usse economy ko remonetise karne ke liye Reserve Bank ko 7,965 crore ka
kharcha aaya, jo pichle saal ke printing cost se zyada tha (do guna se bhi zyada). Jo surplus Government of India ko
transfer kiya gaya wo sirf 30,659 crore tha, jo pichle saal ke amount ka aadha se bhi kam tha. Yeh kam transfer RBI
ke badhe kharchon ke wajah se hua, jo demonetisation ke karan badhe. Iske alawa, demonetisation ki wajah se jo
cash banking system mein aaya, uske wajah se banks ke paas Reserve Bank mein bade deposits ho gaye. Iska matlab
tha ki RBI ko in banks ko interest payments dene mein zyada paisa dena pada.

Highlights:

1. Printing of new notes cost ₹7,965 crore to RBI.

2. The surplus transferred to the Government of India was ₹30,659 crore, less than half of the previous year.
3. Increased deposits with RBI led to higher interest payments by the RBI.

Macroeconomic Impact of Demonetisation

1. Impact on growth and inflation.

According to data released by CSO, the April-June quarter of the year 2017 saw GDP growth fall to 5.7 percent,
lower than the 6.1 percent estimated for January-March 2017, the quarter just after demonetisation. The April-June
quarter of the previous year 2016 had registered a growth of 7.9 percent. According to Economic Survey 2016-17
(Volume II released in August 2017), this decline in GDP growth rates "predated demonetisation but intensified in
the post-demonetisation period". The main cause of the decline was that although the organised sector on the whole
remained resilient as a result of demonetisation, some manufacturing and services segments were adversely affected.
The sectors that were particularly badly affected were the sectors of fast-moving consumer goods (FMCG),
particularly the automobile sector, construction sector, and real estate, unorganised services (maintenance and repairs
of vehicles, retail trade, repair of personal and household goods), etc.

Hinglish Translation:
Growth aur inflation par asar.
CSO ke dwara release kiye gaye data ke mutabik, 2017 ke April-June quarter mein GDP growth 5.7 percent tak gir
gaya, jo ki January-March 2017 ke 6.1 percent se kam tha, jo ki demonetisation ke baad ka quarter tha. 2016 ke
April-June quarter mein 7.9 percent ka growth register kiya gaya tha. Economic Survey 2016-17 (Volume II, August
2017 mein release) ke mutabik, GDP growth rate mein jo girawat aayi, wo demonetisation se pehle shuru ho gayi thi
lekin post-demonetisation period mein uska prabhav zyada badh gaya. Iska main karan yeh tha ki organised sector
kuch had tak resilient raha demonetisation ke baad, lekin kuch manufacturing aur services sectors par negative impact
pada. Jo sectors sabse zyada prabhavit hue unmein fast-moving consumer goods (FMCG), automobile sector,
construction sector, real estate aur unorganised services (vehicles ki maintenance aur repairs, retail trade, personal aur
household goods ki repairs) shamil hain.
Highlights:

1. GDP growth fell to 5.7% in April-June 2017, lower than the previous quarter's 6.1%.
2. Organised sectors were resilient, but manufacturing and services sectors faced difficulties.
3. FMCG, automobile, construction, and unorganised services sectors were significantly affected.

Original Text:
As far as impact on inflation is concerned, the main impact was on food inflation which declined from 3.7 per cent in
October 2016 to 2.0 per cent in December and further to 1.3 per cent in January 2017. This was mainly on account of
vegetables and pulses. As the transactions in fruits and vegetables have always been cash intensive, following
demonetisation, as cash ran dry, there was some compression in demand for fruits and vegetables. Anecdotal
evidence also pointed to some distress sale by farmers, given the perishable nature of green vegetables and fruits.
With a weight of 46 per cent, the sharp fall in food inflation by about 240 basis points or bps (one basis point is equal
to 0.01 per cent) during November 2016-January 2017 pulled down the headline CPI inflation by around 100 bps to
3.2 per cent in January 2017, the lowest inflation reading since the publication of the all India CPI inflation series.

Hinglish Translation:
Jahan tak inflation par asar ka sawaal hai, sabse bada prabhav food inflation par pada, jo October 2016 mein 3.7
percent se December mein 2.0 percent tak gir gaya aur phir January 2017 mein 1.3 percent tak aur kam ho gaya. Yeh
mainly sabziyon aur pulses ke kaaran tha. Kyunki fruits aur vegetables ki transactions hamesha cash-based rahi hain,
demonetisation ke baad, jab cash ki kami ho gayi, tab fruits aur vegetables ki demand mein kuch kami dekhi gayi.
Anecdotal evidence bhi yeh batata hai ki kuch kisan distress sale kar rahe the, given the perishable nature of green
vegetables aur fruits. Food inflation mein 46 percent ka weight hone ke karan, November 2016 se January 2017 ke
beech food inflation mein 240 basis points (bps) ki sharp girawat hui, jo headline CPI inflation ko January 2017 mein
3.2 percent tak le aayi, jo ki All India CPI inflation series ke publication ke baad ka sabse kam inflation rate tha.

Highlights:

1. Food inflation reduction: Food inflation declined from 3.7% in October 2016 to 1.3% in January 2017.
2. Cause of reduction: The drop was largely due to the reduced demand for fruits and vegetables after
demonetisation, which is traditionally a cash-intensive sector.
3. Impact on CPI inflation: A significant reduction in food inflation helped bring down the headline CPI
inflation to 3.2% in January 2017, marking the lowest level since the publication of All India CPI inflation
data.

2. Financial sector.
Demonetisation had an impact on the balance sheet of banks, liquidity conditions, and transmission of monetary
policy, non-banking financial intermediaries, and Jan Dhan accounts. As far as the effect on the balance sheet of
banks is concerned, the decline in currency in circulation due to demonetisation led to a surge in bank deposits.
Between October 28, 2016, and January 6, 2017 (i.e., the days immediately prior to and after demonetisation for
which fortnightly banking system data are available), total currency in circulation declined by about 8,800 billion.
This, in turn, was largely reflected in a sharp increase of about 6,720 billion in aggregate deposits of the banking
system. Surplus liquidity conditions helped facilitate the transmission of monetary policy to market interest rates.
Post demonetisation, several banks lowered their domestic term deposit rates and lending rates. Reduction in deposit
interest rates by banks after demonetisation, in turn, enhanced the relative attractiveness of debt-oriented mutual
funds. As a result, there was a sharp increase in the overall resources mobilised by mutual funds during November
2016-January 2017 in contrast to outflows in the same period of last year. Loan disbursals by all categories of NBFCs
(especially microfinance companies) declined significantly as demand for credit declined due to customers
postponing decisions on account of uncertainty. As far as the impact on Pradhan Mantri Jan Dhan Yojana (PMJDY)
accounts is concerned, deposits under them increased significantly post-demonetisation as many people used these
accounts to convert black money into white (deposits under PMJDY as on November 9, 2016, were 456 billion,
which rose to as high as 746 billion as on December 7, 2016, and stood at 642.9 billion as on March 1, 2017).

Hinglish Translation:
Financial sector par asar.
Demonetisation ka banking sector ke balance sheet, liquidity conditions aur monetary policy transmission par kaafi
asar pada, saath hi non-banking financial intermediaries aur Jan Dhan accounts par bhi iska prabhav hua. Jahan tak
banks ke balance sheet par asar hai, demonetisation ke chalte currency in circulation mein girawat aayi, jiski wajah se
bank deposits mein bhari vruddhi hui. 28 October 2016 se lekar 6 January 2017 tak (yeh wo din the jo demonetisation
se pehle aur baad mein aaye), total currency in circulation mein 8,800 billion ka reduction hua. Isse aggregate
deposits of the banking system mein 6,720 billion ka sharp increase dekhne ko mila. Surplus liquidity conditions ne
monetary policy ke transmission mein madad ki, aur market interest rates par bhi iska asar pada. Post-demonetisation,
kai banks ne apne domestic term deposit rates aur lending rates ko kam kiya. Deposit interest rates mein reduction ke
baad, debt-oriented mutual funds zyada attractive hue. Isliye, November 2016-January 2017 ke dauran mutual funds
mein resources kaafi zyada mobilised hue, jabki pichle saal ke is same period mein outflows dekhe gaye the. Loan
disbursals by NBFCs (especially microfinance companies) kaafi gire, kyunki credit demand mein kami aayi due to
uncertainty. Jahan tak PMJDY accounts ka prabhav hai, unmein deposits demonetisation ke baad kaafi badhe, kyunki
log in accounts ka use black money ko white mein convert karne ke liye kar rahe the (PMJDY accounts mein deposits
9 November 2016 ko 456 billion the, jo 7 December 2016 ko 746 billion tak badh gaye, aur 1 March 2017 tak 642.9
billion the).

Highlights:

1. Demonetisation led to a surge in bank deposits, particularly with a decline in currency circulation.
2. Liquidity conditions helped in reducing interest rates and facilitating monetary policy transmission.
3. PMJDY accounts saw a significant increase in deposits as people used them to convert black money into
white.

Original Text:
3. Financial markets. Demonetisation impacted various segments of the financial markets in varying degrees.
However, in most segments, the impact was transient. Surplus liquidity conditions post-demonetisation imparted an
easing bias to G-sec yields. Overnight call money market rates remained within the corridor but traded with a distinct
softening bias. In sympathy with the overnight call rate, other short-term rates also eased. In the equity market, share
prices relating to cash-intensive sectors such as realty, consumer durables, auto, and FMCG declined significantly in
November and December, but most of these sectors recovered the lost ground subsequently. The impact on the
foreign exchange market was transitory.

Hinglish Translation:
3. Financial markets. Demonetisation ne financial markets ke kai segments par alag-alag tareekon se prabhav dala.
Lekin zyada tar segments mein, yeh prabhav temporary tha. Post-demonetisation surplus liquidity conditions ne G-
sec yields ko thoda aasaan banaya. Overnight call money market rates corridor ke andar rahe, lekin unmein ek
softening bias tha. Overnight call rate ke saath hi, doosre short-term rates bhi kam hue. Equity market mein, cash-
intensive sectors jaise real estate, consumer durables, auto, aur FMCG ke share prices November aur December mein
kaafi gir gaye, lekin in sectors ne apna khoya hua ground baad mein recover kar liya. Foreign exchange market par
bhi prabhav temporary tha.

Highlights:

1. Transitory impact on financial markets: Demonetisation had a temporary impact on financial markets,
particularly G-sec yields and call money market rates.
2. Equity market affected: Cash-intensive sectors like real estate, FMCG, auto, and consumer durables saw a
significant decline in share prices in November and December, but most sectors recovered later.
 3. Foreign exchange market: The impact on the foreign exchange market was short-lived.

Original Text:
4. External sector. About 36 million micro, small, and medium enterprises (MSMEs) contribute around 40 per cent
of India's exports and provide employment to over 80 million persons. Within the MSME sector, gems and jewellery,
carpets, textile, leather, handlooms, and handicrafts are highly labour-intensive sectors and more dependent on cash
for their working capital requirements. Contractual labour in both the wearing apparel and gems and jewellery sectors
suffered as payments from employers became constrained. The cash shortage also adversely affected informal
sources of finance. Reflecting these factors, export shipments of gems and jewellery, readymade garments, meat and
dairy products, and handicrafts and carpets either declined or recorded a lower growth in November 2016 as
compared with October 2016. As far as imports are concerned, the volume of gold imports surged significantly in
November 2016 as domestic buyers were willing to pay a huge premium to dispose of old currency notes with
jewellers. As far as invisibles are concerned, private transfers (particularly remittances for family maintenance)
slowed, perhaps reflecting postponement by remitters as local family members might not have been able to encash
instruments/withdraw immediately due to limits.

Hinglish Translation:
4. External sector. Lagbhag 36 million micro, small, aur medium enterprises (MSMEs) India ke exports ka 40
percent contribute karti hain aur 80 million se zyada logon ko rozgar deti hain. MSME sector ke andar, gems and
jewellery, carpets, textile, leather, handlooms, aur handicrafts jaise sectors highly labour-intensive hain aur apne
working capital requirements ke liye cash par jyada dependent hain. Wearing apparel aur gems and jewellery sectors
mein contractual labour ko kaafi mushkil ka samna karna pada kyunki employers ke payments constrained ho gaye
the. Cash shortage ne informal sources of finance ko bhi adversely affect kiya. In factors ko dekhte hue, November
2016 mein gems and jewellery, readymade garments, meat and dairy products, handicrafts aur carpets ke export
shipments ya to gir gaye ya October 2016 ke comparison mein growth kam ho gayi. Imports ke mamle mein,
November 2016 mein gold imports ka volume kaafi badh gaya kyunki domestic buyers purani currency notes ko
jewellers ke saath dispose karne ke liye huge premium dene ko tayar the. Invisibles ke mamle mein, private transfers
(particularly remittances for family maintenance) dheere ho gaye, shayad remitters ne payments ko postpone kiya
kyunki local family members instruments ko encash ya withdraw nahi kar pa rahe the due to limits.

Highlights:

1. Impact on MSMEs: MSMEs contribute to 40% of India's exports and employ 80 million people, but labour-
intensive sectors like gems and jewellery, textiles, and handlooms were heavily impacted by cash shortages.
2. Export decline: Exports of gems, jewellery, garments, and other items saw either a decline or lower growth
in November 2016 compared to October 2016.
3. Gold imports surge: The volume of gold imports surged in November 2016 as buyers were willing to pay a
premium to exchange old notes.
4. Private transfers slowdown: Remittances for family maintenance slowed due to the inability of family
members to encash instruments because of withdrawal limits.

Original Text:
5. Digital modes of payments. An upshot of demonetisation was that the digital modes of payments picked up
sharply. The Government of India and the Reserve Bank initiated a series of measures, some of which were
temporary, to promote movement from cash to non-cash modes of transactions. They included, inter alia, (1)
reduction in the merchant discount rate (MDR) and point of sale (POS) fees; (ii) monetary incentives in the form of
discounts and prizes; (iii) service tax relief on MDR for small transactions; (iv) waiver of charges for small value
transactions under Immediate Payment Service (IMPS). Unified Payment Interface (UPI) and Unstructured
Supplementary Service Data (USSD) based *99# platform; (v) broadening Prepaid Payment Instrument (PPI) reach
by enhancement of limits; (vi) introduction of a new category of PPIs; (vii) permitting banks to issue PPIs to a larger
set of entities; and (viii) permitting National Payments Corporation of India (NPCI) to launch: (a) the common app
for UPI, and (b) National Electronic Toll Collection (NETC) system.

Hinglish Translation:
5. Digital modes of payments. Demonetisation ka ek fayda yeh tha ki digital payments ka use kaafi badh gaya.
Government of India aur Reserve Bank ne kuch kadam uthaye, jismein kuch temporary the, jisse cash se non-cash
modes ki taraf transaction shift kar sakein. In measures mein shamil tha: (1) Merchant discount rate (MDR) aur point
of sale (POS) fees mein kami; (ii) discounts aur prizes ke roop mein monetary incentives; (iii) small transactions par
MDR par service tax relief; (iv) Immediate Payment Service (IMPS) ke under small value transactions ke liye
charges ka waiver; Unified Payment Interface (UPI) aur Unstructured Supplementary Service Data (USSD) based
*99# platform; (v) Prepaid Payment Instrument (PPI) reach ko limits badhane ke saath badhana; (vi) PPIs ka ek naya
category introduce karna; (vii) banks ko PPIs ko zyada entities ko issue karne ki ijazat dena; aur (viii) National
Payments Corporation of India (NPCI) ko launch karne ki ijazat dena: (a) UPI ka common app, aur (b) National
Electronic Toll Collection (NETC) system.

Highlights:

1. Digital payments rise: Demonetisation led to a sharp increase in the use of digital payment methods.
2. Government measures: The government and RBI initiated several steps to encourage digital transactions,
such as reducing MDR and POS fees, offering monetary incentives, and waiving charges for small
transactions.
3. Expansion of digital platforms: The introduction of UPI, IMPS, and USSD platforms helped increase digital
payment accessibility.

Original Text:
APPENDIX II TO CHAPTER 58 CORRUPTION PERCEPTION INDEX
Transparency International (TI), the Berlin-based anti-corruption watchdog defines corruption as "the abuse of
entrusted power for private gain." According to TI, corruption is a major threat facing humanity. Corruption destroys
lives and communities, and undermines countries and institutions. It generates popular anger that threatens to further
destabilise societies and exacerbate violent conflicts. Corruption translates into human suffering, with poor families
being extorted for bribes to see doctors or to get access to clean drinking water. It leads to failure in the delivery of
basic services like education or healthcare. It derails the building of essential infrastructure, as corrupt leaders skim
funds. Corruption amounts to a dirty tax, and the poor and most vulnerable are its primary victims.

Hinglish Translation:
APPENDIX II TO CHAPTER 58 CORRUPTION PERCEPTION INDEX
Transparency International (TI), jo ki Berlin based anti-corruption watchdog hai, corruption ko is tareeke se define
karta hai "wo power ka misuse jo kisi vyakti ko private gain ke liye diya gaya ho." TI ke according, corruption
insaaniyat ke liye ek bada khatra hai. Corruption zindagi aur communities ko barbaad karta hai, aur desh aur
institutions ko kamzor banaata hai. Yeh loktantrik gussa peda karta hai jo samaj ko aur zyada unstable bana sakta hai
aur violent conflicts ko badha sakta hai. Corruption human suffering mein badal jaata hai, jisme gareeb parivaron se
bribes liye jaate hain taaki doctor dekh sakein ya clean drinking water access kar sakein. Yeh basic services jaise
education ya healthcare ki delivery mein fail ho jaata hai. Yeh zaroori infrastructure ke construction ko derail kar deta
hai, kyunki corrupt leaders funds ko skim karte hain. Corruption ek ganda tax hai, aur iske main victims gareeb aur
sabse zyada vulnerable log hote hain.

Highlights:
 1. Corruption’s Definition: Corruption is the abuse of entrusted power for private gain.
2. Impact on Humanity: Corruption harms societies, destabilizes countries, and generates anger, leading to
conflict.
3. Human Suffering: Corruption results in human suffering, affecting access to healthcare, clean water, and
basic services.
4. Corruption as a “dirty tax”: It exploits the poor and vulnerable, hindering essential infrastructure
development.

Original Text:
For the year 2023, TI has prepared CPI (Corruption Perception Index) for 180 countries and territories. CPI ranks
countries and territories based on how corrupt their public sector is perceived to be. A country or territory's score
indicates the perceived level of public sector corruption on a scale of 0-100. 0 means that a country is perceived as
highly corrupt and 100 means that it is perceived as very clean. A country's rank indicates its position relative to the
other countries and territories included in the index. The CPI measures perception of corruption due to the difficulty
of measuring absolute levels of corruption.

Hinglish Translation:
2023 ke liye, TI ne 180 deshon aur territories ke liye CPI (Corruption Perception Index) prepare kiya hai. CPI deshon
aur territories ko unke public sector ke corruption perception ke hisaab se rank karta hai. Ek desh ya territory ka score
yeh dikhata hai ki us desh ke public sector mein kitna corruption hai, 0 se 100 tak ke scale par. 0 ka matlab hai ki
desh ko bahut zyada corrupt samjha jaata hai aur 100 ka matlab hai ki desh ko bilkul clean samjha jaata hai. Ek desh
ki rank uski position ko dikhati hai doosre deshon aur territories ke comparison mein jo index mein shamil hain. CPI
corruption ke perception ko measure karta hai, kyunki absolute level of corruption ko measure karna mushkil hota
hai.

Highlights:

1. CPI for 2023: Transparency International ranks 180 countries based on perceived public sector corruption.
2. Corruption Scale: CPI uses a scale of 0 to 100, where 0 represents high corruption and 100 represents a very
clean country.
3. Perception-based Measurement: CPI measures the perception of corruption due to the difficulty of
measuring actual corruption levels.

Original Text:
Scale of Corruption
As stated above, the 2023 CPI ranks 180 countries and territories on a scale from 0 (highly corrupt) to 100 (very
clean). While no country has a perfect score, over two-thirds of countries score below 50, indicating a serious
corruption problem. An idea about corruption perception worldwide can be obtained from Table 58.2.
Denmark occupies the first place with a CPI score of 90, while Finland and New Zealand occupy the second place
with a CPI score of 87. India with a score of 39 is ranked 93, which means that it ranks very low indicating that it
suffers from high levels of corruption and lack of transparency. India's low rank is due to scams and incidents of
corruption in the public sector, involving government officials, politicians, and private companies. India has in recent
period been buffeted by a raft of corruption scandals, including allegations of impropriety in the organisation of the
Commonwealth Games and in the allocation of 20 telecom spectrum, in addition to several mining scandals in the
field of iron ore, coal blocks, etc.

Hinglish Translation:
Scale of Corruption
Jaise ki upar bataya gaya hai, 2023 CPI 180 deshon aur territories ko 0 (bahut corrupt) se lekar 100 (bilkul clean) tak
ke scale par rank karta hai. Koi bhi desh perfect score nahi paata, lekin do-tihai deshon ka score 50 se neeche hai, jo
ki serious corruption problem ko dikhata hai. Corruption perception ke bare mein ek idea Table 58.2 se mil sakta hai.
Denmark pehla sthal prapt karta hai CPI score 90 ke saath, jabki Finland aur New Zealand doosra sthal prapt karte
hain CPI score 87 ke saath. India ka score 39 hai aur rank 93 hai, jo bahut neeche hai, jo dikhata hai ki India ko high
levels of corruption aur transparency ki kami ka samna hai. India ki low rank ke liye public sector mein scams aur
corruption incidents jawabdeh hain, jo government officials, politicians, aur private companies se jude hain. India ne
recent time mein kai corruption scandals dekhe hain, jismein Commonwealth Games ke organization aur 20 telecom
spectrum allocation mein galat practices ka shamil hai, iske alawa iron ore, coal blocks jaise mining scandals bhi
hain.

Highlights:

1. Corruption Scale: No country has a perfect score, and more than two-thirds of countries score below 50,
indicating serious corruption problems.
2. Top Scorers: Denmark tops the index with a score of 90, while Finland and New Zealand are second with a
score of 87.
3. India’s Low Rank: India ranks 93 with a score of 39, reflecting high levels of corruption and lack of
transparency due to scandals in the public sector, including in telecom, mining, and the Commonwealth
Games.

Original Text:
To tackle corruption and bring in transparency, TI has recommended establishment of Lokayuktas in all States,
compulsory auditing of accounts of political parties, electoral reforms to prevent tainted politicians from contesting
elections and holding positions of power, and enactment of legislations for forfeiture of illegally acquired properties.

Hinglish Translation:
Corruption ko tackle karne aur transparency lane ke liye, TI ne yeh recommend kiya hai ki har State mein Lokayuktas
ka establishment ho, political parties ke accounts ki compulsory auditing ho, electoral reforms ho taaki corrupt
politicians ko elections mein contest karne aur power ki positions hold karne se roka ja sake, aur illegal tareeke se
acquire ki gayi properties ki forfeiture ke liye legislations banaye jaaye.

Highlights:

1. TI’s Recommendations: To fight corruption and promote transparency, TI recommends setting up

Lokayuktas, auditing political party accounts, electoral reforms, and laws to confiscate illegally acquired
properties.