UPSC Prelims 2021 · Question 9 of 97
UPSC Prelims 2021 question on Black Money Effects
- ExamUPSC CSE
- Year2021
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicTaxation
- DifficultyMedium
- TypeDirect
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Show answer
Answer: D. Loss of revenue to the State Exchequer due to tax evasion
Verdict
Correct answer → Option (d).
Analysis
Black Money: There is no official definition of black money in economic theory. Several terms — parallel economy, black money, black incomes, unaccounted economy, illegal economy, irregular economy — are used more or less synonymously. Black money can come from two broad categories: illegal activity, and legal but unreported activity.
Statement by statement
Option (a) — INCORRECT: Diversion of resources to real estate / luxury housing is a way / channel of utilising black money, i.e., an avenue of creation/use, not the main worry to government.
Option (b) — INCORRECT: Investment in unproductive activities (gold, jewellery, precious stones) is similarly a use/channel of black money.
Option (c) — INCORRECT: Large donations to political parties and growth of regionalism is also a way of using black money.
Option (d) — CORRECT: Loss of revenue to the State Exchequer due to tax evasion is the principal effect that worries the Government, as it directly reduces revenue available for public expenditure and welfare. Options (a), (b) and (c) describe ways of creation/use of black money, while (d) is the effect that hurts the government most.