The size of Indian economy is calculated on the basis goods and service produced with white money. Apart from the white economy, there is a huge black economy that goes unaddressed while computing the GDP of the country.
However, the growth potential is lowered in black economy as it breeds inefficiencies.
Arun Kumar, Malcolm Adiseshiah Chair Professor at the Institute of Social Sciences, New Delhi spoke on this issue: “Take the example of ‘digging holes and filling holes’. One person digs a hole during the day and another person fills that hole during the night. The next day two incomes are generated without any addition to output. If you construct a road without putting enough tar in it and it gets washed away, your investment has not paid off”.
- India has been growing at around 7 percent in last one decade
- Without black money, India could have been growing at 12 percent
- With this calculation, Indian economy today would have been higher by eight times
- Indian economy would have been $18 trillion, rather than the official figure of $2.2 trillion
- India’s per capita income would have been $13,000 instead of current $1,500
Demonetization has been a bold move, but it effectiveness can be put under a question mark. This is simply because cash consist of just one percent of the India’s total black money. Therefore, squeezing out cash, what the demonetization did was being destined to be an ineffective move.
The unorganized sector was hit hard by demonetization which is described by Kumar: “That the unorganised sector got hit much harder than the organised sector has created a divide. Now the push towards greater digitisation has also helped the organised sector more as the unorganised sector does not have the wherewithal to benefit from it. On the one hand, demonetisation has affected the unorganised sector more and two, digitisation has only aggravated this divide”.
The accountability of the money not disclosed is not easy to obtain. For this the following developments are necessary:
- Inner party reforms and the electoral reforms in ensuring the democratic functioning of the parties
- Right to Information is an important step in bringing about accountability in the judicial and executive aspects
- Business class must have accountability to the shareholders
This requires not just political transformation, but also a psychographic transformation, where ethical culture is given value by all walks of life. We should not only learn the language and fashion from the European nations, but also their ethicality that is inbred in their society and culture. For this to happen, a messiah in the form a leader or a path breaking party needs to evolve that will deliver what all other have promised but failed to deliver.