New agency to determine quantum of black money


Shruti Srivastava Posted online: Thursday , Mar 25, 2010 at 0106 hrs

New Delhi : The political brouhaha over black money and unaccounted wealth stashed in Swiss banks has prompted the government to undertake a fresh study on the quantum of black money in the country.

Almost 25 years after the National Institute of Public Finance and Policy (NIPFP) attempted to estimate the quantum of black money in the economy, the government is finally considering appointing a new agency to undertake a comprehensive study.

“We are thinking of setting up a new agency that would be more broad based and the study will cover all sectors,” Central Board of Direct Taxes chairman SSN Moorthy told The Indian Express. The study will focus on forms of black money and the channels from which such unaccounted money originates.

The move comes after the Parliamentary Standing Committee on Finance last year raised concerns over the issue, criticising the government for turning away from its responsibility on claims that maximum transactions of such unaccounted money were in cash, thus making it difficult to track.

The NIPFP had conducted the study in 1982-84 and published a paper in 1985. The study was criticised for various lacunae. Following this, Jawaharlal Nehru University (JNU) professor Arun Kumar undertook an independent study in 1999 detailing the various aspects of black economy.

When contacted, Prof Arun Kumar said, “When we talk about black money, it is not just counterfeit money. We talk about the entire spectrum of illegal activities that are generating black money. Spurious drugs, construction sector, adulterated food grains, financial sector, hawala transactions, smuggling, narcotics, private sector siphoning off money... there is a whole range of such activities. The government has to be very clear, it is not sector specific but in every aspect of life.”

The government must try to deal with causes because post liberalisation, generation of such money has increased due to easy cross-border movement of funds.

The standing committee had observed that certain sectors like real estate and foreign trade were more prone to money laundering, evading tax surveillance and enforcement.

Whether the new agency will also study the illegal money outside the country in secret bank accounts is still unclear. In a study last year, the investigation department of the Ministry of Finance had found black money to the tune of over Rs 4,500 crore during 2008-09, with the quantum of such unaccounted money highest in the real estate sector at around Rs 2,000 crore, followed by the manufacturing sector.

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