Former RBI governor YV Reddy said in Bhopal on Wednesday that it was wrong to perceive that black money was merely a result of heavy taxation, stating that there are several factors behind the menace and there is a pressing need to be address them.
Delivering a lecture on ‘Understanding black money in India’ under the second Mahesh Buch Memorial Lecture at Samanvay Bhavan, Reddy said India had one of the lowest tax regimes among the major economies in the world.
Indicating that there was still huge amount of black money undisclosed, he said the amount recovered under the Centre’s recent scheme for disclosure of black money, which is to the tune of Rs 65,000 crore, is only 0.45% of the country’s GDP.
He said black money is often defined as a parallel economy but said that the fact remains that black money turns into white and white money turns into black, all within a day. Giving an example of the same, he said if a building is being constructed, a part of the money invested in it might be a black money. But when the same money is paid as wages to labourers, it becomes white. When labourers purchase articles from shops, it remains white, but when the builder collects the same money from the market unaccounted, it again becomes black money.
Reddy said the black money stashed in banks abroad flows in and out, given the proper circumstances and regulations. He also said clever and shrewd people look for ways and means to convert their black money into white.
He bemoaned the fact that though benami transactions were the biggest component of black money, successive governments have not been using the Benami Transactions (Prohibition) Act effectively in the past 25 years.
Speaking on the occasion, Consumer Unit and Trust Society secretary general Dr Pradeep S Mehta said black money is a universal problem and election funding was a large generator of black money.
Mehta said that out of the `65,000 crore disclosed as black money in the country, about `52,000 crore was a result of involuntary disclosure.
Meanwhile, chief secretary Anthony de Sa released a book on city planning, authored by former IAS officer MN Buch, in whose memory the lecture had been organised. Senior journalist Shravan Garg conducted the proceedings while Rashmi Saraswat gave the vote of thanks.