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Demonetisation and its effect on black money

The biggest mission of demonetization is described as fighting black money. India’s economy historically holds a big parallel economy where unreported income is the norm.

Demonetization is a currency side step. That itself will not fight black income. The most important policy should be tax administration where the tax authorities can monitor expenditure and matching it with income of the respective individuals.

The effectiveness of demonetization against black money depends upon the follow-up and supportive measures were made by the government. For example, the enactment of the modified Benami Transactions Act from November 1, 2016 will be a big associated tool in the hand of the government to tackle black income. Thus, to assess the effectiveness of demonetisation, we should examine how these steps are complementing each other to fights black money.

Effects of demonetization on black money

Already, several analysis projects that demonetization will bring several long-term besides netting black money deposited in the form of banned notes.  Hence, it is logical to classify the black money fighting effect of demonetisation as (a) direct or immediate and (b) long term.

(A) Direct or immediate effects

Immediate effect of demonetisation comes through the netting of black money deposited in the banking system in the form of banned Rs 500 and Rs 1000 notes from November 10 onwards.

Around Rs 12 lakh crore of the Rs 15.44 lakh crore demonetized currency is with banks now and the extent of black money identified out of this will be the direct effect. Here, it is believed that an estimated Rs 1.5 to 2 lakh crore may be identified as black income. Out of this, around Rs 1.2 lakh crores may be collected as taxes at 50% to 85% tax rate.

If Rs 2 lakh crore is revealed as black money out of demonetisation, it will amount to around 1.75% of India’s GDP. According to National Institute of Public Finance and Policy (NIPFP), black income amounts to nearly 40% of the coutnry’s GDP.

Direct effect depends upon two steps: the Benami Act and the Pradhan Mantri Garib Kalyan Cess

A recent case study on black money front is the non-acceptance of tax from a Gujarati trader -Mahesh Sha and Mumbai family by the Tax Department. In both these cases, the Tax Department refused disclosure under Income Declaration Scheme (which was closed on September 30, 2016) to accept 45% taxes. Instead, the Department invoked provisions of the newly enacted Benami Prohibition Act by waiting till November. The Act prescribes imprisonment up to seven years for having Benami property besides confiscation of the propery.

The same procedure will be repeated in the case of big accounts parked with banks under demonetisation. This shows how effective will be demonetisation when combined with a built-in Income Disclosure Scheme in the name of Pradhan Mantri Garib Kalyan Yojana and the sharpened Benami Prohibition Act.

(B) Long term effects of demonetisation on black money

The long-term effect will be much impactful and depends considerably upon how government deploys more measures to depress the shadow or black economy.

Shadow vs formal economy

A high proportion of the economic transaction happens in the shadow economy and hence are unaccounted. The real estate sector is the most important example. Reducing the size of the shadow economy by enlarging formal economy is the way out. Here, transactions should be recorded. To be recorded, disclosure about the buying and selling people by quoting their financial ID or PAN card is mandatory especially for big transactions. The real estate sector amounts to nearly 45% of India’s parallel economy.

The process of formalization

Formalization means under the monitoring of the government. Here, two formalization options are needed: recording (a) high value transactions and (b) low value transactions.

Formalizing high value transactions: Post demonetisation legal steps should be made to ensure mandatory PAN quoting for high value physical assets – gold/land etc. Though this measure is still prevailing, fragmentizing transactions into small helps black money. To avoid this, every small physical asset transaction should be made with Aadhaar ID proof. When each money is to be reported and recorded; land deals will become automatically white.

Formalizing small value transactions: Here, digitalizing transactions in the form of prepaid payment instruments, debit and credit cards and online payments will reduce black money. Several post-demonetisation steps were made by the government to promote digital payments.

A social shake up against black money

An awareness against black money and consciousness about legal and punitive measures is an intangible positive effect of this demonetisation. It will change the mindset of the people to keep away from black income. This shakeup of Indian society will be a big outcome though it may not be measurable.

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Black Money

In a written reply in the Lok Sabha, Finance said Tax demand of Rs 14,820 crore after completing assessment in 368 cases under the black money law dealing with undisclosed foreign income.

Black money refers to illicit funds acquired through illegal or unethical means that are kept hidden from authorities to evade taxes and engage in other illegal activities.

  Factors contribute to the generation of black money:

• Tax Evasion, Corruption, Unregulated Cash Transactions, Illegal Activities, Offshore Accounts and Money Laundering, Parallel Economy

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Essay on the Black Money of India

In this essay we will discuss about the Black Money of India. After reading this essay you will learn about: 1. Introduction of Black Money in India 2. Estimates of Black Money in India 3. Factors Governing 4. Impact on Economy 5. Measures.

• Essay on the Measures to Control Generation of Black Money in India 

1. Essay on the Introduction of Black Money in India:

By the term parallel economy we mean working of an unofficial or unsanctioned economy parallel to the parent economy of the country. The objectives of such unsanctioned or black economy run parallel to that of the parent economy but in contradiction with the declared social objective.

This type of economy is also known as ‘black economy’, ‘illegal economy’, ‘unaccounted economy’, ‘unreported economy’, ‘subterranean economy’, ‘unsanctioned economy’ etc. According to Prof. J.C. Sandesara, “in popular parlance, the unofficial economy goes by the name of black money and the official, of white money. Black and white are also variously substituted by number two and number one, unaccounted and accounted, unreported and reported, unrecorded and recorded and so on.”

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Multi-dimensional problems are experienced under parallel economy. This type of economy has political, commercial, legal, industrial, social and ethical aspects. There are wide confrontations between the objectives of the legitimate and illegitimate sectors under parallel economy.

The basic objectives of economic planning in India, i.e. establishment of socialistic pattern of society are very much disturbed with the existence of parallel economy. This parallel or black economy started to operate during the Second World War when the country had to experience a serious shortages in essential items and the Government resorted to system of controls and rationing of these items.

With the growth of the economy in the post-independence period the extent of the parallel or black economy has been magnified and now it is playing a dominant role in determining the trend of economic activities as well as to mould the national policies, to change the composition and structure of the output and also to promote a powerful class having huge black money.

This increasing number of black money operators has been able to establish a parallel economy to suit their own interest which is very much in contradiction with the national interest of the country. D.K. Ragnekar has observed, “If the ‘Parallel economy’ poses a serious threat to stability and growth of the official economy, surely it stems from the fact that the magnitude of “black money” is large and rigged dais are growing in volume and complexity at an alarming rate………..”black incomes” are accentuating the inequalities in income and wealth and breeding a new class of “black rich” in a society which is already harshly stratified. The inequalities are no longer below the surface. The conspicuous consumption of the new “black” rich, their vulgar display of pomp and opulence, their unlimited accessibility to finance, their nest-eggs in various places and countries, their influence in important places, all these are now common knowledge”.

D.R. Pendse is of the opinion that there are two possible sources of black money. Firstly it may originate from illegitimate source of income arising out of illegal gratification such as payment of ‘Selami or Pagri’ or income from smuggling, bribery etc.

Secondly, it may originate from legitimate and legal sources of income but concealed from tax authorities out of tax evasion. In big towns and cities, professionals like Doctors, Engineers, Chartered Accountants, Pleaders etc. usually conceal a large amount of their income, although they earn their income from legitimate sources.

Under various situations, this black money is converted into white money or white money is also converted into black money. This problem of black money is quite mixed and vexed issue which is very difficult to isolate. In order to understand the impact of black economy, it is quite important to estimate the extent of black income over a definite time period.

2. Essay on the Estimates of Black Money in India:

In India, the extent of black money is quite significant. In the mean time, various attempts have been made for the estimation of black money in India. There are two different approaches which are mostly followed in the estimation of black money.

(a) Kaldor’s approach of estimating non-salary incomes above the income tax exemption limit and

(b) Edger L. Feige’s method estimating transaction income on the basis of currency deposit ratio.

In the mean time, various estimates of black money have been made in India by different authorities. N. Kaldor in his report on India Tax Reform assessed the black money to the extent of Rs 600 crore in 1953- 54 which was then about 6.0 per cent of GNP.

Wanchoo Committee again estimated the amount of black money at Rs 700 crore in 1961-62, which was about 4.4 per cent of GNP and then rose to Rs 1,000 crore and Rs 1,400 crore in 1965-66 and 1968-69 respectively. Again, Dr. D.K. Rangnekar’s estimate of black money showed an increase in the extent of black income in India from Rs 1,150 crore in 1961-62 to Rs 3,080 crore in 1969-70 which was 8.4 per cent of GNP.

Again Mr. O.P. Chopra prepared a series of estimates of black money where it increased from Rs 916 crore (6.1. per cent of GNP) in 1961-62 to Rs 8,098 crore (10.5 per cent of GNP) in 1976-77. Besides the estimate of black money by Poonam Gupta and Sanjeev Gupta has revealed an increase in its amount from Rs 3,034 crore (9.5 per cent of GNP) in 1967-68 to Rs 46,487 crore (48.8 per cent of GNP) in 1978-79.

Dr. Malcom S. Adiseshiah also estimated the extent of black money to be about X 59,000 crore which was about 40 per cent of GNP. IMF staff survey on the unaccounted sector has estimated the black money in India at about Rs 72,000 crore.

The National Institute of Public Finance and Policy (NIPFP) had also made an estimate of black money from the range of Rs 9,958 crore to Rs 11,870 crore (15 to 18 per cent of GNP) in 1975-76 to the range of Rs 31,584 to Rs 36,784 crore (18 to 21 per cent of GNP) in 1983-84.

The estimates of black money made by NIPFP is the last official estimate. Since then no official study has been conducted by either Planning Commission, or Finance Ministry or any other research institute. Despite economic reforms bringing in their wake a simplified taxation structure, unaccounted money in the economy has risen sharply.

According to an unofficial estimate made by R.N. Lakotia, the amount of black money in India had doubled since the last study was made. The quantum of black money circulating in the Indian economy is at least 6.6 per cent of the GDP which now would be in the range of Rs 70,000 crore.

However, a Parliamentary Standing Committee on Finance quoted unofficial estimates of black money at Rs 1,10,000 crore in 1994-95. Again Prof. Madhu Dandavate, the then Deputy Chairman of the Planning Commission recently quoting an unofficial estimate, disclosed that black money worth Rs 80,000 crore was in circulation in the country.

Again, Dr. Suraj B. Gupta made a guess estimate of black income for three particular years, i.e., 1980- 81, 1983-84 and 1987-88. Dr. Gupta was of the opinion that the estimate of black income by NIPFP is an under-estimate. But the amount of black income in India which was Rs 50,977 crore in 1980-81, increased to Rs 85,208 crore in 1983-84 and to Rs 1,49,297 crore in 1987-88 which were 41.7 per cent, 45.8 per cent and 51.7 per cent of GNP respectively.

Recently the Supreme Court of India asked the government to take black money as a serious issue. Accordingly, in 2011-12, the Centre has initiated the task of making a statistical study of the quantum of black money in economy and of negotiating with various tax-haven countries like Switzerland to unearth unaccounted black money parked outside India.

The statistical study also includes subjects like tax havens, tax treaties, and the trends adopted by tax evaders within the country as also around the world.

Though it is quite difficult to estimate the quantum of black money with accuracy but many attempts have so far been made in India for quantifying it and in most of the cases the findings appear to be far from reality. However, most of such studies undertaken in our country in recent years put the quantum of black money in the neighbourhood of 40 per cent of gross domestic product (GDP).

Accordingly, Indian Institute of Public Finance and Policy (IIPFP) finds that out of the total amount of black money, 48 per cent is generated from evasion of personal income tax alone, 28 per cent from under-reporting of production and 18 per cent from under- registration of immovable property so that these three main components exhaust about 94 per cent illegal income generation.

Presently, most economists feel that the size of unreported economy would be close to 40 per cent of GDP. India’s GDP currently being in the neighbourhood of 62 lakh crore, the country’s underground economy would be worth at least Rs 25 lakh crore. This simply means that the government is losing a tax revenue of more than Rs 7 lakh crore every year which is more than a year’s total tax collection.

The existence of such huge quantum of black money in India results in not only revenue losses, but also availability of less resources for investment in priority areas, increased inequality, illegal transfer of funds to foreign countries underestimated national income money supply and liquidity quantum per capita income and employment.

During the post- reform period, liberalisation has helped big industrial houses in hiding their incomes and their outflow of funds to tax havens. In spite of agricultural sector offering a safe shelter to concealed incomes, the sector continues to remain outside the tax net due to lake of political will to reverse the system.

Thus to have a proper estimate of black money, the biggest sources of black money i.e., the erosion of income tax under-reporting of output and under-registration of immovable property should be under proper scanner and the government should make the rules governing them simpler.

3. Essay on the Factors Governing Generation of Black Money in India:

Various factors are equally responsible for the growing generation of black income in India.

Following are some of the important factors governing the generation of black income in India:

(i) Higher Rates of Taxes:

One of the important reasons behind the generation of black income is the prevalence of higher rates of taxes both in direct and indirect taxes. Higher rates of taxes has resulted in a growing tendency of tax evasion among the tax payers. Dr. K.N. Kabra’s estimate shows that the estimated amount of evasion of income tax increased from Rs 1890 crore in 1971-72 to ?5305 crore in 1978-79.

The evaded tax as percentage of total tax revenue potential has increased from 77.9 per cent in 1971-72 to 82.1 per cent in 1978-79. Tax evasion is widespread in respect in income tax, corporation tax, union excise duties, custom duties, sales tax etc. and it is mostly resulted from higher rates of these taxes.

(ii) Divergence between Expected Rate of Return and Permissible Rate of Return:

In India, individuals expect a higher rate of return than the legally permissible rate of return. The divergence between these two rates is mostly resulted from higher rates of taxation. At one time, the marginal rate of income tax was set as high as 97.5 per cent.

Accordingly, India was termed by many experts as “The most highly taxed nation”. Various committees such as the Wanchoo Committee also advocated to reduce the rate of income and surcharge in different times. In recent years, the then Finance Minister, Dr. Manmohan Singh has also under­taken a series of measures to reduce the rates of taxes in the different budgets.

This has shown a positive result as the tax revenue earned from income tax has increased considerably in recent years. Personal income and corporate taxes taken together are expected to increase its revenue collection by more than 25 per cent in 1994-95. The share of direct taxes in GDP has increased from 2.1 per cent in 1990-91 to 2.8 per cent in 1994-95.

(iii) System of Control Permits and Licenses:

The system of control, permits, licences and quotas associated with mal-distribution of scarce commodities breeds grounds for increasing volume of corruption and generation of black money.

In this connection the Wanchoo Committee observed, “In spite of the vigilance exercised by the Government, controls and regulations came to be used by the unscrupulous for amassing money for themselves. Since considerable discretionary powers lay in the hands of those who administered controls, this provided them with a scope for corruption—’speed money’ for turning a blind eye to the violation of controls. All these gave rise to trading permits, quotas and licences, malpractices in distribution and in the process, it generated a sizable sums of black money.”

It is really difficult to administer controls efficiently and in a corruption free atmosphere.

(iv) Ineffective Enforcement of Tax Laws:

In India, the enforcement of tax laws in respect of income tax, sales tax, excise duty, stamp duty etc. is quite weak. This has led to huge unchecked evasion of taxes and piling up of black income.

(v) Increase in the Volume of Public Expenditure:

Total expenditure of the Central and State Governments and Union Territories has been increasing steadily from Rs 740 crore in 1950-51 to Rs 2,34,647 crore in 1993- 94, which shows an increase of 317 times. The total expenditure of the Central Government has also increased significantly from Rs 22,056 crore in 1980-81 to Rs 1,05,298 crore in 1990-91 and then to Rs 1,62,272 crore (RE) in 1994-95.

This increasing volume of public expenditure has also resulted in misuse of public money in huge quantity. This has resulted in non-fulfillment of physical targets on every project, diversion of resources meant for target groups to non-entity sectors and generation of huge black income in the economy.

(vi) Funding of Political Parties:

There is a growing tendency of funding of political parties with the help of black money through underhand means. Big business houses are donating a huge amount of black money to the political parties, especially the ruling party with the sole intention to tame the political leadership for deriving undue benefits by manipulating policy decisions.

In order to contain the growth of black money, the link between black money and political forces should be broken.

(vii) Generation of Black Money in the Public Sector:

In India, the public sector is being allocated with larger size of investment in the successive five year plans. Various public sector projects and public sector undertakings are monitored by the bureaucrats. Decision making by these are again monitored by political bosses.

This unhealthy nexus between bureaucracy, contractors and politicians may lead to underhand deals, artificial cost escalation of projects leading to finally generation of black income.

(viii) Ceiling on Depreciation and other Business Expenditures:

Imposition of ceiling on depreciation and restrictions on other expenses on advertisement, entertainment, perquisites etc. by the Government are not liked by the businessmen and industrialists of the country. Therefore, by clandestine devices they want to siphon off or convert a portion of the income of the business into black money for the benefit of rich or elite sections related to their business and industry.

(ix) Other Factors:

Generation of black income in a country like India is also resulted from other different activities like smuggling, property deals, bribery, kick-backs, commissions, concealment of income by professionals, artists etc. Thus in this way a huge amount of black income is continuously resulting in enhancement of the area and activities of parallel economy.

4. Essay on the Impact of Black Income on the Economy:

Generation of black income and thereby establishment of parallel economy has been creating serious impact on the social and economic system of the country.

These points of impact are:

1. Black income has been resulting in underestimation of GDP in India as a huge volume of income is diverted to this unaccounted sector resulting in increasing existence of parallel economy of the country.

2. Generation of black income has been resulting in a huge loss of revenue to the state exchequer due to continuous evasion of taxes both from direct and indirect taxes. In this regard, the Direct Taxes Enquiry Committee observed, “Black money and tax evasion which go hand in hand, have also the effect of seriously undermining the equity concept of taxation and warping its progressiveness. Together, they throw a greater burden on the honest tax payer and lead to economic inequality and concentration of wealth in the hands of the unscrupulous few in the country.”

3. Concentration of black incomes in the hands of businessmen and capitalists increases conspicuous consumption which have a demonstration effect on all classes of people. This would ultimately distort the product-mix and raised the production of non-essential consumption at the cost of commodities of mass consumption.

4. Black money has resulted in diversion of resources for the purchase of real estate and luxury housing.

5. Black income encourages increase in the volume of investment in precious stones, jewellery, bullion etc. which are more or less unproductive in nature and thus create adverse effect on the growth of the economy.

6. Black money encourages speculation, profiteering, black marketing, soaring price level and growing inequality in the distribution of income and wealth, leading to imbalances in the working of the economy.

7. Black money also encourages transfer of funds from India to foreign country through clandestine channels, i.e., through the violation of Foreign Exchange Regulation Act (FERA). This may be done by under invoicing of exports or over-invoicing of imports.

8. Existence of black money results expansion of service organisation for its protection composed of brokers, touts, musclemen on the one side and a group of income tax practitioners, chartered accountants and liaison officers on the other side to establish a black money culture or an evil network within the economy.

9. Lastly, existence of black income or the parallel economy has corrupted the base of the political system of the country. On various occasions, MPs, MLAs, Ministers, part office bearers collect funds from black money operators. This has eroded the moral fibre of Indian polity.

The Wanchoo Committee has rightly observed, “It is, therefore, no exaggeration to say that black money is like a cancerous growth in the country’s economy which if not checked in time, is sure to lead to its ruination.” Thus the existence of parallel economy has totally distorted and disrupted the planned economy of the country.

5. Essay on the Measures to Control the Generation of Black Money in India:

In the meantime, the Government has undertaken various measures to control the menace of parallel economy or black economy in the country.

Following are some of important measures that are undertaken by the Government in this regard:

(i) Checking Tax Evasion:

As evasion of taxes has been considered as the major root of the generation of black income. Thus the Government has undertaken various administrative and legal measures to check evasion of both direct and indirect taxes.

These measures were undertaken as per the recommendations of various commissions and committees such as Taxation Enquiry Commission (1953), Kaldor’s recommendation for Indian Tax Reform (1956), Direct Taxes Administrative Enquiry Committee (1958) and Direct Tax Enquiry Committee (1991). The Commissions and Committees pointed out various loopholes and weaknesses in tax laws and suggested various measures to check evasion of taxes.

(ii) Demonetization:

Demonetization of high denomination currency has also been suggested from different levels. In India, demonetization was done for the first time in 1946 and the value of demonetized notes was about Rs 144 crore.

Demonetization of high denomination currency worth Rs 1,000 and Rs 5,000 and Rs 10,000 was again attempted in 1978. Till August 1981, notes worth 125 crore was demonetized. Thus demonetization as a measure of checking black money is not at all successful and it is also very much unpopular.

(iii) Voluntary Disclosure Scheme:

The Government introduced voluntary discloser schemes in different times to unearth black money. This scheme was first introduced in 1951 which resulted disclosures amounting to Rs 71 crore and tax collection of Rs 11 crore. Again the scheme (VDS) was introduced in 1965 with a provision of 60 per cent tax on disclosed income which resulted disclosures worth Rs 146 crore and tax collection of Rs 68 crore.

Again as per the recommendation of the Direct Tax Enquiry Committee, the Government again utilised this scheme (VDS) for both income and wealth. Accordingly, this scheme disclosed Rs 1,578 crore and tax collection of Rs 248.7 crore as income tax and wealth tax. The 1997-98 Budget again introduced the voluntary Disclosure scheme to unearth black money.

(iv) Special Bearer Bond Scheme:

Government introduced special bearer bond scheme in 1981 in order to canalize unreported money. Accordingly, the Special Bearer Bonds, 1981 of the face value of Rs 10,000 each were issued for a period of 10 years at 2 per cent rate of interest per annum. As per 1982-83 budget, a total to Rs 875 crore was subscribed under the Special Bearer Bond Scheme.

(v) Reduction of Tax Rates:

In order to make the taxes more productive, the Government has been reducing the peak rate of personal income tax from 61.9 per cent to 54 per cent in 1990-91 and then to 40 per cent in 1992-93 budget and then finally to 30 per cent in 1997-98 Budget.

Thus reduction of personal income and corporation tax are expected to increase tax revenue by more than 25 per cent in 1994-95. The share of direct taxes in GDP has also increased from 2.1 per cent in 1990-91 to 2.8 per cent in 1994-95 as a result of reduction in tax rates.

(vi) Economic Liberalization:

Introduction of economic liberalisation has removed the regime of controls and regulations and thereby the extent of black economy would be reduced gradually.

(vii) Other Measures:

The Government has also introduced some other measures to contain the growth of black money in the country which includes—Deposit in the National Housing Bank in 1991, NRI-foreign exchanges remittance, issuing National Development Bonds in US dollars, controlling the election expenses incurred by the candidates, conducting searches, seizures, raids and other steps to plug loopholes in the tax- administration etc.

The 1995-96 Budget has also introduced a new scheme where undisclosed income detected as a result of search shall be assessed separately at a flat rate of 60 per cent.

But unfortunately, all these measures are introduced in India half-heartedly, and thus the grip of parallel economy is gradually being strengthened. Had there been a sincere attempt to control the generation of black money in the country by the Government, bureaucrats, tax administrators etc., the network of parallel economy might have been checked and the country might have experienced a better economic situation characterised by better level of living for the common people, moderate inflation and rational economic decisions.

Recently in May, 2011, the Centre has taken a decision to set up a directorate of criminal investigation to its income tax department to deal with issues related to tax crimes and trace black money. This directorate will deal with tax crimes related to illegal activities. It will locate crimes or criminals by tracing the movement of money before, during and after a crime is committed.

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Essay on Indian Economy for Students and Children

500+ words essay on indian economy.

India is mainly an agricultural economy . Agricultural activities contribute about 50% of the economy. Agriculture involves growing and selling of crops, poultry, fishing, cattle rearing, and animal husbandry. People in India earn their livelihood by involving themselves in many of these activities. These activities are vital to our economy. The Indian economy has seen major growth in the last few decades. The credit for this boom largely goes to the service sector. Agriculture and associated activities have also been improvised to match the global standards and the export of various food products has seen an upward trend thereby adding to the economic growth. The industrial sector does not lag behind a bit. A number of new large scale, as well as small scale industries, have been set up in recent times and these have also proved to have a positive impact on the Indian economy.

Government’s Role in Economic Growth

Majority of the working Indian population was and is still engaged in the agriculture sector. Growing crops, fishing, poultry and animal husbandry were among the tasks undertaken by them. They manufactured handicraft items that were losing their charm with the introduction of the industrial goods. The demand for these goods began to decline. The agricultural activities also did not pay enough.

The government identified these problems as hindering the economic growth of the country and established policies to curb them. Promotion of cottage industry, providing fair wages to the laborers and providing enough means of livelihood to the people were some of the policies laid by the government for the country’s economic growth.

Get the huge list of more than 500 Essay Topics and Ideas

The Rise of the Industrial Sector

The government of India also promoted the growth of small scale and large scale industry as it understood that agriculture alone would not be able to help in the country’s economic growth. Many industries have been set up since independence. A large number of people shifted from the agricultural sector to the industrial sector in an attempt to earn better.

Today, we have numerous industries manufacturing a large amount of raw material as well as finished goods. The pharmaceutical industry, iron and steel industry , chemical industry, textile industry, automotive industry, timber industry, jute, and paper industry are among some of the industries which have contributed a great deal in our economic growth.

The Growth in Service Sector

The service sector has also helped in the growth of our country. This sector has seen growth in the last few decades. The privatization of the banking and telecom sectors has a positive impact on the service sector. The tourism and hotel industries are also seeing a gradual growth. As per a recent survey, the service sector is contributing to more than 50% of the country’s economy.

Indian Economy after Demonetization

The worst affected were the people in the rural areas who did not have access to internet and plastic money. This affects many big and small businesses in the country very badly. Several of them were shut down as a result of this. While the short term effects of demonetization were devastating, this decision did have a brighter side when looked at from long term perspective.

The positive impact of demonetization on the Indian economy is a breakdown of black money, the decline in fake currency notes, increase in bank deposits, demonetization stopped the flow of black money in the real estate sector to ensure a fair play, increase in digital transactions, cutting monetary support for terrorist activities.

Many of our industries are cash-driven and sudden demonetization left all these industries starving. Also, many of our small scale, as well as large scale manufacturing industries, suffered huge losses thereby impacting the economy of the country negatively. Many factories and shops had to be shut down. This did not only impact the businesses but also the workers employed there. Several people, especially the laborers, lost their jobs.

The Indian economy undergoes several positive changes since independence. It is growing at a good pace. However, the rural regions of our country are still under-developed. The government must make efforts to improve the economic condition of these areas.

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