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?
A
Diversion of resources to the purchase of real estate and investment in luxury housing
B
Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc.
C
Large donations to political parties and growth of regionalism
D
Loss of revenue to the State Exchequer due to tax evasion
Correct Answer
Explanation
Option (D) is correct because black money is primarily income on which tax has been evaded, leading to a direct loss of revenue for the State Exchequer and hindering the government’s ability to fund welfare, infrastructure, and developmental projects. While options (a) and (b) represent significant consequences involving the misallocation of resources into unproductive assets, they are secondary effects compared to the fundamental fiscal challenge of tax evasion. The core concept being tested is the impact of the shadow economy on the government's fiscal capacity and its ability to maintain a balanced budget.
Indian EconomyBlack Money & Tax EvasionBlack moneyTax evasionGovernment revenueState ExchequerReal estateLuxury housingUnproductive activitiesPolitical donations