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Thursday, February 17, 2005
Black to white
An Indian Express editorial reminds us that in the journey to eliminate black money, India is still, despite post-liberalisation progress, a shade of grey.
Right on.
Today, in many sectors, we are now increasingly seeing a new white economy emerging. In the ’90s, Manmohan Singh and P. Chidambaram killed one big chunk of smuggling operations by removing restrictions on the import of gold. Most of the impetus for smuggling other things (like electronic goods) went away with liberalisation. The railway reservation system, a product of nation wide computerisation, has solved the problem of railway reservations. The end of the government monopoly on telephony put an end to the bribes paid for telephone connections. Stock market transactions went fully electronic, thanks to the computerisation of NSE, BSE and NSDL. This gives an audit trail which has made it harder for incomes to be hidden away.
This effort needs to be carried through. All over the world the informal sector is plagued with black money. It is very difficult to make people pay a service tax. Whenever there is a cash economy it becomes easy for both parties to hide the transaction and escape paying taxes. The way out is to increase the share of the formal sector and reduce the component of the cash economy.
Right on.
