What are the effects of parallel economy on economy?

In simpler terms, the parallel economy inculcates all the forms of activities via which black income is generated especially those which are usually not accounted for. Commonly referred to as black money or black economy, the parallel economy negatively impacts the economic system of a country.

What are the parallel economy?

Parallel economy is the functioning of an unsanctioned sector in the economy whose objectives run in opposite to the objectives of official, sanctioned or legitimate sector. The term parallel economy is also referred as black economy, unaccounted economy, illegal economy, subterranean economy or unsanctioned economy.

What are the causes and effects of black money?

Black money is largely attributed to tax evasion. Its direct impact is the loss of the Government revenue. Since the Government fails to get sufficient tax revenue due to large-scale tax evasion, it is forced to resort to high taxation and deficit financing which again carry their ill-economic effects.

What are the causes of black money?

10 Main Causes of Black Money in India – Explained!

• Unrealistic Tax Laws and Tax Frauds: The increase in taxes and duties compels some people to evade them.
• Different Rates of Excise Duty:
• Control Policy:
• Quota System:
• Scarcity:
• Inflation:
• Elections in a Democratic System and Political Funding:
• Real Estate Transaction:

What is the concept of parallel economy what are the bad effects of parallel economy?

As such, it needs to be curbed. Its elimination will benefit the economy in more than one way. ADVERTISEMENTS: In a general way, we can define black economy as the money that is generated by activities that are kept secret, in the sense that these are not reported to the authorities.

How does the parallel economy or black money exist?

What is Parallel economy & why does it exist? The black money/unaccounted money cannot be transacted in the normal economy as it will catch the government’s eye and tax authorities would figure out the generation of such black money. Therefore, to avoid that, a parallel economy exists.

How do you control a parallel economy?

Controlling Parallel Economy in India: Top 7 Measures

1. Checking Tax Evasion:
2. Demonetization:
3. Voluntary Disclosure Scheme:
4. Special Bearer Bond Scheme:
5. Reduction of Tax Rates:
6. Economic Liberalization:
7. Other Measures:

What are the causes of black income generation in India discuss?

Causes of Black Money in India

• Prohibition causes black money.
• Public Expenditure.
• Political Funding encourages black money.
• Inflation leads to black money.
• Deficiencies of the Tax System pays way for black money.
• Quotas, Controls and Licences generates black money.
• Generation of Black Income in the Public Sector.

Which of the following terms is used for parallel economy *?

Also, several terms are used to describe Black Money – ‘black income’, ‘dirty money’, ‘black wealth’, ‘underground wealth’, ‘black economy’, ‘parallel economy’, ‘shadow economy’, ‘underground’ or ‘unofficial’ economy.

What are the measures to control parallel economy India?

Controlling Parallel Economy in India: Top 7 Measures

• Checking Tax Evasion: As evasion of taxes has been considered as the major root of the generation of black income.
• Demonetization:
• Voluntary Disclosure Scheme:
• Special Bearer Bond Scheme:
• Reduction of Tax Rates:
• Economic Liberalization:
• Other Measures:

Which is not causes of black money?

Prohibition causes black money Certain activities are usually forbidden by law such as gambling, production of illicit liquor, smuggling, trafficking illegal drugs, lending at exorbitant interest charges, money lending without proper license etc.

What are some of the reasons for the parallel economy?

Some of the reasons for the parallel economy are mentioned below Complicated taxpaying procedures and policies of the government. People believe that their money is not going to be properly utilized by the government as their trust in government is less. High inflation which puts taxpayers under high tax-paying brackets.

How to control the parallel economy in India?

From time to time various measures are taken to control the parallel economy in India. Some of the techniques of controlling the parallel economy are: Parallel economy or black money is funds earned on the black market on which income and other taxes have been paid.

What is the meaning of parallel economy or black money?

Meaning of Parallel Economy or Black Money: The parallel economy is based on black money or unaccounted money. We can define the black economy as the money that is generated by activities that are kept secret, in the sense that these are not reported to the authorities.