(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 the growth of regionalism
(d) Loss of revenue to the state exchequer due to tax evasion
Answer: d
Explanation:
Black money is a term used in common parlance to refer to money that is not fully legitimate in the hands of the owner. This could be for two possible reasons
- money may have been generated through illegitimate activities not permissible under the law, like crime, drug trade, terrorism, and corruption
- wealth may have been generated and accumulated by failing to pay the dues to the public exchequer in one form or other.
Impacts of ‘Black Money’
Its major impact is the loss in revenue collection as it loses the tax which would have come to the Exchequer if such transactions had been done in the open and duly accounted for.
Black money situation results in an under-estimation of resources available in the country which can distort major investment targets and objectives of the government’s planning.
In order to avoid detection, these ill-gotten gains are kept either outside the country as deposits in foreign bank accounts which deprive the country of a part of its wealth that could have been used for growth or is hoarded within the country and results in immobilisation of investible funds, which could have helped in the economic growth of the country.
Black money provides an alternative source of credit at a ‘free market’ rate which defeats the Government’s economic policies, particularly related to credit and investment, and makes them ineffective.
Lead to economic inequality and concentration of wealth in the hands of the unscrupulous few in the country.
Black money encourages over-financing of business which adds further to the inflationary pressures in the country.
Hence, option d is correct.
Read: Solved Economy PYQs With Explanation 2021 UPSC Prelims