What is Black Economy?

Black economy is referred by more than 30 different names across the globe as per some international studies. The other names of the black economy are parallel economy, black money, informal economy etc. Basically black economy consists of all the activities in which black incomes are generated which do not get reported to tax authorities. Black economy exists everywhere, from developed countries to developing countries. Those involved in black economy circumvent the rules and regulations set by the Governments.

Aspirants would find this topic very helpful in the IAS Exam.

What is the Percentage of Black Economy in India?

As per estimates of some economists, the black economy of India is estimated to be at 62% of the GDP. It is more than the income generated by Agriculture and Industry combined together. It is larger than the spending of Government of India. The impact of it is, the Indian economy has been losing growth at an average of 5% from the 1970s.

What is the Amount of Black Economy in India based on Study Commissioned by the Ministry of Finance?

Ministry of Finance had commissioned a secret study, which concluded in 2014. As per the report, around 90% to 97% of the unaccounted wealth of India was lying within India and not outside India. This was one of the key factors for the Government of India to go ahead with demonetization, which removed 85% of currency in circulation. This report was an amalgamation of reports generated by three Institutes. As per National Institute Public Finance and Policy (NIFP), between 1997 and 2009 the flow of illegal money out of the country was 0.2% to 7.4% of GDP. As per 2 other institutes the flow of illicit money out of country ranged from 2.8% to 10% of the Indian Economy. However all 3 institutes unanimously reported that all 97% of the illegal wealth was within India.

What Type of Economy is followed in India?

India has a mixed economy. As per latest almost 50% of the country’s workforce is dependent on agriculture. Approximately 30% of the workforce is employed in the services sector. 2/3rd of India’s output comes from the Services sector. The productivity of this segment resulted in India shifting more towards market economy. In the 1990s it opened its economy with privatization, liberalization, and globalization.


The above details would help candidates preparing for UPSC 2020.

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