Black money may be 21 per cent of GDP, find economists

THIRUVANANTHAPURAM: A fresh look at tax evasion conducted post-demonetisation has found that the size of the shadow economy in the country is not as gargantuan as it has been made out to be. The study, ‘Cash Holding, Tax Leakage and Estimate of Parallel Economy in India’, has revealed that the proportion of tax-evaded income or ‘black money’ is 21 per cent of the gross value added (GVA) and not 60 per cent or above as rumoured. In absolute size, the tax evaded income (potential tax base minus gross total income) has been estimated at Rs 17 lakh crore, Rs 19 lakh crore, and Rs 22 lakh crore for the fiscals 2011-12, 2012-13 and 2013-14 respectively.

This is far below the global average of 38 percent. The study — done by R. Mohan, a former IRS officer, Dr N. Ramalingam of GIFT, and Dr D. Shyjan of John Mathai Centre, Thrissur — attempted to get a sense of the parallel economy by estimating the potential tax base of the country. They tried to detect leakages in the two main direct taxes, personal I-T and corporate tax. For this, they used the data on factor incomes in Gross value Added, published by the Central Statistical Organisation.