It results in the loss of revenue of the Government. Black money and tax evasion go hand by hand” Honest tax payers are hard hit and it leads to economic inequality.
Unscrupulous businessman, traders, Capitalists and middlemen increase their wealth. They increase conspicuous consumption. The unproductive assets like precious stone, jewellery increase. People become dishonest at large, black money causes siphoning off funds as people and business community at large use funds for different motives and purposes.
Black money encourages additional consumption with-higher propensity to consume. This creates an inflationary situation as there will be greater demand for fewer consumer goods. But only those people will be able to meet their consumer demand whose income is higher due to black income. That will also increase the consumption of undesirable commodities.
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Another aspect may be mentioned here is that black money creates a situation in which money is transferred abroad, through unknown channels. Such transfer takes place violating and breaking all norms.
Observers have pointed out existence of black money in the society moulds the people perception and character in such a manner that they become greedy. Even there are kickbacks and bribery in defence deals and home affairs functioning which are ominous sign for a country’s security.
Black money becomes white through capital flight. A large part of money is sent to abroad and brought back into the coming through Hawla market channel.
In, the black money generation mechanism there is a nexus and liason among bureaucrats, political and business leaders. Black money eroded the values of our common people which is a dangerous sign for the nation as a whole.