Demonetisation effect: Parliamentary panel split over impact on black money

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New Delhi | Updated: June 25, 2019 5:54:58 AM

The panel, headed by Congress leader Veerappa Moily, cited three estimates pegging black money between $216.5 billion and $ 490 billion over various periods between 1980 and 2010.

black money, demonetisation, notebanNIPFP concluded that during the period 1997-2009 illicit financial flows out of the country have been in the range of 0.2% to 7.4% of GDP. (PTI)

A parliamentary panel has acknowledged “a lack of accurate and well-accepted methodology” to estimate the size of unaccounted wealth and refrained from drawing conclusions on whether and how demonetisation curbed black money, “due to lack of consensus”.

The panel, headed by Congress leader Veerappa Moily, cited three estimates pegging black money between $216.5 billion and $ 490 billion over various periods between 1980 and 2010.

Appearing before the panel, the revenue secretary said: “…the three studies have observed that the reliable estimation of unaccounted income and wealth is extremely difficult. They have also reported a very huge variation in estimations of unaccounted income ranging from 7% to 120% of the reported GDP. There is a lack of consensus regarding the most suitable method in the Indian context.”

“The Chief Economic Adviser has opined that there is no scope for arriving at a common estimate of unaccounted income by combining estimates from the three reports (studies),” the parliamentary panel’s report tabled in Parliament on Monday, said.

In March 2011, National Institute of Public Policy and Finance (NIPFP), National Council of Applied Economic Research( NCAER) and National Institute of Financial Management (NIFM) were asked by the finance ministry to conduct studies to assess and survey unaccounted income and wealth both inside and outside the country.

NIPFP concluded that during the period 1997-2009 illicit financial flows out of the country have been in the range of 0.2% to 7.4% of GDP. In NCAER estimate, wealth accumulated outside India is estimated to exist between $384 billion and $490 billion during the period 1980 to 2010.

NIFM said that total illicit outflow at the present value (including opportunity cost) from India in the reform period (1990-2008) is Rs 9,41,837 crore ($216.48 billion). Importantly, illicit outflows from the country are estimated on average to 10% of the estimated unaccounted income, it added.

Further, the studies conducted by the three institutes have found that the sectors where unaccounted income is found to be the highest included real estate, mining, pharmaceuticals, pan masala, gutkha, tobacco, bullion, commodity, film, and education.,

“All estimates depend upon the underlying assumptions made and the sophistication of adjustments incorporated. Among the estimates made so far, there is no uniformity, or consensus about the best methodology or approach to be used for this purpose,” said the report titled ‘Status of Unaccounted Income/Wealth Both Inside and Outside the Country – A Critical Analysis’.

Also read: Income Tax Dept made seizures of Rs 1,584 crore in FY 2019

Following the general elections, 17th Lok Sabha has been constituted. The committee also noted that as only a “limited number of stakeholders” could be examined by it, owing to the paucity of time, “this report might be considered as a preliminary report”, pending examination of other witnesses including non-official witnesses or experts on the subject and after evidence replies of the finance ministry which are awaited.

“In the meantime, the Committee would expect the Ministry of Finance (Department of Revenue) to continue their efforts with greater vigour to unearth and bring to book unaccounted income/wealth both within and outside the country including follow-up action on the seven reports of the special investigation team (SIT) constituted on black money as well as the three study reports on estimation of unaccounted money,” it said.

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