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UPSC Prelims 2021 Paper-1 📅 10 Oct, 2021

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

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 growth of regionalism
D
Loss of revenue to the State Exchequer due to tax evasion
Result Summary
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APEDIA

UPSC Prelims
2021 • 10 Oct, 2021 • Paper-1
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Correct Answer
Loss of revenue to the State Exchequer due to tax evasion
Macroeconomic Significance: While black money does lead to speculative investments in real estate, hoarding of precious metals, and corrupt political funding, t......
Ref/Book : UPSC Prelims 2021
Ref. Subject Economy
Chapter -
Ref. Topic Public Finance
Pg. No -
💡 Analysis & Explanation
Macroeconomic Significance ▼
While black money does lead to speculative investments in real estate, hoarding of precious metals, and corrupt political funding, these are secondary manifestations or channels for hiding the money.
Core Government Concern ▼
The most direct and damaging macroeconomic impact for the government machinery is the massive loss of tax revenue. Black money is essentially unaccounted wealth that escapes the tax net.
Fiscal Impact ▼
This persistent tax evasion severely restricts the State Exchequer's ability to fund public infrastructure, social welfare schemes, and developmental projects, while simultaneously widening the fiscal deficit. Therefore, revenue loss stands as the primary structural worry for the state.
Conclusion ▼
The loss of revenue due to tax evasion fundamentally cripples the government's economic capacity.
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