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Tag: demonetization

  • India on the Rise: Achieving a $5 Trillion Economy

    After 75 years of independence from the British Raj, India has emerged as the fastest-growing and fifth-largest economy in the world. By the year 2020-2021, India’s per capita income has increased to INR 1.28 lakh. By August 2022, the country’s Foreign Exchange Reserves amounted to USD 572.97 billion and its GDP (Gross Domestic Product) rose to USD 3.5 trillion. India aspires to reach a USD 5 trillion economy by the year 2024-2025.

    Economic History
    Current Economic Status
    Way To USD 5 Trillion Economy
    Challenges & Obstacles
    Conclusion

    Economic History

    At the end of the 1st millennium BC, India was one of the largest economies around the globe which ended around the beginning of British rule. Under British rule, India experienced decentralization as well as the cessation of various craft industries. This coupled with accelerated economic and population growth in the west led to a steep decline in India’s share and by independence, the country’s GDP had been reduced to a mere 4.2%. India’s global industrial output also reduced from a towering 25% in the 1700s to a mere 2% in just a little over 200 years. The British left India in dire straits, dealing with a collapsing economy, poverty, high inflation, and an utter state of confusion.

    Post-independence, India adopted five-year plans concentrating on centralized economic and social growth programs. The first five-year plan focused on agriculture and irrigation and aimed to boost farm output and the second, launched in 1956 advocated rapid industrialization with a focus on heavy industries and capital goods. However, this caused the funds to be taken away from the agricultural sector leading to food shortages and inflation. In the 1960s Indian economy was worsened by the wars with China and Pakistan and the political instability within the country. This led to the devaluation of the Indian Rupee. Then, a little over two decades later came the oil crisis in 1991 resulting in a balance-of-payment crisis for the country. The global economic crisis of 2008 left the Indian economy deeply scathed and the country’s fiscal deficit rose to 6.4% of its GDP in 2009-2010.

    However, two economic events that have assured a place in history were the demonetization of 2016 and the implementation of the Goods & Services Tax (GST) in 2017. Demonetization was aimed at flushing out black money and striking out corruption and the introduction of GST introduced a uniform tax rate across all states paving the way for easier compliance.

    Current Economic Status

    Since the beginning of the 21st century, India’s annual average GDP growth has been around 6% to 7%. Between the years 2013 and 2018, India surpassed China and became the world’s fastest-growing economy. The country is the third largest unicorn base globally, being home to 100 unicorns that are collectively worth USD 335 billion. The country is also the third largest by PPP (Purchasing Power Parity) with an estimated USD 11.75 trillion.

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    Way To USD 5 Trillion Economy

    The country currently has strong economic fundamentals and is well on the road to becoming a USD 5 trillion economy. Various factors are working in favor of the country. These factors are –

    Diversified Economy

    India enjoys strong trade relations with many other countries. Its economy is well-diversified with healthy roots.

    New Technology Adoption

    In the past few years, India has quickly adopted newer technologies, especially in the manufacturing and financial sectors. This has led to higher quality and reduced production costs driving profitability. It has also led to increased investment in innovation.

    India's Gross Domestic Production
    India’s Gross Domestic Production 

    Increasing Off-Shore Opportunities

    As devastating as the effects of the covid-19 pandemic were, it has favored India, as the working culture shifted to remote teams. This led to developed nations finding it more cost-effective to work with people living in India.

    Young Average Age Population

    India’s youth population is the largest globally at approximately 356 million. This represents a high 64% working population that contributes to the country’s growth in GDP and per capita income.  It also presents a high consumer base for companies to thrive and grow.

    Shift to Renewable Energy

    India’s dependency on energy imports has lessened considerably with almost 40% of the country’s installed electricity capacity coming from non-fossil fuel sources. This has reduced operational costs for businesses and individuals.

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    Challenges & Obstacles

    India’s fast growth has persisted even in the face of the globally crippling pandemic coronavirus. The country, however, is facing several challenges on the path to becoming a USD 5 trillion economy.

    Supply Chain Bottlenecks

    Developed economies resorted to distributing cash to households to combat the debilitating effects of the pandemic. The supply-chain bottlenecks resulting from the pandemic have also not eased. These have led to soaring inflation across the world, which is exacerbated by the ongoing Russia-Ukraine war.

    Interest Rate Increase by the Federal Reserve

    The Federal Reserve has increased the interest rates to combat rising inflation. However, these threaten economic growth and may cause ripple effects within India.

    Strengthening Dollar to Indian Rupee

    The US Dollar is consistently strengthening against the Indian Rupee adding to inflation and can have a negative impact as India purchases oil and other imports in this currency.

    EU Energy Crisis

    The ongoing war between Russia and Ukraine has led to a severe energy crisis in the European Union. This acts as a growth inhibitor.

    China’s Covid Policy

    At one time, leading the global economic growth, China has continued to announce restrictions due to its zero-covid policy making international trade difficult.

    Conclusion

    India’s growth is unprecedented and its march is strong and sure. However, challenges like generating employment, curbing inflation, increasing foreign direct investment into the country, and maintaining macroeconomic stability must be successfully dealt with to make a USD 5 trillion economy a reality.

    FAQs

    How does the Indian economy compare to other economies in the world?

    India is the world’s fifth-largest economy by nominal GDP and the third-largest by PPP(Purchasing Power Parity).

    What are the key policies and initiatives taken by the Indian government to boost economic growth?

    The Indian government has implemented policies such as Make in India, Atmanirbhar Bharat, Digital India, Start-up India, GST, FDI liberalization, Pradhan Mantri Jan Dhan Yojana, and Swachh Bharat Abhiyan to boost economic growth and development.

    What is the role of foreign investment in India’s economic development?

    Foreign investment has significantly contributed to India’s economic growth by providing capital and technology, improving productivity, and creating jobs. The Indian government has implemented policies to attract foreign investment, which has increased exports and skills in various sectors.

    What are the main sectors driving economic growth in India?

    The main sectors driving economic growth in India are services, agriculture, and manufacturing.

  • Rupee vs. Dollar – Journey Since Independence

    The US Dollar is the most commonly held currency in the world today holding over 60% of global foreign reserves. All the countries across the globe, including India, measure their currency values against USD in the global market. The fluctuating value of any currency against USD 1 is called the exchange rate.

    Global trade is possible because of the existence of exchange rates and it is an important determinant of any country’s economic prowess.

    Value Before Independence
    INR Journey Post Independence
    Conclusion

    Value Before Independence

    It has been 75 years since India became a free country. Since then, the country’s currency has been on a roller-coaster ride against the US dollar. There have been various reasons for the largely downward trajectory of the INR’s journey including economic reforms, geopolitical issues, and even international issues. Currently, the Indian Rupee’s value against USD 1 is approximately INR 82.

    It all began with the Bretton Woods Agreement in 1944 which required each country to measure its currency against the US Dollar. The dollar itself was convertible to gold at the rate of USD 35 per ounce. Being a part of this agreement, India followed the par value system of relative exchange rates. As the country was under British rule, INR value was derived from the British pound which was GBP 1 equaled INR 13. Similarly, GBP 1 equaled USD 2.73, which roughly translated to USD 1 equalling INR 4.76.

    History of Indian Rupee vs US Dollar

    INR Journey Post Independence

    The journey of the Indian Rupee against the US Dollar can be mapped in different phases since India won independence.

    Phase I – From Independence to the 1960s

    India gained independence from British rule on 15th August 1947. It was a time of great turmoil as the country’s economy was in shambles. In a bid to jump-start the economy, the first prime minister, Jawaharlal Nehru adopted the five-year plans from Russia and began consistent loan borrowing in the 1950s which substantially increased in the 1960s.

    However, even with increased borrowing, the country’s economy was facing a budget deficit which was further aggravated by the two wars in the decade. The first was the Indo-China war of 1962 and the second was the Indo-Pak war of 1965. Then struck the natural disaster of drought in 1965-1966. All of these added to increased spending on defense which reached a high of 24.06% of the total government expenditure.

    Also, by 1966, the Indian Rupee finally moved away from the rate comparison of GBP 1 equalling INR 13 to a direct comparison with the US Dollar. All the economic upheaval of the previous years led the then Prime Minister to devalue the Indian Rupee to INR 7.50 against USD 1, which till then, had held a constant value of INR 4.76 against USD 1. This devaluation, in return, led to cheaper exports and expensive imports resulting in sharp inflation.

    Phase II – Reduced Oil Production by OAPEC – The 1970s Decade

    This was a decade of two major changes. First, the Bretton Woods Agreement collapsed in 1971, which meant India adopted the fixed rate system, linking its currency exchange rate to the UK Pound Sterling. A couple of years later, in 1973, the Organisation of Arab Petroleum Exporting Countries (OAPEC) decided to reduce oil production. By 1974, the INR value further deteriorated to INR 8.10 against USD 1 in reaction to the oil crisis. In a bid to ensure stability and to its currency and to ensure that the increasing disadvantages of associating with a single currency were curbed, the Indian Rupee was pegged to various other currencies as well.

    Phase III – The 1980s and 1990s

    The two decades of the 1980s and 1990s were politically unstable for India. The assassination of Prime Minister, Indira Gandhi, in 1984 reduced foreign investor confidence in the economy. A few years later, in 1991, the Soviet Union collapsed, which was, till then, a crucial trade partner of India. This led to a sudden and large export fall. The Persian Gulf nations had doubled crude oil prices just a year prior leading to India facing a serious balance of payment crisis. The fiscal deficit of the country decreased to 7.8% of the GDP and the interest payment rose a whopping 39% of the total government’s revenue. Furthermore, the WPI inflation within the country was around 14%. The country was on the brink of bankruptcy and had no choice but to further borrow money from IMF (International Monetary Fund) against its gold reserves.

    This severe economic crisis of 1991 was dealt with by the then government by further devaluing the Indian Rupee and by 1992 the exchange rate of USD 1 was INR 25.92.

    Phase IV – The 21st Century

    The Indian Rupee’s decline continued into the new century and by 2002 it was valued at INR 48.99 against USD 1. However, this also proved to be a turning point in the country’s economy as Foreign Direct Investment (FDIs) increased within India and sustained till 2007 when the Indian Rupee appreciated reaching INR 39.27 against USD 1.

    Unfortunately, the global financial market collapsed in 2008 ending the upward trend of the Indian Rupee and by 2009 it fell to a record of INR 51.75 against USD 1. Contributing global and domestic factors saw the INR further fall to 56.57 against USD 1 by early 2013.

    Three years later, in an effort to combat corruption and black money within the economy, the Indian government announced demonetization which discontinued Rs. 500 and Rs. 1000 notes with immediate effect. This led to almost 86% of the country’s currency being invalid adversely impacting consumption patterns, investment, and income. It was also a major push to a new digital India, thereby increasing cashless transactions. However, in 2016, the value of the Indian Rupee further decreased to INR 68.77 against USD 1.

    Last but not least, was the global economic crises that followed in the wake of the coronavirus pandemic of 2020 and the ongoing war between Russia and Ukraine. Currently, the exchange rate of the Indian Rupee against the US Dollar is approximately INR 82.7.

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    Conclusion

    The journey of the Indian currency against the US dollar is also a testament to the economic journey of the country since independence. Being one of the fastest-growing economies today and also one of the top 5 in the world, India is in a strong position of recovery. It will be interesting to watch how the Indian currency fares against the US dollar in the coming days.

    FAQs

    What factors affect the exchange rate between the Indian rupee and the US dollar?

    Several factors can affect the exchange rate between the Indian rupee and the US dollar, including:

    • Interest rates
    • Inflation
    • Economic performance
    • Political stability
    • Trade balance
    • Capital flows
    • Monetary policies

    How has the exchange rate between the Indian rupee and the US dollar changed over time?

    The exchange rate between the Indian rupee and the US dollar has varied over time due to economic and political factors. The rupee has appreciated and depreciated against the dollar at different times, influenced by global economic conditions, monetary policies, and geopolitical events.

    How do changes in oil prices affect the exchange rate between the Indian rupee and the US dollar?

    Oil price changes impact India’s import bill and can affect the exchange rate between the Indian rupee and the US dollar. Higher oil prices lead to a higher import bill, putting pressure on the rupee, while lower oil prices can support the value of the rupee.

    What is the role of the Reserve Bank of India in managing the exchange rate between the Indian rupee and the US dollar?

    The RBI manages the exchange rate by intervening in the foreign exchange market, using monetary policy tools, and managing India’s foreign exchange reserves.

  • Is Printing Money a Solution to Save the Economy?

    International economies are adopting unconventional stimulus measures, such as printing money, in response to the Covid-induced crisis. The United States, the European Central Bank, Japan, and even developing economies like Turkey and Indonesia are creating money to revive their economies.

    Now as people have very smartly pointed out saying; “India must do the same.” The question entails, can India afford to do it? If yes then how will it help? as well as what India can do about it?  ‌‌

    What Does Printing Money Mean?
    Should the RBI print money to boost the economy?
    Are Other Economies Doing the Same?
    Is Monetization Necessary?‌‌‌‌
    Government’s Strategies to Overcome COVID Gap
    Challenges for the Government

    What Does Printing Money Mean?

    Now going by the textbook meaning, The Reserve Bank of India has a monopoly on printing the country’s currency notes. Except for one rupee note, it has sole authority to issue currency notes of various values (which are issued by the Ministry of Finance.)  

    So basically, the Central bank buys Government debts/ bonds – Which injects money into the economy – This is similar to printing new money, but this is done electronically.

    Should the RBI print money to boost the economy?

    The Reserve Bank of India
    The Reserve Bank of India

    Is it as easy as it sounds? In India, small industries have sprung up recently, pleading with the Reserve Bank of India to generate money and give it to the government to spend.

    The central government’s revenue collection through excise duty and the goods and services tax, or Goods and Services Tax (GST), has collapsed due to low employment and a sharp decline in non-essential consumption beyond food, medicine, and a few other basic products.  

    Given how adversely foreign trade has been affected in the post-Covid era, there is reason to assume that tax collection through customs duties has also suffered. The central government is expected to benefit from the recent significant rise in excise duty on gasoline and diesel. ‌‌

    Are Other Economies Doing the Same?

    Yes, In April 2020, the Bank of England granted a direct monetization facility to the UK government, despite Bank of England Governor Andrew Bailey’s fierce opposition until the last minute. Similarly, the US Federal Reserve used it extensively to tackle the financial crisis of 2008, and the same pattern is being used to combat the Covid situation.

    A snippet of an article published on the Financial Times website about the Bank of England granting direct help to the UK government.
    A snippet of an article published on the Financial Times website about the Bank of England granting direct help to the UK government.

    The European Central Bank has lifted the restriction on the number of bonds it can purchase from any single Eurozone country. The Bank of England has come on record and said, If necessary, we are willing to lend money to the government on a temporary basis. The Bank of Japan will also purchase an infinite number of government bonds.

    The Bank of England
    The Bank of England

    Is Monetization Necessary?‌‌‌‌

    In the past, The RBI “naturally” monetized the government’s deficit until 1997. Direct monetization of deficit spending, on the other hand, has downsides. Manmohan Singh (then-RBI Governor and then-Finance Minister) and C Rangarajan (then-RBI Governor) decided in 1994 to scale out the facility by 1997.  

    However, even Rangarajan now believes that India would have to monetize its deficit. “Deficit monetization is necessary. He recently stated that “such a big increase in expenditure cannot be controlled without monetization of government debt.” ‌‌

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    Government’s Strategies to Overcome COVID Gap

    State governments also aren’t making a lot of money from taxes. With lockdown in place for more than two years, private automobiles are hardly moving; as a result, state governments’ sales tax/value added tax revenues on gasoline and diesel use have taken a hit. Even though several state governments have raised the sales tax/VAT on gasoline and diesel, this trend continues.

    At the start of the lockdown, alcohol shops were closed, and state and local governments lost all of the income generated through this channel. As a remedy, alcohol stores were opened amid the concern of societal tensions and moral concerns.

    A snippet of the news article explaining the opening of liquor shops during the pandemic by TOI
    A snippet of the news article explaining the opening of liquor shops during the pandemic by TOI

    ‌‌As a result, both the federal government and state governments earn very little revenue from taxation. However, to meet its usual obligations (salaries, pensions, vendor payments, debt servicing, and so on), this is also the moment when the government is supposed to act as the last-resort spender.

    Due to various reasons (varying from people being confined in their houses to the psychology of a recession setting in), private sector expenditure has fallen, and the government must spend money to get the economy moving again.‌‌

    The above graph shows the Indian GDP growth for the years 2015-2021
    The above graph shows the Indian GDP growth for the years 2015-2021

    Challenges for the Government

    The central assumption against it is not really about how it started as it is about how it ended. This power, in theory, allows the government to boost overall demand at a time when private demand is falling, as it is right now. This instrument, however, sows the seeds for another crisis if governments do not withdraw quickly enough.  But how?

    Expenditure by the government with this new cash enhances salaries and raises private demand in the economy. As a consequence, inflation is fueled. A small increase in inflation is helpful since it stimulates economic activity. However, if the government does not intervene in a timely manner, more money will flood the market, causing high inflation.  

    And, while inflation takes time to show up, it’s sometimes too late for governments to realize they’ve over-borrowed. Macroeconomic instability is exacerbated by rising prices and government debt. ‌‌

    One argument against direct commercialization is that governments are seen as inefficient and corrupt whenever it comes to spending decisions, such as who to bail out and how much.

    In short; taking most of these variables into account, practically everyone who has knowledge of regular economics or business recommends money printing.  This is largely what representatives of this emerging small-scale industry are proposing, urging the RBI to generate money and the government to spend it.

    Conclusion

    As for the effect of Covid-19 on the nation, the economy was most affected by it. But to revive the economy, printing money is an option to consider or not is still a debatable topic.

    It is best believed to provide better wages to the poor instead of directly dropping the pot of money to them. Yet, many countries have gone with the idea of printing their currency to revive the economy but with the increased inflation as an after effect.

    FAQs

    Does printing money cause inflation?

    Increased money might create more need for products. This can also hinder the basic demand and supply model causing inflation in the nation.

    Can a country print unlimited money?

    Basically, there is no national restriction over the printing of money. Yet, printing money is a solution that is accepted by governments when the nation falls short of money. With increasing money in a nation, inflation will automatically increase and the power of currency will fall weak.

    Who decides how much money to be printed?

    Each country has different regulations and responsible bodies to print their money. For India, RBI is given the power to print money and decide on the same. Yet, the final decision is still kept under the government to decide.

    What happens to an economy if the government print too much money?

    If a country keeps on increasing money, inflation will rise an equal percentage. With the situation, there can come a time when inflation will be highest in the market because of no supply of goods and infinite demand.‌‌‌‌‌

  • Black Money Scenario in Startup World: A Detailed Analysis

    India is the birthplace of cultural, grassroots, and frugal innovation. The population of over one billion people makes this an exciting geography for startups to build repeatable and scalable business models. The beauty of startups is that they provide their employees freedom, the opportunity to innovate and explore rather than just to engage in unproductive work. There exists black money within this rising economy of startups.

    Introduction to Black Money in Startups
    Current Scenario and Analysis of Black Money in Startup World
    How Whitewashing of Black Money is Done?
    Impact of Whitewashing Black Money on the Economy
    Black Money in Startups – Conclusion
    Black Money in Startups – FAQs

    Introduction to Black Money in Startups

    “The Indian startup ecosystem is said to be the third largest in the world having added over 1,300 tech startups in 2019. Number of Indian unicorns could increase to 95-105 by 2025,” says Nasscom president Debjani Ghosh.

    Home of the largest e-commerce deal between Walmart and Flipkart, 31 unicorns and counting, and plenty of untapped opportunities — it shouldn’t come as a surprise that India has been home to some of the biggest startup success stories. Over the years, Indian startups have found success across sectors, with startups in enterprise tech, e-commerce and travel tech grabbing global attention. There has, however, been a grey cloud spanning the growing startup industry in recent years, something we are all familiar with – black money.

    Canadian-Indian writer Rohinton Mistry says, “It is so much a part of our white economy, a tumour in the centre of the brain — try to remove it and you kill the patient. A 2015 FICCI report estimated black money in India to be as high as 75 per cent of the GDP.”

    In today’s world, it is difficult to explain how a social anomaly could appear in the world of budding talent, making the next generation soar to the highest levels of recognition and profit. This anomaly increases the need for black money in startups or businesses. The purpose of this case study is to analyze the entry of black money into the industry, the factors that influence it, and how it is being whitewashed, as well as the impact this has on our economy.

    Current Scenario and Analysis of Black Money in Startup World

    Let’s look upon the case where a reputed startup lawyer (let’s name him ‘A’) in the capital has worked with startups including two well-known hotel room aggregators, a funded media startup and few e-commerce firms. He is also involved in deals with a well-known real estate group in the country that is trying to dabble into tech startups. He gives a shocking revelation: “Some expatriate businessmen are using startup investing as a way to move black money into India.”

    Here’s the underside, suppose you have $10 million cash parked in Mauritius. You look for tech startups where you can take a majority control or create an entity that can furnish a website, an app and a small team in place. You incorporate the company as a private limited entity and also register an overseas subsidiary. Once a legal structure is in place, you start routing the overseas money into that technology company.

    The routing can happen on the seed stage – A funding round. Now to embezzle the funds, from that startup money you can buy a luxury car and other assets, pay yourself, your kin huge sums as directors. You run that company for a period of two years or more till you’ve routed all the money into India. Once done, you can simply close that startup, declaring the company bankrupt and paying off creditors and share-holders which might be your own companies. Even if they have not routed the money overseas, dabbling in startups by opening up mentorship firms has become easy and a glam route to use that money legally.

    “Am not saying all such firms are using startups as a means to turn black money into white but this glamorous route has started to be misused in India,” says A, a managing partner of the law firm, requesting anonymity.

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    How Whitewashing of Black Money is Done?

    Another lawyer (let’s name him lawyer B) who is brokering deals for a Gurgaon-based fashion app and another small hotel rooms aggregator ratifies it. His firm which specializes in transaction advisory for tech startups says that there are many ways dishonest businessmen launder.

    • An unsavory investor makes his family members the board members of that startup.
    • Other companies of the same group act as vendors to that startup and quote ridiculous prices for that service or product.
    • These investors ask for too much equity and control of the startup (often over 70%). They wish to keep their kin on board.
    • They park the money in a trust-friendly jurisdiction, such as Switzerland, before it is moved to a tax-efficient country such as Cyprus, where the taxation levels are very low or have no taxes. It is then routed to a tax-friendly country like Mauritius, before reaching the final destination in India. India has a Double Taxation Avoidance Treaty (DTAA) with Mauritius.
    • Trade mispricing is a tool used to siphon off money, plays an important role in bringing money back into India. Instead of inflating invoices, a business can under-invoice and export machinery or software. One can open a company to sell bags or a restaurant. The business may not take off, but the owner can still show cash sales of Rs 1 lakh to Rs 2 lakh a day. Slowly, but surely, all money would be legitimate one day!

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    Impact of Whitewashing Black Money on the Economy

    Along with the economic effects, black money also has social consequences. Some of them are mentioned below:-

    • Loss of revenue to the government and running of parallel economy in the country – It is the increase and spread of black money that poses a serious economic threat since it leads to a decrease in government revenues. If only some part of the black money that has been in circulation in the economy could have been paid as taxes to the government, it would have benefitted the Indian economy to a large extent.
    • Vicious circle as a result of black money and corruption – Black money has added to corruption by the illegal transactions made to hide the black money. Bribes are given by the people to bureaucrats, government officials, etc. This forms a vicious circle which is never going to end unless some serious step is taken by the government.
    • Effects on national income and real capita income– Black money is a result of revealing low income to the government while paying tax by people which results in low national income of the country. The national income of the country will take a big leap if the amount of black money in circulation is backed up to the national economy of the country. This will also increase the quality of life for the whole country.
    • Higher taxation and inflation – The main reason behind the taxation is to earn revenues for the expenditures done by the government to make a balanced budget. Therefore, it is obvious that if the amount of black money which the people are hiding from the government is revealed and included in the budget of the government then the tax rate will surely come down as the revenues which the government wants to earn from the people by imposing high taxes will already be with the government. Therefore the amount of goods and services which were there in the market according to the accounted money gets a hike in their prices which results in inflation.
    • Difficulty in the formation of monetary and fiscal policy – This is an obvious impact as the government while making these policies is not able to count the exact national income because of the hidden black money which makes such policies unrealistic.
    • Increased criminal activities in society– Black money usually gives rise to various illegal activities in society and corruption is one of them. The duration of the election is also the time when the illegal use of black money can be seen. Various terrorist activities have backup power of hoarders of black money which is even harmful to the whole country. The illegal weapons with various groups of unsocial elements are usually bought up by the use of black money.

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    Black Money in Startups – Conclusion

    The problem of black money should be solved in a real sense and a very rational manner.

    • First of all the problem is to be dealt with morally. The morals of the people in the society must be raised.
    • The tax system should be realistic in nature.
    • The authority which is responsible for the collection of taxes should be honest, without any corruption.
    • Various incentives should be given so that people voluntarily agree to disclose their real income.
    • The Economic Intelligence unit must be maintained thoroughly and should be looked after.
    • The corruption in administration must be stopped at all levels.
    • Startups should be aware of individuals who ask for higher credit in the company.
    • Limited kin involvement should be allowed.
    • The accounts must be looked after by the team and not the angel investors.

    The government alone cannot curb this issue completely from society. Making different policies, laws, acts and legislation will not work alone. For the implementation of these laws and policies, every citizen has to come forward. People should understand why it is important to pay tax and should stop evading their income and should not lead to the generation of black income. Every citizen should make some contribution to the development of the country in the form of paying taxes. By doing this, the economy will definitely decrease its black money, as well as startups will not need black money to operate.

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    Black Money in Startups – FAQs

    Why do Startups have Black Money?

    The social anomaly could appear in the world of budding talent, making the next generation soar to the highest levels of recognition and profit. This anomaly increases the need for black money in startups or businesses.

    What is Black Money?

    Black Money is the money that is earned through illegal activity and that money is not recorded for tax purposes.

    Are Startups a way to convert black money into white?

    Not always, because even startups fail. So if the startup fails, say in 2 years, then your money is gone. But it can be a way to convert black money into white. As the Startups have to pay taxes on raised money.

    Can a person convert black money into white through the stock exchange?

    No, even the money that is invested in the stock market is invested via banks. So if one breaches their bank limit, it automatically catches the eye of IT officials.

    There is no other way to convert black money into white besides paying taxes. If there would have been a way then no person has to leave their native country and roam like a fugitive.