Day 54 – Q 2. What is parallel economy? What are its implications for the internal security scenario? Discuss.
2. What is parallel economy? What are its implications for the internal security scenario? Discuss.
समानांतर अर्थव्यवस्था क्या है? आंतरिक सुरक्षा परिदृश्य के लिए इसके निहितार्थ क्या हैं? चर्चा करें।
Introduction
Left Wing extremism, North-east insurgencies and Jammu & Kashmir crisis are three of the most critical internal security issues India is currently facing. Parallel economy is one of the biggest reasons that even after seventy years of independence country is still struggling to contain these issues.
Body
What is parallel economy?
The black economy or parallel economy consists of all the activities in which black incomes are generated and black incomes are factor incomes, property incomes, not reported to direct tax authorities.
A parallel economy in its broadest sense may consist of –
- Illegal economy, such as money laundering, smuggling, etc;
- Unreported economy including tax evasion;
- Unregulated economy i.e. economic activities outside law and regulations.
India’s parallel economy is estimated to be 62% of GDP, generating about Rs 93 lakh crore of revenue.
This economy is running with the help of various factors such as counterfeit currency infused through borders, tax heaven, organised crimes and unorganised market, and hostile behaviour of foreign factors. Hawala and Benami transactions, tax heavens etc are also significant facilitators of parallel economy.
Implications of the parallel economy on internal security of India:
Parallel economy is the main source of resources for all the major internal security issues of India.
Economic terrorism:
The country has to contend with Economic terrorism. Pakistan has been flooding the country with counterfeit currency with a view to subverting its economy and funding terrorist activities in different parts of the country.
It is estimated that Pakistan pumped in 16 billion worth of FICN into India in 2010, a figure that rose to 20 billion in 2011 and 25 billion in 2012.
Organised crime:
Organised crimes in India especially in metro cities such as Mumbai and Delhi are rising due to flourishing parallel economy. Such organised criminals also fund for radicalisation of youth and terrorist attacks.
Religious or ideological extremism:
Parallel economy is greatest source of financial help to extremists. Financial incentives lure unemployed youth towards antinational activities in the name of particular religion or ideology.
Cybercrime:
Crypto-currency and unrecorded cash transaction in e-commerce are also emerging means to supply resources to hostile elements in the country.
Armed violence:
Armed violence which was hitherto legacy of Maoists or insurgencies is now taking a new form throughout India especially in the form of right wing extremism. Recently there has been reports of seizure of illegal weapons and public firing by individuals. Black money is easy source of illegal arms trade in India.
Measures taken by Government to contain parallel economy
- Voluntary income declaration schemes, such as Gareeb Kalyan Yojana
- Demonetisation
- Tax reforms; GST
- The Benami Transactions (Prohibition) Act
- Prevention of Money Laundering Act
- Financial Action Task force; for international cooperation in case of terror funding
- Reviewing of Double Taxation Avoidance Agreements
- Formalisation of economy
- Banking reforms
- Promotion of cash less economy: Digitisation of economy
Conclusion
Though we have taken many measures to contain the parallel economy but success is far below the potential. Political will to curb corruption and organised crime, and poverty alleviation along with social will to remove the cancer of black economy from society can only lead to elimination of parallel economy and subsequently control over internal security of the country.
Best Answer: P29
