Black money is the money that is unaccounted for, wherein taxes have not been paid on that money. Sources of black money are often illegal, such as crime – trafficking, illegal trade, fraud – and corruption -bribery, leakages from government programmes; but the source of black money can be legal too. To be black, a money just has to be unaccounted for, and untaxed.
Some black money, especially in the poor classes, is unavoidable in any economy. The black money which the government agencies target is that associated with tax evasion and illicit organised crime such as human trafficking. Legal definitions of black money may vary, for example, under the Black Money Act 2015, the term ‘black money’ covers only the ‘undisclosed foreign income and assets’.
Money laundering is the process wherein proceeds of crime are converted into legal money or asset in order to obscure its origin.
Global efforts for financial stability have picked up after the 2008 global economic crisis, but anxieties about such a crisis, and the organisations for promotion of financial stability, have existed since much before. These organisations facilitate cooperation between governments and central banks with the aim to avert or reduce the likelihood and negative impact of another financial crisis.
While the global multilateral financial institutions have remained dominated by the western countries, the influence of Asian countries in these institutions is growing. Meanwhile, certain financial mechanisms have been built by the Asian Countries to support their economic development and to widen their choices for development financing.
Micro, Small and Medium Enterprises (MSME) are small businesses, mostly in the unorganised sector, that are registered as MSME to enable them to get benefits from government policies and schemes created for the promotion of this sector.
Salient features of MSME sector and its importance to Indian economy
The MSME sector is crucial for Indian economy as it employs around 40% of the workforce of India, and constitutes around 40% of India’s manufacturing output and 30% of India’s total exports. The sector is resilient and agile to economic shocks, and has clocked a consistent growth rate of around 10% during 2012-2018. While the sector is labour intensive, it is less capital intensive, holding great scope for job creation and industrialisation of rural areas.
Infrastructure sector is very important for the economy, but it has been facing an investment crunch due to long gestational period characteristic of the sector, coupled with the rising NPAs of commercial banks. Moreover, cost overruns due to administrative delays make investment in infrastructure sector unattractive.
National Investment and Infrastructure Fund (NIIF)
NIIF is an investor owned fund manager, created to provide equity support to infrastructure finance companies, by mobilising capital from both domestic and international sources. It currently manages three funds, each with its distinctive investment strategy and mandate: Fund of Funds, Master Fund, and Strategic Fund. These funds are registered with SEBI as alternative investment fund (AIF).
A non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days. NPAs can also be called bad loans, or non-performing loans.
NPAs in India
Gross NPAs in India’s banks were around 10% of the gross advances in financial year 2018-19, according to a CRISIL report. In absolute terms, it amounts to around 10 lakh crore rupees. This figure is expected to reduce considerably by March 2020 on account of lesser slippages by banks.
Most of the NPAs are in infrastructure sectors like power, steel and road projects, because of the long gestation period and cost over-runs.
India is among the major economies having worst non-performing loan ratio, along with Italy, Greece, Portugal and Ireland.
Poverty refers to the state of being poor. It is a relative concept, and its understanding varies with what level of living standards are considered essential in a community or a region. Absolute poverty, extreme poverty, or destitution refers to the complete lack of means necessary to meet basic personal needs such as food, clothing, and shelter.
Measures and Definitions of Poverty
Poverty Line is the income or expenditure level, below which a person is considered to be poor.
Head Count ratio
The Head Count Ratio (HCR) is the proportion of a population that lives below the poverty line. It is the most common way of measuring poverty.
Head Count Ratio can be measured with respect to a relative poverty line or an absolute poverty line. The main form of poverty line used in the OECD and the European Union countries is the relative one, based on the concept of economic distance, and is defined as a level of income usually set at 60% of the median household income.
Poverty Gap – Severity of Poverty
Poverty Gap Index is a measure of the intensity of poverty, and is expressed as a proportion of the poverty line. It measures the depth of poverty by considering how far, on average, the poor are from the poverty line. It is an improvement over the Head Count Ratio.