Page 352 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Indian Economic Policy Dilfraz Singh, Lovely Professional University

Notes
Unit 28: Parallel Economy

CONTENTS
Objective
Introduction
28.1 Parallel Economy
28.2 Summary
28.3 Key-Words
28.4 Review Questions
28.5 Further Readings

Objectives

After reading this Unit students will be able to:
• Discuss Parallel Economy.
Introduction

India's parallel economy is so deeply entrenched that possession of black money is not even considered
worthy of reproach in social reckoning. In fact, custodians of the administrative machinery themselves
seem to have joined the race to accumulate such wealth.
Perhaps such attitudes were understandable to an extent during the high noon of repressive taxation
and socialist subjugation in the 1960s and 1970s, when anything other than a frugal lifestyle was all
but impossible for an honest taxpayer to maintain. Those were days of misery. But tax rates in India
today are moderate by any yardstick in the world, and the persistence of the impunity with which
black money is held suggests a much older provenance. Looking further back in history, the black
sector emerged in India during World War II, when daily necessities were in acute scarcity and the
government of the day adopted rationing as a welfare policy, thus introducing a system of controls.
With prices no longer set by the natural interaction of market demand and supply, black marketeering-
the surreptitious sale of diverted goods at higher prices-emerged. The continuance of controls, post-
1947, that defied economic sense was justified in the context of the prevailing deprivation then. The
parallel economy began to expand, and once the control mechanisms were instiutionalised, it attained
multifarious dimensions.
28.1 Parallel Economy

Parallel economy connotes the functioning of an unsanctioned sector in the economy whose objectives
run parallel, rather in contradiction with the avowed social objectives. This is variously referred to as
‘black economy’, ‘unaccounted economy’. ‘illegal economy’. ‘subterranean economy’, or
‘unsanctioned economy’. The term ‘parallel economy’ emphasizes a confrontation between the
objectives of the legitimate and illegitimate sectors. For instance, in the broad long-term objectives of
planning to establish a socialist pattern of society, we include full employment, removal of disparities
of income and wealth, avoidance of conspicuous consumption so that more resources are available
for a larger volume of saving, the removal of poverty, the attainment of self-reliance and provision of
equality of opportunity. The main purpose of planning was to subordinate the capitalist spirit of an
acquisitive society to the goals of planned development so that greater social welfare is promoted.
Naturally, the vested interests are bound to oppose these progressive trends and the curbs that may
be imposed on their unfettered right of exploitation. The principal function of the state pledged to the
establishment of a democratic socialist society is to ensure that state policies and the controls are so

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