Question

What do you mean by paralllel economy ?What are its bad effects?

Answer 1

${\bf{\bold{\underline {Parallel\: Economy\: or\: Hidden\: Economy}}}}$

It includes activities based on $<b>Black(unaccounted) Money </b>$.
It causes a huge loss in tax & revenues for the government.

$\underline {BAD\: EFFECTS}$

Growth of economic dualism,

Under-estimation of the true size of the economy,

Tax evasion, thereby loss of revenue to Government,

Undermining equity,

Widening Gap between the Rich and Poor,

Lavish Consumption Spending,

Distortion of Production Pattern,

Distribution of Scarce Resources,

Deterioration of General Moral Standards of the Society,

Effects on Production.

$\underline {CONCLUSIONS}$

> DEMONETIZATION
> RAIDS
> VOLUNTARY DISCLOSURE SCHEMES: Government may adopt the policy that those who voluntarily disclose their black income of the past to the taxation authorities, their punished and penalties may be minimized.
> TAXATION REFORMS