Monday, August 8, 2011

Corruption and Black Money

I am highly tempted to write on this topic because not only it is currently a highly debated issue in the Indian media but it is also highly misunderstood topic as well. With this blog I would like to push forward my understanding on corruption and black money. In my subsequent blog I will highlight the quid-pro-quo scenario between them.


This article is written keeping in mind the current laws in India. According to Prevention of Corruption Act, 1988, the corruption is defined as an act committed by a person holding a public office which directly or indirectly benefits him or other person apart from the remuneration received for holding the position (The exact legal statements could be read in the official act). In technical sense, this act sub-optimises the decision making process which ultimately leads to loss in revenues for the country from which it can benefit from. The act where money is not concerned, the decision making process favours nepotism instead of merit. It is important to note that corruption is strictly defined for people holding public office and the misuse of position and powers under the office. A public servant (person holding public office) accepting money (except from the remuneration in form of salary) for performing the regular job, delaying the process or taking biased decisions that undermines the office are the simplest form of corruption. There is huge difference between corruption and cheating. For example, an auto rickshaw driver denying to go unless you pay high price than normal is not corruption. It is cheating. This process does not involve a public office. Similarly, you pay to some agency for constructing a road and the agency constructs a poor road that wither away in the first monsoon. In this case, the agency has committed a financial fraud by siphoning off the money that should be used for constructing quality road.

Black Money

Presently, the issue of black money is gaining a lot of momentum. In general people ask – what is black or white has to do with money. Money is money in the end. A currency note does not bear any black or white colour. It is true. But the main point is how this money is generated. Money generated through any activity that is considered legal in the country is white and through illegal activities is black. This clause of legality plays the fundamental role in determining the authenticity of money. In this regard, money generated though activities such as smuggling, drug trafficking, prostitution, etc. is regarded as black because they are illegal. This difference is very basic and easy to define. But confusion arises due to the synonymous use of money with currency notes. Money is a concept which is abstract whereas currency notes are physical entity and are real. To create a link between an abstract concept and a real entity, the concept of accountability is introduced.

Accountability means the paperwork involved that defines the way the money was obtained/generated. Naturally, money involved in illegal activities goes unaccounted. The best way to move unaccounted is physical transfer in form of cash. Again, it is important to understand that every unaccounted money is not black . The money transfer that takes place between two parties where both know that it is going to be unaccounted is black.

To know more about black money read the new article :- "Money that changes color".

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