Effects of Latent Money on Economic System

Effect of latent money on the economic and social system.

Introduction:

emergence of crypto-currency and its growth over time in circulation has adverse effects on the Indian economy in many ways.  So it is essential to analyse its effect.

Effects of Latent Money 

 1. The direct impact of cryptocurrency is on the government exchequer.  Growth of black money tax evasion reduces government tax revenue.  The government has to levy more taxes to cover this.  Many people believe that this is the reason why the Regressive tax structure has developed in India.  Both black money and tax evasion are intertwined.  Both these together burden the righteous tax payer.  It leads to inequality of income and assets.  Black money helps tax evaders to increase luxury consumption.  D.K.  According to D.K. Rangnekar, while the incomes of taxpayers are falling, the incomes of tax evaders are increasing and luxury consumption is increasing, leading to widening of wealth and income inequality.

 II.  Businessmen and investors boost consumption on luxury goods with tax-evaded cash.  Its demonstration effect is on people of all sections of the society.  The production of luxury goods will increase in place of essential goods and there will be shortage of goods of the lower classes.  As a result, the prices of essential commodities will rise and the real incomes of the low earners will fall.  There is no link between the production activities in the economy and the goals we set in the plans.

 III.  "Monetary circulation contributes to investment in unproductive goods like expensive diamonds (stones), gold jewellery etc. and cripples investment in the productive sector. Money circulation in economic activity decreases. It inhibits growth of production.

 v.  Increase in house assets, building luxurious houses etc. due to secret money.  are encouraged.  Registrations are done by artificially devaluing assets.  A lot of this2. Black money can be unearthed and used.  Due to the increase in black money, the prices of land and houses are increasing... This is a big blow to our economy from the point of view of the prosperity of the country.

 v.  Usually black money is in the form of some money so it increases liquidity in the economy.  By increasing this black liquidity, the black market will grow.  Consequently, if the government ever implements credit control, it will have no effect in reducing liquidity.  Prices due to lack of government control over the economy  leading to uncontrolled inflation.  An unofficial shadow economy circulates in competition with the authoritarian government.

 VI / Cryptocurrency helps to move our country's monetary resources abroad.  Bad activities like devaluation of export goods and increase in value of imported goods circulate in the guise of black money.

 v.  Usually black money is in the form of some money so it increases liquidity in the economy.  By increasing this black liquidity, the black market will grow.  Consequently, if the government ever implements credit control, it will have no effect in reducing liquidity.  Prices due to lack of government control over the economy  leading to uncontrolled inflation.  An unofficial shadow economy circulates in competition with the authoritarian government.