Impact of Economic

offences
 Impact of Economic Offences on National
Economy

The economic offences cause-

• 1.) significant damage to general economy of the
country
• 2.) adversely affect the growth and development of
the nation
 Some of the major impacts that may be caused by the economic
offences:-
• 1.) Increase in inflationary • 7.) Country’s economic equilibrium is
pressure at stake
• 8.) Breeding ground of corruption
• 2.) Uneven distribution of
• 9.) Illicit business and public office
resources and creation of corruption thrive and affect normal
elitism business activities
• 3.) Marginalisation of tax base • 10.) Resources of financial
• 4.) Generation of abundant institutions and commercial
institutions are diverted and distorted
black money • 11.) Weakens morale and the
• 5.) Creation of a parallel commitment of the citizens
economy • 12.) The poor/weak continue to be
• 6.) Development works/efforts poorer and are at risk
are undermined
• INCREASE IN BLACK MONEY(BM)

INCREASE IN INCOME(Y)

• INCREASE IN AGGREGATE DEMAND(AD)

(FEW GOODS AND SERVICES CHASED BY HUGE AMOUNT
OF MONEY)

• INCREASE IN GENERAL PRICE LEVEL(P)

• INFLATION(I)= P= P(t)-P(t-1)/P(t)

• INFLATIONARY PRESSURE
So how does inflation affect us?

Inflation can be defined as the currency losing its purchasing

power by a certain percentage. But this is inflation at its most
basic

most disastrous for the economy is when this percentage of excess

money supply is restricted in the hands of few, while the living
standards of the rest of the population shrinks by the same
percentage

That is what happens when black money causes inflation

Needless to say, levels of corruption also increase in tandem

• Corruption and black money are two sides of the same coin

• Black money is generated through corrupt activities like-

bribes, and “cuts” paid to officials, hoarding and selling
commodities at more than market prices, and tax
evasion

• India ranked 76 with a score of 38.38 (0 - highly corrupt, 100 - very

clean) as per the 2015 survey of 168 countries and territories

• Corruption prevents the natural laws of the economy from

functioning freely

• As a result, corruption in a nation's political and economic

operations causes its entire society to suffer
• MEASURING CORRUPTION
• Due to its nature, the scale of corruption is impossible to measure
with complete accuracy
• But there are informed estimates available
• Transparency International regularly publishes a number of
assessments, surveys and indices which measure corruption:
• CORRUPTION PERCEPTIONS INDEX
• TI’s Corruption Perceptions Index (CPI) is the best known of our
tools
• First launched in 1995 it has been widely credited with putting the
issue of corruption on the international policy agenda
• The 2011 CPI measures the perceived levels of public sector
corruption in 183 countries and territories around the world
• GLOBAL CORRUPTION BAROMETER
• The Global Corruption Barometer is the only world-wide public
opinion survey on corruption
• BRIBE PAYERS INDEX
• The 2011 Bribe Payers Index (BPI) ranks the likelihood of companies
from 28 leading economies to win resources-resources-business
abroad by paying bribe
• PROMOTING REVENUE TRANSPARENCY
• The 2011 Report on Oil and Gas Companies which is based on
research conducted in 2010 and is an expanded version of a report
published in 2008, rates 44 companies on the public availability of
information on their anti-corruption programmes and how they report
their financial results in all the countries where they operate
• TRANSPARENCY IN CORPORATE REPORTING
• This study analyses-
the transparency of corporate reporting on a range of
anticorruption measures
among the 105 largest publicly listed multinational
companies
• Together these companies are worth more than US$11 trillion and
• DEFENCE COMPANIES ANTI-CORRUPTION INDEX 2012
(CI)
• The CI analyses anti-corruption and compliance systems in 129
defence companies around

• GOVERNMENT DEFENCE ANTI-CORRUPTION INDEX 2013

(GI)
• The GI measures the risk of corruption in 82
national defence establishments around the world
 Corruption perception index 2018
Denmark DNK WE/EU 88 1
New Zealand NZL AP 87 2
Finland FIN WE/EU 85 3
Singapore SGP AP 85 3
Sweden SWE WE/EU 85 3
Switzerland CHE WE/EU 85 3
Burkina Faso BFA SSA 41 78
Ghana GHA SSA 41 78
India IND AP 41 78
Kuwait KWT MENA 41 78
Lesotho LSO SSA 41 78
Trinidad and Tobago TTO AME 41 78
Turkey TUR ECA 41 78
Somalia SOM SSA 10
180
Industrialists who have money to bribe government officials can-
manipulate policies and market mechanisms thereby
circumventing the law of economics
which requires improving the quality of goods and services, and still sell at a high
price

Corruption leads to uneven distribution of wealth and uneven distribution of

resources

black money is unaccounted for, it cannot be taken into consideration while

forming the fiscal and monetary policies
government becomes incapable of forming realistic and effective policies

Black money and corruption hits the economy from every side-
impairs development
steals the wealth of a nation and
impoverishes its people
need to plug loopholes in the system that allow the generation of black wealth and
take drastic steps to be control corruption
given the progressive structure of income taxation-
the incentive to make black income through under
statement of legal
source incomes clearly increases with income
expect richer households to earn proportionately greater black
incomes through
this means

for illegal source black income-

whether through illegal economic activity or illegal transfers

opportunities for earning such black incomes are skewed in favor

of the 'haves' (such as industrialists, traders, real estate
operators, contractors, lawyers, accountants, politicians,
bureaucrats and artists)

rather than 'have-nots', such as small-holder farmers, landless

in the case of all types of black income,

it is at least plausible that the secondary effects associated with

expenditure from black incomes do not compensate for the initially
greater skewedness in the opportunities for making these incomes

Tentative conclusion would be that the distribution of actual

household income (from all sources) is likely to be even more skewed

in favor of the rich (say, the top decile)

than is indicated in surveys carried out by the NSS

“Wealth: Having it all and wanting more”, a research paper published by Oxfam
in January 2015, shows that the richest 1 percent have seen their share of global
wealth increase from 44 percent in 2009 to 48 percent in 2014, and at this rate, it
will be more than 50 percent in 2016. The 80 richest people on the planet have the
same wealth as the poorest 3.5 billion people, the report says

Data source: Oxfam

 Of the remaining 52 percent of global wealth, almost all (46 percent) is owned by
the rest of the richest fifth. The remaining 80 percent share just 5.5 percent. Stark
enough–even more simply, think of global wealth as a pizza.

Little wonder then that obesity is likely to overtake hunger as the top global
health issue
 While the post 1990s economic boom led to large increases in wealth, thus
pulling many out of abject poverty, disparities have grown because public
policy is dictated by the rich–lobbying, access to finance and tax havens
help enrich the rich.

Data source: CSFB Global Wealth Data book

2014
Data source: World Institute for Development
Economics Research
 The Indian context
• A new report on inequality in South Asia released by the World
Bank shows-
that concentration of billionaire wealth in India (12
percent of GDP) is
unusually large for economies in the same stage of
development.
This is borne out by trends in wealth distribution:
• The two charts above say a lot about India’s wealth building
journey:

• The 2008 crisis saw concentration peak and proved to be a 

leveler of sorts
• Share of the very wealthy is higher in India, but China’s catch-
up is by far the steepest
• At the start of the economic boom, India’s wealth
• The starkest statistics:

• While the trend in top decile wealth is broadly in line with other
countries (and well below the global average), the top percentile’s
share of wealth is at 50 percent, ahead of any other part of the
world 

• When compared with China, India has far greater wealth

disparity as shown by the comparison of Gini Coefficients
(higher Gini coefficients signify greater inequality in wealth
distribution with 1
being complete inequality and 0 being complete equality)

• While India’s income-based Gini (which measures disparity in per

capita GDP) shows much greater equality than in China, the
wealth-based Gini shows much greater disparity
•gap between the ‘have-a-lot’, the ‘haves’ and the ‘have-nots’ is
clearly much larger in India
•India’s rich are disproportionately richer while India’s poor are
disproportionately poorer than their global peers
•In layman’s terms, there is an even larger share of pizza going
around for the richest of the Indian rich. And it’s growing

•For Indians, excess wealth (which sounds like an oxymoron to most)

has ended up in under-utilised real estate in Dubai, London and New
York (real estate advisory firm Knight Frank suggests that on
average, wealthy Indians park 44 percent of their investments in real
estate)

•private jets that have no space to be parked and operate under

onerous restrictions besides luxury yachts docked all over the globe
due to poor (!) infrastructure at home… next up, private islands

•While one shouldn’t grudge those who have earned their keep in an
•The question for India really is that can a country ranked 135/187
in the UNDP’s Human Development Index afford persistent and
growing wealth disparity?

•The HDI reflects long-term progress in three basic dimensions of

human lives—
a long and healthy life
access to knowledge and
a decent standard of living

•Despite being a much larger economy and growing at a faster rate

than its regional peers, India’s progress on HDI has been dismal due
to poor social indicators
Why this matters?

•This isn’t just about morality-

•Inequalityplainly hurts economic growth (or will some day) a better
balance actually
sets the foundation for sustainable growth
Equitable distribution would be beneficial for many reasons:

•The aspirational poor tend to take on too much leverage in order to

achieve a lifestyle of a certain order
•thus creating boom-bust cycles at the micro and macro levels

•less rich spend a much larger portion of their wealth

•under-rich can buy only so many homes or cars

•growth will accelerate only when wealth is more evenly distributed

• Costs of inequality are borne by the rich, eventually:

First order cost-

effects of inequality are in the form of schemes such as NREGA, FSB, fuel
subsidies, etc, borne by
the entire tax-payer base

Second order-
effects come from a stunted future for the world where malnourished and
under-educated
sections of the population deflate notions of a demographic dividend

Third order-
effects are social disorder, rise in terrorism, Naxalism, street crime,
disease, etc. The rich
cannot wish these problems away nor can they insure themselves against
these, beyond a point

Take the case of ebola or closer home, dengue for instance, long considered a poor
man’s disease, prevalent in a world very distant from the rich
Wealth: A Means to an End
Two of the three richest men in the world, Bill Gates and Warren
Buffett (worth over $150 bn combined), have committed most of
their wealth to charity

Additionally, Bill Gates is funding and promoting market-based,

sustainable, for-profit initiatives across the world to end poverty,
improve education and boost sanitation while Buffett has
convinced 128 billionaires to join his ‘Giving Pledge’

Back home, Azim Premji has already committed 25 percent of his

$18 billion wealth to charity.

So the answer to the question,

‘What would you do (for yourself) with a billion
dollars?’ is, in the case
of some billionaires, ‘Not much’.
Alongside this increasing disparity, commercialization and a
consumerist social order, terms like  ‘minimalist living’,
‘freelancing’, ‘volunteer work’ and ‘sabbaticals’ are also entering the
Indian business dictionary

An increasing number of people are looking for that deeper purpose

or true calling

The common thread: Obtaining wealth is a means to something, not

an end in itself

Even as trends suggest a staggering disparity in wealth distribution,

in a globalized world, the interests of the rich and poor will
increasingly converge

An investment in equality would thus be an investment in one’s own

future
 Measures against Economic Offences
• Revamping the laws governing economic offences
• Freezing all assets of the economic offenders
• Tightening bail provisions
• Creating exclusive courts
• Simplifying court procedures
• Public notification on the economic offenders
• Coordinated and concerted action by the various agencies dealing
with this menace
• Declaring diversion of funds as illegal
Tackling economic offences therefore require thorough knowledge
about:
• The various categories of economic offences
• The legal frameworks
• Identifying economic offenders
• Identifying loopholes in the existing systems
• Preventing economic offences
• Loss recovery methods
• Conducting investigations
• Indicting criminals