Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Answer & explanation
Answer: (d) Loss of revenue to the State Exchequer due to tax evasion
Black money is, at its core, income hidden from the tax authorities. The Finance Ministry's White Paper on Black Money (2012) describes it as wealth built up by failing to pay dues to the public exchequer, so the loss of tax revenue is the government's central worry; the other options are side effects.
- ✓ (d) Unreported income escapes tax, shrinking the revenue the State needs for public spending and shifting the burden to honest taxpayers.
- ✗ (a) Parking black money in real estate and luxury housing does happen, but it is a consequence of the hidden income, not the main concern.
- ✗ (b) Buying gold and jewellery with black money is a way of storing it; the harm the government stresses is the tax that was never paid.
Remember · Black money = income or wealth concealed from tax authorities; its chief cost to the State is lost revenue through tax evasion.
📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 3 (practise this chapter)
Sources
- Ministry of Finance, Department of Revenue: White Paper on Black Money (May 2012) ↗ “The second and perhaps more likely reason is that the wealth may have been generated and accumulated by failing to pay the dues to the public exchequer in one form or other.”
- NCERT Class 12 · Introductory Macroeconomics, Chapter 3 “It improved tax compliance as a large number of people were bought in the tax ambit.”
Question and answer: UPSC's official GS Paper I (2021, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·