Munich Personal RePEc Archive

Unparallel View of Parallel Economy

Batabyal, Partha (2009): Unparallel View of Parallel Economy. Published in: Journal of Social Sciences (26. March 2009)

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Abstract

Despite the considerable media attention being given to the financial meltdown there has been little attention on why this happened. This paper investigates into this matter and takes a very unique point of view. Whenever we talk about this matter we thought of liquidity crunch, sub prime crisis, high fiscal and trade deficit etc but we never think about parallel economy and money laundering. Here are some facts regarding this as-pect: the amount of money laundered in the whole world is close to $2.85 trillion per year. As per an estimate of International Monetary Fund the aggregate size of this un-derground and illegitimate market is between 2 to 5 percent of world’s gross domestic product. Criminals become wealthy enough to bribe officials and ensure their continu-ing profitability. Bribed officials becomes a mere puppet in their hands and act accord-ingly to their needs. Key media are controlled which prevents any publicity. Terrorist financing, drug trafficking and the black economy are nothing but the pitfalls of this growing menace. This is the biggest industry in the whole world. It is bigger than oil or arms for that matter. Many international money laundering rackets control the whole procedure. In this paper we have presented how parallel economy is affecting various developed and developing countries like U.S.A, U.K, Australia, India, China etc. We have also showed that how it is being done and who the main players behind conspir-acy are. This paper also prescribes the steps that are needed to be taken by the regula-tory bodies to control and regulate this matter. What financial restructuring that are needed to be done. We have also portrayed what are the loopholes that we have in our economy especially in money market and forex market. We have also analyzed and in-terpreted what are the levels of intensity of anti money laundering laws and what ef-fects they are having in their respective economy. We have suggested in this paper how we can cope with this situation by bringing some technical changes in our financial sys-tem. The main purpose of our paper is to show the areas we need to look at, to build a concrete economy, free of any type of black money. The new financial system should be equipped to tackle these frauds and take productive steps to counter them. There should be transparency in this whole process and no one should be spared if they are found guilty irrespective of position.

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