Has Black Income as a Proportion of GDP in India Declined in the Post-Reform Period?

Though the rapid growth of black income in India in recent years poses to be a serious economic threat, some recent studies report that it has been declining in the post-reform period. This decline in black income - as these studies claim - has been attributed to the ameliorative effects of economic reforms and liberalization ushered in India in the early nineties. Studies such as Schneider et al. (2003), and Schneider et al. (2010) estimating black income in India from 1960 to 1997 and from 1999 to 2007 respectively conclude that black income in India has declined since 1992-93. Likewise, a recent draft report of the National Institute of Financial Management (NIFM) also notes that the share of black income in the GDP has declined during the 1990's. Apparently this decline in the share of black income in GDP post-reform could be a sign of great relief to the policy makers as well as to the Indian government, reinforcing their belief on the benign effects of structural reforms and liberalization. But such inferences could be highly misleading. The present study contradicting the findings of Schneider et al. (2003), Schneider et al.(2010), and the draft NIFM Report observes that from 1951 to 2011 black income in India has increased at an increasing rate with no sign of abatement even after 1992-93 in the post-reform liberalization period. This contradictory finding of the present study vis-a-vis the earlier studies should be a clarion call to the government and the policy makers to take a serious note of the problem.