Gandhi lowers the boom on India's booming black market

Prime Minister Rajiv Gandhi has brought India's booming underground economy under official assault -- to the incredulity of many and horror of some. Mr. Gandhi has traumatized many of his countrymen in the process. A tearful New Delhi hostess confided she couldn't possibly finish the entertainment season without imported and black-market wines and specialty food.

Aided by an army of tax inspectors, customs officials, and smugglers now seeking rewards, Gandhi has personally orchestrated sweeping government raids meant to dismantle what has become a national way of life.

According to some experts, the business of ``black'' or unaccounted, untaxed wealth is now half as large as the official gross national product -- $165 billion in the 1983-84 fiscal year. And, without a sluggish bureaucracy, the black economy is said to work twice as efficiently.

It helps fill the coffers of political parties, including Gandhi's own, and supports the world's most prolific filmmaking industry. It accounts for hundreds of thousands of land deals, business ventures, even unemployment schemes. And it has provided a way for the parents of unmarried daughters to give dowries, which are illegal but still a custom in some families.

``It is almost impossible to be legally rich in India,'' said a Bombay businessman. ``Income tax once went up to 97 percent.''

The next day he left for Switzerland and was rumored to be carrying 24-carat ``biscuits'' of gold. Perhaps he could be forgiven. He has four unmarried daughters.

Laundered money, unaccounted money, and double and triple sets of accounting books are part of the system. If the black economy were dismantled, India's legitimate economy could collapse, a top economist says.

The National Institute of Public Finance and Policy estimates that India's unaccounted money reached $60 billion during the 1980-81 fiscal year.

``It is not only black income, but black savings, black investment, black production, and black employed,'' wrote Swaminathan Iyar in the Indian Express newspaper. ``Even the interests of the poor may be jeopardized by a shift of income from the black economy to the government.'' The government has not heeded Mr. Iyar's advice.

To persuade Indians to legalize their wealth, India's new budget includes tax inducements and legalizes contributions by companies to political parties.

Over the last two months, officials -- some armed with astrological charts -- have raided scores of questionable business houses. The raids began only after astrologers noted in mid-January that the sun had entered the sign of Capricorn -- supposedly an auspicious season for marriage. The officials presumed that caution would be abandoned or compromised as more marriages took place and pressure to come up with dowries mounted. That assumption proved correct.

More than $10 million in smuggled gold was seized in Bombay harbor in the first two weeks of February alone.

Tax inspectors also swooped down on Bombay's diamond market -- the largest in the world. Some diamond merchants are suspected of concealing more than 60 percent of their profits every year. The merchants have been raided 30 times in the past six months; $4 to $5 million worth of diamonds have been seized. The merchants have threatened to cancel diamond imports for the second time in five weeks.

``It is a most frightening prospect,'' says a New Delhi housewife who, for the first time, feels a camaraderie with the besieged financiers. ``It makes you suspect everyone. It's rather Orwellian. I'm frightened to even go to the grocer. And he's been my source of [black market] wine and smoked oysters for over five years.''

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