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?

(a) Diversion of resources to the purchase of real estate and investment in luxury housing
(b) Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc.
(c) Large donations to political parties and growth of regionalism
(d) Loss of revenue to the State Exchequer due to tax evasion ✓ UPSC's answer

Why the answer is (d)

• Black money is income on which taxes have not been paid; its defining harm to the Government is the loss of tax revenue that would otherwise fund public services and reduce deficits — option (d).

• The Government's white paper on black money (2012) and measures such as demonetisation, the Black Money Act, 2015 and GST were framed chiefly around plugging tax evasion.

• Diversion into real estate, gold and jewellery (options a and b) and political funding (option c) are consequences, but the primary fiscal worry is the revenue leak.

• Hence option (d).

Why the other options are wrong

(a) Diversion of resources to the purchase of real estate and investment in luxury housing: Real-estate diversion is a consequence, not the main fiscal worry.
(b) Investment in unproductive activities and purchase of precious stones, jewellery, gold…: Unproductive investment is a consequence, not the primary concern.
(c) Large donations to political parties and growth of regionalism: Political donations are a symptom, not the main revenue concern.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2021, held on 10 October 2021. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.