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AIR spotlight summary on “Pradhan Mantri Garib Kalyan Yojana”.



AIR spotlight summary on “Pradhan Mantri Garib Kalyan Yojana”.


The government has recently announced the Pradhan Mantri Garib Kalyan Yojana where black money can be deposited by paying a tax of 50%. Besides, declarant must make mandatory deposit of 25% of undisclosed income in the zero-interest Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 with lock-in period of 4 years. With this amount the government will be making investments in rural infrastructure. This is a very good measure the government has adopted to unearth the black money which people have.

Efforts to tackle Black Money

  • The government has been serious about tackling the black money problem. The Income Declaration scheme which was brought earlier was able to attract around 65,000 crore. With the Demonetisation scheme the government believed that people would disclose their income. However that did not happen so much. There are so many activities going on in the form of money laundering where people would deposit money in other’s bank account. So the government gave opportunity for people to declare their incomes and become part of the progressive India which can contribute for rural development.
  • Despite the demonetisation there has been hoarding of new currency. It has not been able to completely do away with the black money which was being generated and hoarded. The government wants to give people an opportunity and rather than government raiding the black money holders it wants those people to disclose their incomes on their own.
  • Not many developed countries have come out with similar kind of scheme. Couple of European countries have come out with similar kind of scheme with 30 to 35% of tax.
  • The tax penalties are not very high because generation of black income is a crime. One has to realise that they are safe from criminal penalty.
  • People believe that black money generation started when the taxes were extremely high. To start with when the tax system was introduced in the country the tax rates were as high as 98%. It was later lowered. This resulted in creation of black money.
  • When there is lesser tax rates and more compliance it doesn’t cost to be a part of the system. So keeping the tax rates low would act as a beneficiary.

Concerns / Challenges

  • People should not be incentivised like these amnesty schemes because they create an avenue for people to disclose their black incomes. Every time the government brings out these amnesty schemes the fear of being penalised is lost. There will be no fear among people in creating black money.
  • The highest tax bracket is 30% and the penalty the government has put is 50%. So the penalty is not very high and this penalty should not dissuade the honest tax payers from making those payments. Whereas some say, amnesty schemes are good where lot of people disclose their black incomes which add to the revenue of the government.

Rural Development

  • It is important to bring the rural India and make it an integral part of the inclusive growth. 2011 census identified 6.4 lakh villages. There is a need for development of roads, electricity, healthcare, education etc. The government has highlighted that it is going to use the 25% deposited money for rural development.
  • The government can create IT infrastructure and involve the panchayat raj institutions in developing the framework in villages. 45% of the villages are still not completely electrified. The rural India has Kachha roads which are not able to connect the villages to rest of the part of India especially in the rainy season. The development of roads and infrastructure would allow for better transport, better logistics and better food management.
  • The Pradhan mantri Swarozgar Yojana and Pradhan mantri Gram Sadak Yojana are at a compound growth rate of about 5.4%. In the previous two budgets the government focused on rural development. Rural development is going to bring the requisite economic growth in the country which will then connect and empower citizens.
  • When rural India is connected with the urban India, the advancements in education, health care, IT infrastructure and banking system would be more reachable.


The Jan Dhan accounts were created as a means towards financial inclusion for the deprived, urban and rural poor to get an access to the banking system. They should not be misused by people who are blank money holders. One must be an honest citizen to the country, must pay his taxes and become a part of economic prosperity and development. There should be state of prosperity between the urban and the rural India leaving no gap between the two.