Estimating Indian shadow economy

Abstract

This paper analyses the various approaches existing for estimating the shadow economy and the difficulty in doing so. It critically analyses to see which all existing models could be applicable for measuring Indian shadow economy. It attempts to model the approaches to get better results for Indian economy. It also touches upon need to measure it and the crucial aspects of it. The results show black economy at 16% of the GDP in 2002-03. It shows a declining trend in2003-04 and shows it at 14.26%. The paper further delves in the trend exhibited by the results. The trend shows that economic reforms post 1992-93 is resulting in reducing the black economy. An attempt was made to improve existing model for this. It was found that all the existing models have not got very strong theoretical and/or mathematical base, because it is very difficult to find data about strong indicators for black economy. There are some suggestions offered for reduction of black economy based on existing theory and observation of author.