Black Economy

Business, Legal & Accounting Glossary

Definition: Black Economy



What is the dictionary definition of Black Economy?

Dictionary Definition


A hidden segment of a country’s economy that operates on barter and numerous unreported private cash transactions with the aim of avoiding tax. Also known as the cash economy. By definition, it is of unknown size but suspected to be a very significant minority of developed countries activity, and of larger importance in developing countries.


Full Definition of Black Economy


Black economy is also known as the underground economy in economic terminology. It is basically a type of market where the rules of taxation and trade are not applicable. The black economy is also called underdog, black economy, shadow economy and parallel economy.

The range of activities that take place in the black economies at present is vast. It has been observed that the size and scope of the black economy are indirectly proportional to the amount or extent of economic liberties permitted in various states. This implies that the black economy is significant in countries where it is tough to operate a legitimate business as a result of certain internal economic factors. The most noteworthy among such situations are corruption, legal monopolies and regulation.

The Black Economy In India

The black economy in India is gaining in prominence by the day. Much of this could be attributed to the negligent attitude of the concerned authorities. Over the years, the black economy has had a substantial impact on the size of the Indian economy. The high rates of inflation and taxation in India have been a result of the increasing powers and activities of the black economy.

The Black Economy In Pakistan

The condition of the black economy is as acute in Pakistan as India. It has been assumed by the State Bank of Pakistan. In fact, the size of the black economy in Pakistan is equivalent to half of the formal economy. The entire situation is pretty critical as the black economy could have a negative impact on the public welfare plans in Pakistan. The black economy in Pakistan has grown throughout the years as a result of the immense amount of unethical and unlawful practices that have exploited the lack of documentation in the Pakistani economy.

Examples Of A Black Economy

Some of the most common examples of black economies are wars, prohibitions in the United States of America on alcohol and smoking. The Clearstream scandal is one of the major modern-day examples of a black economy. Clearstream is headquartered at Luxembourg deals in financial clearing services. This implies that it concentrates the operations of a number of banks. A number of these banks operate from places where there are lesser economic restrictions.


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Definition Sources


Definitions for Black Economy are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th April, 2020 | 0 Views.