Question

UPSC Prelims 2021 Question:

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?

  1. 1. Diversion of resources to the purchase of real estate and investment in luxury housing
  2. 2. Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc.
  3. 3. Large donations to political parties and growth of regionalism
  4. 4. Loss of revenue to the State Exchequer due to tax evasion

Answer (Detailed Solution Below)

Option 4: Loss of revenue to the State Exchequer due to tax evasion

Detailed Solution

Explanation:

  • Black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes. These funds do not enter the official banking system. It causes financial losses for the Central and State Governments as unreported income is not taxed.

Therefore, option (4) is the correct answer.

Relevance: The Standing Committee on Finance recently came out with its report on the status of unaccounted income and wealth both inside and outside the country.

Subject: Economics | Public Finance

Latest UPSC Exam 2026 Updates

Last updated on August, 2026

→ UPSC Mains 2026 will be conducted on 21st, 22nd, 23rd, 29th and 30th August 2026.

→ Check out the latest UPSC Syllabus 2026 here.

→ UPSC Mains Admit Card 2026 is now out.

→ Enroll in Vajiram & Ravi’s UPSC Mains Test Series 2027 for structured answer writing practice, expert evaluation, and exam-oriented feedback.

→ Join Vajiram & Ravi’s UPSC Mentorship Program 2027 for personalized guidance, strategy planning, and one-to-one support from experienced mentors.

→ Go through the UPSC Mains Previous Year Papers to enhance your preparation.

→ Download UPSC Mains Essay Paper 2025, UPSC Mains GS Paper-I 2025, UPSC Mains GS Paper-II 2025, UPSC Mains GS Paper-III 2025, UPSC Mains GS Paper-IV 2025, UPSC Mains English (Compulsory) Paper 2025, UPSC Mains Hindi (Qualifying) Paper 2025 here.

→ UPSC has released UPSC Toppers List 2025 with the Civil Services final result on its official website.

→ UPSC Calendar 2027 has been released.

→ Also check Best UPSC Coaching in India

Tags: Analytical Conceptual UPSC Prelims 2021 UPSC Prelims 2021 Question

Abhishek Singh
Abhishek Singh is an SEO Specialist and content strategist with over 4.5 years of experience in driving organic growth across education and service-based industries. He specializes in on-page SEO, technical SEO, content optimization, and data-driven strategies that improve search visibility and organic traffic. His work focuses on creating accurate, well-researched, and search-optimized content that helps students, professionals, and online audiences find reliable information. By combining SEO expertise with a strong understanding of search intent and evolving search technologies, he works to build content that delivers visibility, engagement, and long-term trust.
Our Latest UPSC Courses
UPSC GS Course 2026
UPSC GS Course 2026
₹1,80,000
Enroll Now
GS Foundation Course 2 Yrs
GS Foundation Course 2 Yrs
₹2,45,000
Enroll Now
UPSC Mentorship Program
UPSC Mentorship Program
₹85000
Enroll Now
UPSC Sureshot Mains Test Series
UPSC Sureshot Mains Test Series
₹27000
Enroll Now
Prelims Powerup Test Series
Prelims Powerup Test Series
₹14000
Enroll Now
Enquire Now