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?

The correct answer is: Loss of revenue to the State Exchequer due to tax evasion.

Understanding Black Money:
Black money refers to funds earned through illegal activities or legally earned income that has not been declared to the tax authorities to evade taxation.

Why Tax Evasion is the Main Worry for the Government:
While black money leads to various social and economic issues—such as inflation, investment in unproductive assets (like real estate and luxury goods), and corruption—the direct and most severe consequence for the Government of India is the loss of tax revenue.

1. Reduction in Public Funds: When individuals and corporations evade taxes, the State Exchequer loses a massive portion of revenue that could otherwise be utilized for public welfare, infrastructure development, healthcare, education, and social security programs.
2. Fiscal Deficit: A severe shortfall in tax collection forces the government to rely on domestic and external borrowing, widening the fiscal deficit.
3. Economic Distortions: Tax evasion undermines the fairness of the taxation system, placing a heavier burden on honest taxpayers and paralyzing official economic policy planning due to an inaccurate estimation of national GDP.

Therefore, while all options represent harmful side effects of black money, the continuous loss of revenue to the State Exchequer due to tax evasion remains the fundamental cause of concern for government revenue management and economic administration.