Black economy which is also known as parallel economy connotes the functioning of the unsanctioned sector in the economy. It runs parallel rather than in contradiction of the social objectives. The roots of parallel economy are deepening in our economy which tends to be a great threat to our nation. The main objective of this paper is to highlight the how severe is the problem of black money for a developing country like India. This paper attempts to show how the black money is creating dampening impact on investment and enhancing the conspicuous consumption. This paper presents the various estimates of black money by the different experts. Further, it will focus on the challenges and threats of the black economy the country may face. At last, it will also discuss the various steps has been taken by the government over the years and what are the government policies in future to tackle this severe problem.