Q. With reference to the “Tax-to-GDP” ratio of India, which of the following statements is/are correct?
1. Higher the tax to GDP ratio the better financial position the country will be in.
2. India’s Tax-to-GDP ratio is higher than the average OECD Tax-to-GDP ratio.
Select the correct answer using the codes given below: 
Answer: A
Notes:
Tax-to-GDP ratio represents the size of a country’s tax kitty relative to its GDP.
- It is a representation of the size of the government’s tax revenue expressed as a percentage of the GDP.
- Higher the tax to GDP ratio the better financial position the country will be in.
- The ratio represents that the government is able to finance its expenditure. A higher tax to GDP ratio means that the government is able to cast its fiscal net wide.
- It reduces a government’s dependence on borrowings.
- Although India has improved its tax-to-GDP ratio in the last six years, it is still far lower than the average OECD ratio which is 34 per cent.
- India’s tax-to-GDP ratio is lower than some of its peers in the developing world. Developed countries tend to have higher tax-to-GDP ratio.
Source: The Hindu
Discover more from Free UPSC IAS Preparation Syllabus and Materials For Aspirants
Subscribe to get the latest posts sent to your email.
