{"id":280871,"date":"2024-02-02T20:05:53","date_gmt":"2024-02-02T14:35:53","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=280871"},"modified":"2024-02-02T20:05:53","modified_gmt":"2024-02-02T14:35:53","slug":"higher-tax-to-gdp-ratio-needed","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/higher-tax-to-gdp-ratio-needed\/","title":{"rendered":"Higher tax-to-GDP ratio needed"},"content":{"rendered":"

Source:<\/strong> This post has been created based on the article \u201cHigher tax-to-GDP ratio needed\u201d<\/strong> published in \u201cBusiness Standard\u201d<\/strong> on 2nd<\/sup> February 2024.<\/p>\n

UPSC Syllabus Topic: <\/strong>GS Paper 3 Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.<\/p>\n

News:<\/strong> The article discusses the need for maintaining a higher Tax-to-GDP ratio. It also highlights the importance of increasing GST in this regard, and the steps being taken.<\/p>\n

A detailed article on Interim Budget 2024<\/strong> can be read here<\/a>.<\/p>\n

What are the issues with the Indian economy?<\/strong><\/h2>\n

Experts have pointed out that while growth has rebounded after the pandemic, the following are the major issues:<\/p>\n

    \n
  1. High levels of unemployment, especially among the young.<\/li>\n
  2. Lagging private investments.<\/li>\n<\/ol>\n

    In this regard, the government compensated for inadequate private investment by increasing its own investment, however, this puts a strain on the fiscal deficit.<\/p>\n

    How can the government maintain the high level of investments? <\/strong><\/h2>\n

    This requires the tax-to-GDP ratio to move to at least 20% in the medium term, compared to the present level of 17-18%.<\/p>\n

    What would be needed to increase the tax-to-GDP ratio?<\/strong><\/h2>\n

    This would require GST contributions to move from 6.4% of GDP now to at least 7.5% of GDP.<\/p>\n

    Achieving it would require the average incidence of GST duty to increase from the present 11.8% to the 14.8% that was prevalent in the pre-GST period.<\/p>\n

    How can GST be increased?<\/strong><\/h2>\n

    1) Rate Rationalisation:<\/strong> An increase in the merit rate of 5% and the peak rate of 28%, along with the phasing out of GST exemptions can be implemented.<\/p>\n

    2) Expanding the Manufacturing Base:<\/strong> It has to increase as GST collections depend on value addition in manufacturing, which contributes to 65% of the GST collected.<\/p>\n

    3) Revamping the Services Sector: <\/strong>The services sector\u2019s contribution to GST is only 35%. This is because it largely covers low value-adding units in the informal sector.<\/p>\n

    What has the government done in this regard?<\/strong><\/h2>\n

    1) A Committee under the Finance Minister of Uttar Pradesh has been constituted for GST rate rationalisation.<\/p>\n

    2) The government has identified new sunrise sectors such as electric vehicles, renewable energy and network electronics, which can contribute to expanding the manufacturing base.<\/p>\n

    What should the government do about the problem of unemployment?<\/strong><\/h2>\n

    Government should lower the cost for labour-intensive sectors such as apparel, leather and food processing by bringing down the Custom duties on critical raw materials and components.<\/p>\n

    Question for practice:<\/strong><\/p>\n

    A higher Tax-to-GDP ratio is necessary for investments in the economy. How can it be achieved?<\/p>\n","protected":false},"excerpt":{"rendered":"

    Source: This post has been created based on the article \u201cHigher tax-to-GDP ratio needed\u201d published in \u201cBusiness Standard\u201d on 2nd February 2024. UPSC Syllabus Topic: GS Paper 3 Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment. News: The article discusses the need for maintaining a higher Tax-to-GDP ratio. It… Continue reading Higher tax-to-GDP ratio needed<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,167],"tags":[10503,216,8184],"class_list":["post-280871","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-economy-subject","tag-business-standard","tag-gs-paper-3","tag-indian-economy","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/280871","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=280871"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/280871\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=280871"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=280871"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=280871"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}