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Doctors Medicines MCQs Q&A

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
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1 Answers

Option 1 : 1 only

The correct answer is 1 only. 

  • A tax-to-GDP ratio is a gauge of a nation's tax revenue relative to the size of its economy as measured by gross domestic product (GDP).
  • The tax-to-GDP ratio is a measure of a nation's tax revenue relative to the size of its economy.
  • It determines how well a nation's government use its economic resources via taxation.
  • Developed nations typically have higher tax-to-GDP ratios than developing nations.
  • If the tax to GDP ratio is low it shows a slow economic growth rate.
  • The ratio represents that the government can finance its expenditure.
  • A higher tax to GDP ratio means that an economy's tax buoyancy is strong.
  • A lower tax-to-GDP ratio puts pressure on the government to meet its fiscal deficit targets.

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Reasons behind low India's tax-GDP ratio:

  • The excise rate was 16 per cent in 2007-08, whereas it dropped to 12 per cent in consequent years. An expanding economy needs to maintain a 16% rate recovery.
  • The drop in customs revenue, from 2.02 per cent of GDP to 1.50 per cent.
  • The drop in corporate tax revenue, with GDP.
  • Excessive subsidies and revenue expenditure. 

  • It only shows growth in the economy not the distribution of national income. Hence statement 2 is incorrect
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