4 Consider the following statements 1 Tax revenue as a percent of GDP of India has steadily increase...........

Economic Affairs Growth and Indicators

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4. Consider the following statements :

1. Tax revenue as a percent of GDP of India has steadily increased in the last decade.

2. Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.

Which of the statements given above is/are correct ?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Why: Basic macroeconomic data from Economic Survey
Justification: Statement 1: It asks about India’s Tax buoyancy, which the responsiveness of tax revenue mobilisation to GDP growth.
It is calculated as a ratio of percentage growth in tax revenues to growth in nominal GDP for a given year.
Tax is said to be buoyant (more than 1) if the gross tax revenues increase more than proportionately in response to a rise in GDP figures. If it is less than 1, it means tax revenues have not increased proportionately with GDP growth.
The figure below shows variation in tax buoyancy from 2004-05 to 2015-16, which have been up and below 1 like a wave. So, statement 1 is wrong.
The graph above shows tax revenues as a percentage of GDP from 2002 to 2014.
https://thewire.in/32648/new-data-indicates-that-direct-tax-share-in-economy-is-at-decade-low/
Statement 2: Fiscal deficit as a percentage of GDP had increased rapidly in recession years (post 2008) due the fiscal stimulus given by the government and then declined due to the fiscal consolidation measures adopted. So, 2 is also wrong.