Question map
Not attempted Correct Incorrect ★ Bookmarked
Loading…
Q94 (IAS/2017) Economy › Economy Current Affairs › Fiscal trends and taxation Official Key

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 ?

Result
Your answer: —  Âˇ  Correct: D
Explanation

The correct answer is option D (Neither 1 nor 2).

**Statement 1 Analysis:** India's tax revenue as a percentage of GDP did not show a steady increase during 2007-2017. While tax revenue data is tracked as a percent of GDP by the World Bank[1], the actual trend during this period showed fluctuations rather than consistent growth. The tax-to-GDP ratio experienced variations due to economic cycles, policy changes, and implementation challenges.

**Statement 2 Analysis:** India's fiscal deficit as a percentage of GDP also did not steadily increase during this decade. In fact, fiscal consolidation post-2010 was achieved, with consolidations in "non-special" category[2] states being driven by increased revenues[2]. The period saw efforts to reduce fiscal deficits, particularly after the 2008-09 global financial crisis spike, with the government working toward fiscal consolidation targets. The fiscal deficit generally declined or remained stable during the latter part of this period, rather than showing a steady increase.

Therefore, both statements are incorrect, making option D the correct answer.

Sources
  1. [2] https://thedocs.worldbank.org/en/doc/400139d320ead96a0ec624d3608d9b56-0310012025/original/India-Country-Economic-Memorandum-2024-0227c.pdf
How others answered
Each bar shows the % of students who chose that option. Green bar = correct answer, blue outline = your choice.
Community Performance
Out of everyone who attempted this question.
50%
got it right
PROVENANCE & STUDY PATTERN
Guest preview
Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Consider the following statements : 1. Tax revenue as a percent of GDP of India has steadily increased in the last decade. 2. Fiscal de…
At a glance
Origin: Mostly Current Affairs Fairness: Low / Borderline fairness Books / CA: 0/10 ¡ 5/10
You're seeing a guest preview. The Verdict and first statement analysis are open. Login with Google to unlock all tabs.

This is a classic 'Trend Analysis' trap. UPSC takes a volatile economic indicator and adds the word 'steadily' or 'continuously' to test if you remember major economic shocks (like the 2008 crisis). You don't need exact numbers; you need to know the 'shape' of the graph.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Did India's tax revenue as a percentage of GDP steadily increase over the decade 2007–2017 (fiscal years ~2007–08 to 2016–17)?
Origin: Weak / unclear Fairness: Borderline / guessy
Indirect textbook clues
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Government Budgeting > p. 188
Strength: 5/5
“Consider the following statements: [2017] • (i) Tax revenue as a percent of GDP of India has steadily increased in the last decade.• (ii) 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? • (a) (i) only• (b) (ii) only• (c) Both (i) & (ii) only• (d) Neither (i) & (ii)• 14.”
Why relevant

This textbook presents the exact claim as an exam-style proposition, signalling it is non-trivial and contested (an item for verification rather than accepted fact).

How to extend

A student should treat the claim as testable: locate year-by-year tax-revenue/GDP ratios for 2007–08 through 2016–17 (e.g., from budget documents or RBI) and check for a monotonic upward pattern.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 8: Inclusive growth and issues > 8.13 Rising Income Inequality > p. 276
Strength: 4/5
“However, these may not be pragmatic solutions. The tax/GDP ratio has to be raised with a wider tax base rather than increasing the tax rate. The new and aspiring India wants equality of opportunity rather than redistributive measures. As we initiated the reforms in 1991, the Indian economy moved on a higher growth trajectory of 6.3%, which helped the government to raise more resources and it also pulled in a lot of population in the growth process. The proportion of nationwide population living below the poverty line (as per the planning commission estimates) fell from 36% (40.7 cr) in 1993-94 to 27.5% (35.5 cr) in 2004-05 and 21.9% (26.9 cr) in 2011-12.”
Why relevant

Discusses the tax/GDP ratio as an explicit policy metric and links it to economic growth—implying tax/GDP can change with growth and policy (wider base vs higher rates).

How to extend

Combine knowledge of India’s growth episodes and any tax policy changes in 2007–17 (e.g., base changes, major tax reforms) to judge whether tax/GDP would plausibly rise steadily or fluctuate.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Status of Deficit Financing in India > p. 114
Strength: 3/5
“India first used this tool in 1969 and since then it became a routine phenomenon till 1991 in order to tackle higher and higher fiscal deficits. The fiscal deficit which was below 4 per cent of GDP till the 1970s climbed above 7 per cent in the second half of the 1980s. The revenue deficit also increased considerably. Thus, India was bound to resort to deficit financing. However, India after 1991 gradually moved towards fiscal reforms in the form of fiscal consolidation to reduce its dependence on deficit financing. In this regard, the Fiscal Responsibility and Budget Management Act (FRBM Act) was enacted in 2003.”
Why relevant

Describes fiscal consolidation since 1991 and notes fiscal deficits/revenue deficits trend dynamics—showing deficits and fiscal policy can influence revenue measures as % of GDP.

How to extend

Compare periods of fiscal consolidation or rising deficits in 2007–17 with tax revenue series to see if policy shifts explain increases or declines in tax/GDP.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 1: Fundamentals of Macro Economy > 1.12 Nominal and Real GDP > p. 19
Strength: 4/5
“So, economic growth from 2011-12 to 2012-13 will be measured by change in Real GDP (and not nominal GDP) which is 11.2 % In the above example, Real GDP is steadily/consistently increasing from 2011-12 to 2014- 15 but "change in real GDP" is decreasing from 11.2% to 4.6%. (And same is true for nominal GDP also). Above is a case of economic growth as real GDP is increasing. To calculate GDP at market prices, first we calculate GDP at factor cost/basic prices and then we separately add the governments total indirect taxes including both GST and non-GST tax revenue of Central and State governments.”
Why relevant

Explains GDP measurement (nominal vs real) and notes government indirect taxes are part of GDP at market prices—highlighting the importance of using consistent GDP definition when computing tax/GDP.

How to extend

When assembling tax/GDP time series for 2007–17, ensure taxes (central+state) are compared to the same GDP series (nominal at market prices) to avoid spurious trends.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > PRESENT TREND IN DEFICITS > p. 112
Strength: 3/5
“• Type: Fiscal Deficit; 2019-20 (Actuals): 4.6% of GDP; 2020 - 21 (Revised Estimates): 9.5% of GDP; 2021 - 22 (Budget Estimates): 6.8% of GDP • Type: Revenue Deficit; 2019-20 (Actuals): 3.3% of GDP; 2020 - 21 (Revised Estimates): 7.5% of GDP; 2021 - 22 (Budget Estimates): 5.1% of GDP • Type: Effective Revenue Deficit; 2019-20 (Actuals): 2.4% of GDP; 2020 - 21 (Revised Estimates): 6.3% of GDP; 2021 - 22 (Budget Estimates): 4.1% of GDP • Type: Primary Deficit; 2019-20 (Actuals): 1.”
Why relevant

Provides recent deficit-to-GDP figures and emphasizes that fiscal indicators vary year-to-year, suggesting that related ratios (like tax/GDP) may also not be monotonic.

How to extend

Use the documented year-to-year variability in fiscal ratios as a cue to expect possible non-steady behavior in tax/GDP; check annual tax receipts against GDP for volatility in 2007–17.

Statement analysis

This statement analysis shows book citations, web sources and indirect clues. The first statement (S1) is open for preview.

Login with Google to unlock all statements.

How to study

This tab shows concrete study steps: what to underline in books, how to map current affairs, and how to prepare for similar questions.

Login with Google to unlock study guidance.

Micro-concepts

Discover the small, exam-centric ideas hidden in this question and where they appear in your books and notes.

Login with Google to unlock micro-concepts.

The Vault

Access hidden traps, elimination shortcuts, and Mains connections that give you an edge on every question.

Login with Google to unlock The Vault.

✓ Thank you! We'll review this.

SIMILAR QUESTIONS

IAS ¡ 2015 ¡ Q81 Relevance score: 5.10

With reference to Indian economy, consider the following statements : 1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade. 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade. Which of the statements given above is/are correct?

IAS ¡ 2010 ¡ Q87 Relevance score: 4.74

With reference to India economy, consider the following statements: 1. The Gross Domestic Product (GDP) has increased by four times in the last 10 years 2. The percentage share of Public Sector in GDP has declined in the last 10 years Which of the statements given above is/are correct?

IAS ¡ 2011 ¡ Q81 Relevance score: 4.45

In the context of Indian economy, consider the following statements : 1. The growth rate of GDP has steadily increased in the last five years. 2. The growth rate in per capita income has steadily increased in the last five years. Which of the statements given above is/ are correct?

CDS-II ¡ 2025 ¡ Q76 Relevance score: 3.97

Consider the following statements about Union Government's Expenditure on revenue account and effective capital expenditure : 1. Effective capital expenditure as percentage of GDP has increased from 2020 - 21 to 2023 - 24. 2. Expenditure on revenue account as percentage of GDP has increased from 2020 - 21 to 2023 - 24. Which of the statements given above is/are correct ?

CDS-II ¡ 2020 ¡ Q4 Relevance score: 3.88

Which one of the following statements about Indian economy during 2019-20 is not correct?