Tax when you want to spend

Raise the tax-GDP ratio to finance rising revenue expenditure

The principal fiscal challenge that India faces is the stagnation in the tax-GDP ratio for several decades. The tax revenue of the Union government, after netting out the share of the states in collected taxes, was an average of 7 per cent in the five years ending in 1978–79 and also, four decades later, in the five years ending in 2019-20(1). There were two periods when the ratio went up by about 1 per cent — in the latter half of the eighties and during the boom years in the first decade of the new millennium. But basically, the Union