Will less cash raise the tax-GDP ratio?

Tax base could get a boost from reduced cash intensity, focused tax administration strategy and GST

With less than a month to go for the 2017-18 Budget, the issue of the potential fiscal benefits from “demonetisation” has predictably taken centre stage. The most important question being asked is whether demonetisation will prove to be the silver bullet for tax collections by increasing the tax-GDP (gross domestic product) ratio.

A quick comparison with emerging market peers underscores the need to push this ratio up to create fiscal space. The tax-GDP ratio (Centre+state) in India is the lowest in its league — at 16.6 per cent as compared to China at 19.4 per cent, Brazil at 35.6 per