Examine the role of tax buoyancy in achieving sustainable economic growth. Analyze the challenges in maintaining a stable tax-to-GDP ratio. Suggest measures to enhance revenue mobilization while ensuring fiscal discipline.
Kartavya Desk Staff
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development
Q6. Examine the role of tax buoyancy in achieving sustainable economic growth. Analyze the challenges in maintaining a stable tax-to-GDP ratio. Suggest measures to enhance revenue mobilization while ensuring fiscal discipline. (15 M)
Difficulty Level: Medium
Reference: TH
Why the question “India has to maintain a tax buoyancy in the range of 1.2-1.5 to achieve a growth of 6.5-7%,” an EY report said Key demand of the question The question requires an explanation of tax buoyancy’s role in economic growth, identification of challenges in maintaining a stable tax-to-GDP ratio, and suggesting revenue mobilization measures while ensuring fiscal discipline. A structured analysis with a balanced conclusion is needed. Structure of the answer Introduction Define tax buoyancy and its significance in ensuring sustainable economic growth. Mention India’s tax-to-GDP trends and policy focus on fiscal stability. Body Role of tax buoyancy in economic growth – Explain how stable tax revenue enables public investment, macroeconomic stability, fiscal discipline, and inclusive development. Challenges in maintaining a stable tax-to-GDP ratio – Discuss issues like tax evasion, reliance on indirect taxes, slow tax base expansion, policy unpredictability, and state-level fiscal imbalances. Measures for revenue mobilization and fiscal discipline – Suggest reforms like direct tax base expansion, GST optimization, subsidy rationalization, disinvestment, and adherence to fiscal consolidation targets. Conclusion Emphasize the need for a balanced approach between tax efficiency, compliance reforms, and fiscal prudence to achieve sustainable growth and macroeconomic stability.
Why the question “India has to maintain a tax buoyancy in the range of 1.2-1.5 to achieve a growth of 6.5-7%,” an EY report said
Key demand of the question The question requires an explanation of tax buoyancy’s role in economic growth, identification of challenges in maintaining a stable tax-to-GDP ratio, and suggesting revenue mobilization measures while ensuring fiscal discipline. A structured analysis with a balanced conclusion is needed.
Structure of the answer
Introduction Define tax buoyancy and its significance in ensuring sustainable economic growth. Mention India’s tax-to-GDP trends and policy focus on fiscal stability.
• Role of tax buoyancy in economic growth – Explain how stable tax revenue enables public investment, macroeconomic stability, fiscal discipline, and inclusive development.
• Challenges in maintaining a stable tax-to-GDP ratio – Discuss issues like tax evasion, reliance on indirect taxes, slow tax base expansion, policy unpredictability, and state-level fiscal imbalances.
• Measures for revenue mobilization and fiscal discipline – Suggest reforms like direct tax base expansion, GST optimization, subsidy rationalization, disinvestment, and adherence to fiscal consolidation targets.
Conclusion Emphasize the need for a balanced approach between tax efficiency, compliance reforms, and fiscal prudence to achieve sustainable growth and macroeconomic stability.