UPSC CSE Prelims
Question 51
A decrease in tax to GDP ratio of a country indicates which of the following?
- Slowing economic growth rate
- Less equitable distribution of national income
Select the correct answer using the code given below.
View correct answer and explanation
Correct answer: A
Correct Option: A
Explanation: The exam key links a falling tax-to-GDP ratio to slowing growth rather than to any definite conclusion about income inequality. In strict economics, however, this ratio alone cannot establish either outcome.
Statement/Pair-wise Analysis:
Statement/Item 1: Correct - A slowdown can weaken tax collections relative to GDP, which is the intended inference in the supplied key; the relationship is not automatic.
Statement/Item 2: Incorrect - A lower tax-to-GDP ratio does not by itself measure the equality of national income distribution.
Option-wise Analysis:
A: Correct - includes all and only the correct items.
B: Incorrect - includes incorrect statement/item 2; omits correct statement/item 1.
C: Incorrect - includes incorrect statement/item 2.
D: Incorrect - omits correct statement/item 1.
Review Note: Conceptual caveat: a lower tax/GDP ratio is not conclusive proof of slower real GDP growth; tax policy, compliance and the composition of GDP also matter.